Bharti Airtel, RCom spar over rates as new competition looms

Bharti Airtel, RCom spar over rates as new competition looms
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First Published: Tue, Apr 29 2008. 12 16 AM IST
Updated: Tue, Apr 29 2008. 12 16 AM IST
New Delhi: India’s two biggest mobile phone firms, Bharti Airtel Ltd and Reliance Communications Ltd, or RCom, announced steep rate cuts on long-distance and roaming phone calls in rapid succession on Monday.
The cuts came ahead of what is expected to be a bitter year of tariff wars as new entrants prepare to start operations in the world’s fastest growing market for phone services.
Airtel and RCom aim to boost usage on their networks and gain a bigger market share before aspirants such as Datacom Solutions Ltd and Unitech Ltd offer services by the end of the year.
Barely hours after Bharti Airtel said it was slashing long distance tariffs to Rs1.50 a minute, down 43%, and roaming calls to Re1 a minute from Rs1.75, starting 30 April, closest rival RCom said it would offer free unlimited national long-distance calls for a monthly rent of Rs440 for post-paid and Rs496 for prepaid customers.
Indian mobile phone companies, which bill an average 80 paise per minute for calls, added a record 10.2 million subscribers in March, taking their number to 261 million. In the process, India overtook the US and became the world’s second largest market after China.
Despite falling call rates, profits margins of firms such as Airtel have not been hit because lower rates encourage users to talk more, increasing usage volumes on their networks.
For the March quarter, total minutes of usage at Airtel stood at 105 billion, up 19% from the December quarter, after the company introduced a Re1 flat call rate for all domestic calls. “While average revenue per minute could be headed south because of falling rates, these companies are able to boost call-minute volumes,” said an analyst at a New Delhi brokerage, who asked not to be identified.
The average revenue per user, or Arpu, has been falling 4-5% every quarter, and is currently at around Rs340. “While Bharti reported an Arpu of around Rs357, Idea Cellular’s Arpu is at Rs290,” said Yogesh Kirve, telecom analyst at Anand Rathi Securities Ltd.
Phone users such as New Delhi resident Richa Gupta, a personal financial consultant at a national bank, said falling call rates have reduced her monthly phone bill, even as she bills more minutes.
“Until two-three months ago, my average monthly phone bill was almost Rs2,000. Now it is around Rs800-1,000,” the RCom customer said.
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First Published: Tue, Apr 29 2008. 12 16 AM IST