New Delhi: In a sign that the telecom price wars will intensify, India’s largest telecom firm has taken the battle into enemy territory.
Bharti Airtel Ltd on Thursday became the latest operator to bill customers for every second of usage. Under its newly launched Freedom Plan, the firm is offering its prepaid customers a tariff of 1 paise per second on local and intercity calls made to another user on its network and a tariff of 1.20 paise per second for calls made outside its Airtel network.
The move comes even as Bharti faces stiff competition from rivals such as Tata Teleservices Ltd that have signed on users and grown their market share with similar per-second billing offers.
Falling in line: Bharti’s Kohli says while some users would prefer the per-second option, others may want to stay with the per-minute plan. Harikrishna Katragadda / Mint
“The competitive intensity will be there for few quarters. The new operators who have said they were expecting huge losses will expect significantly more losses and at some point they will stop burning any more cash,” said Bharti joint managing director and CEO Manoj Kohli. “Some customer segments would prefer this option while others will still prefer the per-minute billing. We have studied it completely. It is not a short-term offer.”
The announcement, which came on a day when the company announced second quarter results for the current fiscal that were below analyst expectations, was surprising, as earlier during the day the firm had dismissed any plans of matching its competitors’ offers of per-second tariffs.
“We will be competitive, (but) there is no reason why we should always match the lowest common denominator,” said Akhil Gupta, deputy CEO, Bharti Enterprises, during a media briefing on Friday to announce the results. He also added that the ongoing tariff war was not sustainable and would lead to operators with stronger balance sheets emerge stronger while smaller operators would face “irreparable damage.”
Bharti director Rajan Bharti Mittal said on Wednesday that consolidation is inevitable because there are “too many” operators. The price war and one-off factors such as weak rural demand led to the worst profit growth for Bharti in nine consecutive quarters.
Net profit rose 13% to Rs2,320 crore for the September quarter, from Rs2,050 crore for the same period a year ago, but profits fell 8% on a sequential basis. Total revenue grew 9% to Rs9,850 crore ($2.1 billion) over the same period last year while revenues fell almost 1% from the first quarter of the current fiscal year.
“We believe a timely move by Bharti will prevent build of scale by new players and accelerate the consolidation process,” observes Rajiv Sharma, analyst with HSBC Securities and Capital Markets (India) Pvt. Ltd.