That the market for non-unlimited mobile plans is over is best proven by the admission of Idea Cellular, which tried it in the April-June quarter but did not succeed, leading to erosion of average revenue per user (Arpu) during the period.
With the arrival of Reliance Jio, mobile tariffs have gone the unlimited way — pay a specific amount and get a fixed amount of data per day and free voice calls with a validity of one month. During the quarter, Idea tried non-unlimited plans, which means that for a specific amount you get limited free voice calls and limited data, but the specific amount you pay would be lower than unlimited plan charge. With Idea having a huge 2G subscriber base, it thought the plan would work if discounts were offered, but it did not.
Idea Cellular managing director Himanshu Kapania told analysts that the company wanted to try the new strategy of balancing unlimited plans as it wanted to see whether non-unlimited plans as a category can be retained by offering aggressive offers to them. As part of the plan, the company tried to retain subscribers who prefer the non-unlimited plans by offering them discounted voice and data tariffs. However, despite a significant portion of customers taking these plans, it ended up in an overall Arpu decline rather than increase, he said.
In a candid admission, Kapania said this was the “worst experiment” that the company carried out. “We had hoped that this Arpu will increase by the benefit of volume increase, (but) the volume did not compensate for this. So it’s a learning for us in one quarter… and it is very clear that given that the strong demand for unlimited plan, other strategies — short-term strategies of giving aggressive STDs or minute bundle doesn’t stand a chance”.
To be sure, Idea has been bruised badly on the Arpu front, which declined to the industry’s lowest at Rs 100, from Rs 105 in the preceding quarter, and the fall is much more when compared with a year ago’s levels of Rs 141.
However, Kapania added that the unlimited bundled plans have now become a new norm with an estimated 450 million customers out of the 1 billion people as at the end of June 2018 choosing such offerings.
“Growing popularity of these plans is expected to result in even higher adoption rates amongst Indian mobile subscribers in the forthcoming quarters from the current penetration mark of nearly 40%,” he said.
In January 2018, the prices of monthly unlimited voice plans bundled with data at a higher level of 1.4 to 2 gigabytes a day were revised downward to Rs 165 or lower from earlier higher levels of Rs 300 for the first 28 days net of taxes in April 2017.
Kapania said that then starting February 2018, there was a mass promotion of unlimited voice bundled plans at Rs 49 with subsidised 4G feature phone and introduction of mass market Rs 99 unlimited voice bundles and Rs 149 unlimited voice offerings, with a 1.5 gigabytes-per-day data plan.
He highlighted that adoption of bundled plans by the high Arpu subscribers have led to a Rs 75 year-on-year decline in Arpu for them. As there has not been a lot of adoption for the same by the low Arpu subscribers, industry revenues have seen a significant decline, he observed.
Analysts said that Idea, which was already in a tough spot, is seeing the going getting tougher. The Q1FY19 was the first quarter since Jio’s launch where Idea’s operating trends weakened a lot more than Bharti, analysts at Kotak Institutional Equities noted in a recent report. “Hope-based survive-till-market-improves mindset is a risky one…and we don’t like it,” they observed.
For instance, Idea’s data traffic at 9,92,000 million Mbs is less than half of Bharti’s 21,50,645 million Mbs reported during the quarter. The Arpu at `100 is lower than Bharti’s `105. On total voice traffic too, Idea is the lowest in the pack with 349,500 million minutes reported in the April-June 2018 period, while Bharti leads with 684,191 million minutes.
“Relative under-investment in networks and reluctance (forced by the balance sheet, perhaps) to match the market-best pricing on a broad basis were bound to start reflecting in weak subscriber and usage metrics at some point. 1QFY19 may have marked the beginning,” analysts at KIE wrote.