Reliance Communications fired a fresh salvo in the Indian Telecom Industry by halving 3G Data Tariffs across the board, pre-paid and post-paid. RCom has 3G Mobile Data Services in 13 Circles – Delhi, Mumbai, Kolkata, West Bengal, Punjab, Madhya Pradesh, Himachal Pradesh, Bihar, Orissa, Rajasthan, Assam, North East, and Jammu & Kashmir.
With the external parts of the hi-speed wireless data ecosystem (smartphone penetration,awareness, apps gaining popularity) falling into place, a price reduction on 3G data packs to broaden the user base and spur usage was expected. However, the extent of cut announced by RCOM does come as a bit of a surprise. 3G penetration in India remains low (25 mn subs; active 3G subs base less than 3% of overall SIM base and just about 2% of population) even after 2+ years of 3G network launches.
What is RCom’s Strategy Behind this Move ?
With strong 2G data and smartphone penetration growth in recent times, reducing the gap between 2G and 3G data pricing (RCOM’s 1 GB pack pricing removes the gap completely) should serve as good inducement for the current 2G data users (nearly 5X the current 3G user base at 115-120 mn) and drive strong 3G data volume growth.
Globally, there is no difference between 2G and 3G pricing. Achieving the same in India was a challenge given extremely low 2G pricing in the past – that has corrected a bit and the remaining gap can be bridged should the industry follow RCOM on this 3G price cut. Another important aspect, if true, is that the lowest volume pack on which the price is being reduced is the 1 GB pack – this should also drive volume pack.
How will the A-Vo-Id [Airtel, Vodafone, Idea] Group React to RCom 3G Tariff Reduction ?
Since RCom has also chartered a plan to grab as many high profile Mobile Customers from A-Vo-Id group using mobile number portability, A-Vo-Id companies have no choice but to drop 3G mobile Data Tariffs in Delhi & Mumbai circle for sure. It is also possible that A-Vo-Id Operators will match Tariffs in all 13 Circles where Reliance Mobile will provide low priced 3G data Services. However, it is to be seen what will happen in other circles as A-Vo-Id Cartel is being dragged to the Supreme Court for Intra-Circle roaming arrangements.
Accelerated 3G volume offtake should follow, in our view and a good part of the accelerated off take would be 2G to 3G shift and hence may not be revenue-dilutive. A modest side positive would be reduction in 2G network utilization; however, from a longer-term perspective, the overall volume/ pricing / capex economics for 3G do take a hit at revised reduced pricing levels.