Bharti Airtel?s move to introduce a prepaid tariff plan may lead other telcom majors such as Vodafone, Idea Cellular and Reliance Communications to follow suit, analysts say. The company recently introduced the Airtel Advantage (AA) plan offering local/national long distance (NLD) calls at 25-66% lower rates. The move, aimed to protect its revenue share, would imply a revenue loss of 2-3% for Bharti by the end of FY10.
According to a report by Anand Rathi, the AA plan would yield average revenue per month (ARPM) of 53.5p, which is 8% lower than Bharti’s first quarter ARPM and 5% lower than third quarter ARPM as estimated by Anand Rathi. However, factors like higher pace of subscriber addition coupled with increased STD on net calls may offset this impact.
Bharti Airtel?s aggression is understandable. The increase in Tata Teleservices’ net subscriber additions for August clearly suggests that incumbents are losing minutes of usage with rapid proliferation of multiple sim-ownership. The combined impact of tariff cuts and lower per second billing would lead to porting away of 10-15% of the sector’s revenues, say analysts.
?Tata-DoCoMo announced its pricing plan in July, which would suggest that Bharti may have seen a shift in usage by its high-end subscribers. We agree with Bharti?s strategy of protecting revenue share and believe its cuts could discourage some of the new entrants from expanding or rolling out their services,” says a recent report by HSBC Securities. The business model of the new entrants is driven by their ability to churn high-end subscribers. “We believe such an aggressive cut in prices is negative for sector-wide sentiment as it is likely to aggravate investor concerns about industry fragmentation,? the report added.