With Reliance Jio raising the price of its 1GB-per-day pack from Rs 309 to Rs 399, Idea Cellular has managed to beat the new operator in this segment, though not by much.
Idea Cellular offers 1GB/day for 84 days at Rs 397, making it cheaper by 2 rupees. Though Idea’s scheme is not listed on its website, it is available to almost all 4G users on their selfcare app.
In other words, both Jio and Idea now offer 1 GB/day at about Rs 143 per month.
That pricing is also comparable to a similar plan from Bharti Airtel that provides 1 GB per day for Rs 150 per month, but without the free call facility.
END OF DOG DAYS?
Though the impact of the tariff plan may not be much, it does mark a milestone — an achievement of parity — in the battle between the incumbents and the challenger.
Since it began operations nearly a year ago, Jio had been unassailable in terms of pricing.
The company’s offerings were priced at half, or even a third, of what comparable plans cost on rival networks.
However, the Mukesh Ambani-led company has to make money too, and to this end, it has set in motion a slow and gradual chain of events to get its users to pay more for voice and data.
For example, for the last three months, they were getting 1 GB per day and unlimited voice for about Rs 100 per month. But, starting from July 15, they will get it at about Rs 150 per month.
The company’s aim is to eventually raise it to Rs 300 per month.
How long it will take to achieve this target will depend on the impact of the current price change from Rs 100 to Rs 150.
If it finds a lot of abandonment — people simply refusing to recharge when the price is increased — it will introduce its next price increase later, perhaps towards the end of 2017.
If, on the other hand, abandonment rates are low, it would take a step towards increasing the price to 200 or 250 in October, potentially reaching the 300 mark by January.
At 300 rupees per month, the incumbents can — with some difficulty — compete with Jio, at least as far as data is concerned.
VOICING PAIN
However, this hardly means that the pain is getting over for the incumbents. In fact, the real pain may be only just beginning.
That’s because of the possibility of the Ambani firm taking aim at the incumbents’ cash cow — voice services.
Jio provides unlimited voice calls for Rs 150 per month, while the incumbents offer unlimited voice calls at Rs 350 per month.
Yet, the newcomer has not been able to disrupt the voice market as radically as it has been able to impact the data market. Data prices have fallen by nearly 50% since Jio launched, but voice prices have fallen only by around 20%.
Idea’s voice pricing, for example, fell to 26 paise last quarter from about 33 paise a year earlier. In contrast, its data price fell by half to 11.5 paise per MB from about 23 paise in the same period.
Because of the resilience exhibited by voice prices, the incumbents have not yet faced the full impact of the new entrant on their voice business that contributes about 80% of their profit.
This has been because of three reasons — all related to the quality of hardware available in the market.
First is device price. Jio’s voice works only on higher-end phones with 4G VoLTE, and these cost at least Rs 3,500. Many people are unwilling or unable to make a one-time investment of Rs 3,500 to save Rs 100 or 150 per month on voice bills.
The second factor is ease of use. Many — especially those above 40 — do not like to operate touch-screen devices. They prefer the simplicity of a bar phone, and are confused by the smartphone.
The third factor is sturdiness. Full-touch devices are fragile, and are often destroyed at a single fall. This keeps many customers — especially those that do not use much data — from going for a smartphone.
All these three factors are expected to be addressed by Jio with its upcoming feature-phone.
With a reported price tag of Rs 999, the device will address all the barriers that have so far been holding back more widespread adoption of the company’s voice services.
If, as a result, the incumbents are forced to cut their voice tariffs by another 35%, it would seriously impact their ability to remain profitable concerns.