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Uninor takes telecom tariff war to the next level

Uninor takes telecom tariff war to the next level
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First Published: Fri, Apr 30 2010. 09 04 PM IST

Entry strategy: Pricing models such as that of Uninor’s could help new entrants but may not be sustainable in the long term, say analysts. Ramesh Pathania/Mint
Entry strategy: Pricing models such as that of Uninor’s could help new entrants but may not be sustainable in the long term, say analysts. Ramesh Pathania/Mint
Updated: Fri, Apr 30 2010. 09 04 PM IST
Mumbai: Taking the cellular tariff war to a new high, entrant Unitech Wireless Pvt. Ltd (Uninor) on Friday unveiled a pricing model that offers call rates as low as 20 paise per minute based on real-time network congestion levels.
The lowest rate so far, offered by two other new service providers, is 30 paise per minute.
Aggressive pricing was introduced by operators such as Tata Teleservices (Maharashtra) Ltd when they launched per-second billing and one-paise-per-second call rates. Other operators adopted these models and some lowered the rates even further.
There are 14 mobile service providers in India.
Entry strategy: Pricing models such as that of Uninor’s could help new entrants but may not be sustainable in the long term, say analysts. Ramesh Pathania/Mint
Uninor is initially launching its discount-pricing model in Andhra Pradesh, Tamil Nadu and Karnataka, and plans to extend it to other circles later.
The firm, which launched services in December, operates in eight of India’s 22 telecom circles and owns licences for the remaining ones. It has a subscriber base of 4.3 million, compared with India’s total mobile subscriber base of 584 million.
In Uninor’s pricing model, discounts on a call can go from 5% to 60%, at which level the effective call rate would be 20 paise per minute on a base rate of 50 paise per minute.
Branded as “24X7 Badalta Discount Plan,” the discount will in effect depend on location and time. Individual cellphone towers will broadcast different discounts in real time based on call traffic volumes. Discounts available at any given time will be visible on handset screens displaying the broadcast.
Telecom analyst Harit Shah at Karvy Stock Broking Ltd said pricing models such as that of Uninor’s would likely help new entrants get subscribers but may not be sustainable in the long term, especially if larger players decide to follow.
“While it is a bold move to gain subscribers, especially for a new entrant with (a) relatively small subscriber base, it is also a risky one in that the larger players can easily price out the smaller and relatively newer players,” Shah said. “Given the scale that larger players have, they can afford to play the tariff game longer, thus making survival difficult for smaller players.”
But the larger players too have been strained by the competition. On Thursday, India’s largest telecom firm, Bharti Airtel Ltd, posted an 8% drop in profit for the three months ended 31 March because of the tariff war—its second consecutive quarterly decline.
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First Published: Fri, Apr 30 2010. 09 04 PM IST