One of the interesting insights into the results reported by Indian mobile companies in the last two weeks is the slowdown in growth.
Idea Cellular, which was the most aggressive in hiking call tariffs, saw the biggest decline in growth, while Bharti Airtel, which was the least aggressive in raising call rates, saw the least decline.
When asked, Idea MD Himanshu Kapania said the company did not want to comment on the way forward just yet, and would prefer to watch how consumers react.
The reason is not far to seek. Idea has raised average call rates from 41.2 paise per minute in December to 44.7 paise for the September quarter. In comparison, Bharti Airtel’s average India mobile tariff rose only to 36.74 from 35.17 paise during the same period.
Not surprisingly, Bharti users are making more calls than Idea users. For example, end of September, an average Bharti Airtel user was making 437 minutes of calls per month compared to just 368 minutes for Idea Cellular. What’s worse, for Idea, the minutes of use fell by 30 during the latest quarter compared to the previous one, while it fell only by 18 minutes for Bharti Airtel.
In fact, some decline, of the order of 3-4% was expected due to the September quarter being traditionally low on usage, but the 7.5% decline in Idea’s usage numbers came quite as a shock.
Not suprisingly, Idea’s stock has reacted negatively to the results while Bharti Airtel has had a positive response from investors.
Airtel said there was very little chance of any further increase in baseline tariffs, but the company would like to see higher rates achieved through lower discounts and offers.
The only major Indian listed company left to report results in Reliance Communications, which too has increased its rates. But since the average call rate for RCom is even lower than that of Bharti Airtel, it could be that people may be using RCom’s SIMs to make outgoing calls in response to the overall rising trend in call rates.
From managements’ comments it is clear that the operators who were the most aggressive in raising rates may have to relook at their strategy. After all, India is a volume game, not a margin game.