Beleaguered Integrated Telecom company, Reliance Communications’ has raised its headline voice tariff by ~6.7% to 1.6 paise/ sec (vs 1.5 paise/ sec currently). It is also increasing tariffs on discounted plans by up to 20%. eg.1) Reduced 100 mins of STD to 80 mins of STD on Rs45 voucher; 2) talk time reduced to 400 mins from 500 mins on Rs 148 voucher; 3) talk time reduced to 2,500 mins of on-net from 3,000 mins on Rs 259 voucher.
Incumbent Operators Keep the Indirect Onslaught on Consumers
Though incumbent operators have not changed the headline tariffs so far, they continue to reduce benefits on discounted vouchers. Airtel has recently tweaked few discounted plans (eg. Earlier Rs 46 voucher used to reduce call rates to 45 paise/ min v/s 50 paise/ min now). Given that realized rates for incumbent operators (Idea and Bharti) are still significantly below headline tariffs (~37 paise / min of realization vs headline tariff of ~75-90 paise), we believe there is still sufficient headroom to increase ARPMs.
Bridge the 2G vs 3G Internet Data Services Gap
Airtel reduced its validity of 500MB 2G speed data pack @ Rs125 from 28 days to 21 days. This is inline with operators’ strategy to bridge the gap between 2G and 3G data tariffs and in turn shift data customers to 3G. Migration to 3G will lead to better realizations, efficient spectrum management and benefits from increase in usage. We believe the pick-up in data / 3G over the next 3-5 years will be one of the key drivers of revenue and margins of incumbent operators.
These emerging trends (consolidation, growth in data, potential tariff hikes etc) will benefit Idea Cellular and Airtel in the medium to long term.