The stocks of Bharti Airtel and Idea Cellular were down around 4% in early trade on Wednesday after Reliance Jio indicated that it would cut tariffs by about 25% as part of a new Republic Day offer.
Airtel shares were trading down 21 rupees at Rs 471, while those of Idea were down 4.35 rupees at Rs 94.85 as of 10:07 IST.
The move to cut prices, according to Jio sources, was ‘necessitated’ by after its rivals matched its tariffs.
At the time of launching Jio, Chairman Mukesh Ambani had promised that it would always give more data than the incumbents for any given tariff plan.
However, earlier this week, Bharti Airtel matched Jio’s offer of 1 GB per day for 84 days for Rs 399.
Bharti also introduced a special top-up coupon that was giving data at a rate of around Rs 2.14 per GB, much cheaper than what even Jio was offering.
These moves ‘forced’ the Mukesh Ambani company to slash its prices barely two weeks after it had last done so as part of its ‘New Year Offer’. As part of the offer, it had cut its data price by about 30%.
With the incremental 25% cut, Jio has more or less halved the price of its 4G data in a matter of three weeks.
The latest cut is also meant to send a clear signal to Bharti Airtel to stop trying to match Jio’s offers.
The discounts and price cuts are especially harmful for legacy companies like Bharti Airtel, Vodafone and Idea Cellular as they operate using less efficient, older networks that cost more to run.
While Jio can still hope to break even at current data prices, its rivals have almost no hope of avoiding losses at these prices. Airtel recently called current data prices ‘clearly unsustainable’.
At the same time, Bharti Airtel — as the market leader — was loath to let the Mukesh Ambani company continue to position itself as the most cost-effective provider of 4G services.
Contributing to the nervousness felt by honchos at Bharti Airtel has been the seemingly untiring subscriber additions at the new operator.
Jio’s growth pattern has outperformed even the wildest assumptions of most industry veterans.
Speaking in October 2016, shortly after Jio started giving away free connections, Bharti Airtel CEO Gopal Vittal had said that he expected the newcomer’s subscriber additions to slow after hitting about 40 mln subscribers by the end of 2016.
“They are still adding at the rate of maybe 400,000, 300,000 to 500,000 a day, which means that by December you could potentia
lly see 40 million customers in that ballpark. And after that there could be some slowdown because of the sheer absolute number of 4G devices in India,” Vittal had said.
However Jio has continued to report multi-million subscriber additions every month through 2017 and has remained the No.1 in this regard since it started reporting subscriber numbers.
In December 2017, it added a whopping 8 mln users to take its total subscriber base or connections to 160 mln.