Free voice with data could be it, Trai IUC also critical.
On the face of things, telecom major Bharti Airtel’s new myPlan Infinity is merely repositioning its earlier Infinity plan where, for Rs 1,999, it offered unlimited local calls with free STD and roaming along with 7 GB of data and unlimited music on Wynk and movies on Eros/Hooq. Since that didn’t get too many takers, Airtel is now offering a base Rs 1,199 plan with the same facilities but 1 GB of data; the new Rs 1,999 plan offers 10GB of data. It is difficult to know whether that is value accretive or destructive since data on how many subscribers each telco has in each revenue segment is not public. Broadly speaking, since Airtel gets around 20% of its revenues from the post-paid segment that accounts for around 6% of subscribers, it gets a monthly revenue of Rs 750-800 from each one of them. If a big share moves to even the basic Rs 1,199 plan, that’s value accretion—if a big share moves down from higher bills today to Rs 1,199, it could be value destructive.
It is difficult to predict if this will catch on—per second pulse billing seemed a gimmick a few years ago when newcomers introduced it, but that is the norm today. From an industry point of view, the more customers there are on fixed-billing plans, the better. Higher data speeds of networks has made it possible to do more internet calling—such as on WhatsApp—and this will only get better. So, if the share of voice calls falls over the medium term, it is important to lock in as many customers as possible on fixed-tariff plans. If customers can be lured on the promise of unlimited voice calls, this may even improve the amount spent on data as, with good data speeds and free music/movies, data usage could also increase. Right now, though, data growth is slowing—for Bharti Airtel, while the number of broadband customers was rising sequentially by over 22% in the June 2014 quarter, this fell to under 15% in the March 2016 quarter; growth in MBs consumed on the entire network nearly halved from 18.3% to 9.6%.
Airtel’s move is also tactical since, with RJio expected to launch this year, this robs it of the first-mover advantage of offering free voice calls bundled with data. If RJio has to better the offer, it will increase its cash-bleed—of course, with deep pockets, Reliance’s capacity to bleed is very high. What is critical here is what Trai, the regulator, does on internet usage charge (IUC). While RJio can afford to offer unlimited voice calls since its network is empty, the current IUC regime means it will have to pay 14 paise per minute to the operator to whose network the call is made. Trai, however, has just come out with a consultation paper on reducing the IUC—it came out with one in June as well on internet telephony which also talked of zero IUC—and it remains to be seen how that plays out. What is odd is that while the current IUC regime came into being just a year ago—and the telcos are in court arguing the rates are below-cost—Trai is already planning a new one. As with the dispute over net neutrality and OTT players like WhatsApp, the issue will boil down to why telcos will invest lakhs of crores on building out networks if other players are allowed to use them for free. Expect this battle to sharpen over the next few months.