Another bout of price-cutting in India

Ruth David
telecomasia.net
Shares of Indian telecom market leader Bharti Airtel fell sharply Monday after Tata DoCoMo launched a pay-per second roaming plan over the weekend, signaling another price war in an industry that already has among the lowest revenues per user in the world.
 
Bharti Airtel, which last week had introduced a new tariff plan that slashed roaming charges by 20%-60%, fell 2.5% to Rs 275.80 on the Bombay Stock Exchange Monday. Shares of Idea Cellular were down 2.9% at Rs 49.35 and Reliance Communications fell 1.0% to Rs 172.05.
 
But investors remained bullish on Tata Teleservices, whose GSM arm Tata DoCoMo has been adding large numbers of subscribers every month because of lower pricing plans. Shares of Tata Tele were up 4.5% on the BSE at Rs 165.50. Other companies are expected to also cut roaming tariffs following the latest move. Tata was the first to introduce pay-per second calls as well.
 
Starting Monday, Tata DoCoMo’s customers are now able to make calls across the country at 1 paisa per second (equivalent to 1.2 US cents a minute), and incoming calls will be charged on a per second basis. The company operates in 19 of India’s 22 telecom circles.
 
Another factor expected to hit the profitability of established players is the move by regulator Trai to introduce mobile number portability on December 31. The feature will first be introduced in metro cities and other key telecom zones and in other areas by March 20.
 
The regulator has instructed operators not to charge users more than Rs 19 (41 cents) for the service. An earlier consultation paper had suggested fees as high as Rs 200. The low tariffs are expected to encourage a larger number of users to switch operators once the number portability is in place.
 
Several analysts have already factored in the impact of portability, and say it is unlikely to topple the present market leaders. “MNP can hurt Bharti if it loses its high-value postpaid customers. 10%-11% of Bharti's high value subscribers contribute 40% to its revenues. However, we do not expect that the propensity to shift of these subscribers increases due to the lower port transaction charge,” Deutsche Bank analysts said in a note to clients Monday.

“The lower charges does [sic] incentivize the prepaid users to shift. However, there is already a phenomenon of multiple SIMs among prepaid users which limits the incremental downside.” 

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