Voice becomes free in new data-centric model
It is early days, but market-leader Bharti Airtel has completely changed the telecom paradigm, at least at the upper end of the market. While launching its 4G services in 296 cities across 14 circles at least a few months ahead of Reliance Industries’ Jio steals Reliance’s thunder, the move goes beyond that. What it does is to junk, at the top end of the market, the famous minute-factory model where the emphasis is to churn out as many minutes as possible to customers. Under the new model, to be expected given how data ARPUs have risen—data revenues now comprise 19.2% of Bharti Airtel’s revenues—the telco is now offering free voice minutes bundled with data packages above a certain value, much like what is done in mature markets like the US. The new emphasis is to concentrate on getting higher per-customer revenues. While Bharti Airtel’s average voice ARPU is Rs 151, the Rs 999 infinity plan offers 3GB of data bundled with unlimited voice calls, albeit on an Airtel-to-Airtel network. The Rs 1,499 plan which comes with 5GB of data, removes the restriction on calling Airtel networks and, as you go higher up the price chain, even STD and roaming is bundled in for free. It is difficult to know how this will impact profits, but local voice calls account for 56% of an operator’s revenues today while STD accounts for another 18%. And since entertainment is going to be core part of RJio’s offering, Airtel has also bundled a lot of entertainment through its Wynk services. At some point, Airtel will have to look at offering all the programmes it is offering on its DTH platform—how soon depends on how much customers are willing to pay for the exclusive content.
While Airtel has no plans to offer bundled plans for 2G/3G services as of now, a lot will depend upon how the market takes to the service. With Jio expected to roll out by December, other telcos will follow suit—Vodafone’s Mumbai head has announced that its 4G services would be available in that city by the end of the year. As in the case of 3G services some years ago, telcos cannot be caught without such services as their top-end customers are likely to migrate if they don’t. The speed at which bundled-data packages will be offered will also depend upon the price at which 4G-enabled smart phones are made available at reasonable prices. While such phones cost around R25,000 a year ago, they are now retailing at around Rs 6,000-7,000—while 5 million 4G handsets are likely to be shipped this quarter, the number is estimated to rise to 50 million in the next 12-15 months.
As such bundled offers rise, the net neutrality debate which was largely focused around using cheap VoIP calls using apps like WhatsApp and Viber becomes irrelevant since voice calls will now be free. Whether the move will help the industry get out of the hole it is in, of course, is uncertain. With spectrum in India costing even more than it does in the US, and Indian ARPUs less than a twentieth, a lot will depend on what prices future spectrum will have to be bought and how soon the consolidation in the industry will happen. At current voice/data rates, the industry is going to continue to bleed.