Starting with Delhi, telcos have now extended the 3G price increases to a few more circles (UP-W, Haryana, Punjab). The operators have taken a circle-by-circle approach rather than a pan-India price increase in order to test customer reaction. This is the first instance
of a major price increase in 3G data since its launch. In the context of the preceding discussion, we believe it is too early to get excited about these tariff increases.
One important reason why we believe the tariff structures in India are not quite supportive of rapid scaling up of data market (beyond the affluent subscriber base) is that minimum monthly commitments for 3G data are high.
On the prevailing tariff structure, subscribers need to spend a minimum of Rs100 per month to have 3G subscription (this plan gives 300MB monthly data allowance). On the new tariffs plans post the hike, the minimum monthly commitment required of a subscriber
for 3G service is Rs255 (this gives 650MB of allowance; the old Rs100 plan's validity is now cut down to just 10 days).
Our point here is that in a market where the industry's blended ARPU is just Rs120, it is unlikely that a minimum 3G monthly commitment of Rs255 (more than 2x industry ARPU) will find a large addressable market.
Furthermore, assuming that RJio has any success at all in attracting subscriber and revenue share, the directional amendment to revenue forecasts for incumbents Airtel, IDEA and RCOM will have to be downward; RJio's revenue market share starting point is
currently zero.
