UPDATE: Vodafone Essar, BSNL Launch Low Tariff Bill Plans
16 October 2009 - 8:16PM
Dow Jones News
Vodafone Group PLC's (VOD) Indian unit said Friday it has
launched a plan to offer some calls at as low as INR0.20 a minute,
while state-run Bharat Sanchar Nigam Ltd. introduced plans at
INR0.50 a minute, further heating up a tariff war in a country that
already has the lowest rates in the world.
While Vodafone Essar Ltd.'s plan is for southern Andhra Pradesh,
BSNL's rates apply to all local and long-distance calls to any
telecom network within the country, under the India Golden 50
plan.
Mobile phone tariffs in India are on average less than INR1 a
minute for local calls and about INR1.50 a minute for national
long-distance calls.
Existing operators are cutting tariffs to gain or maintain
market share as at least four new companies - including Etisalat DB
Telecom Pvt. Ltd. and Unitech Wireless Ltd. - are gearing up to
start mobile phone services in the world's fastest growing telecom
market by subscriber additions.
The new plans by Vodafone Essar, India's third-largest mobile
phone company by subscribers, and BSNL, the fourth largest, come
within days of smaller rival Idea Cellular Ltd.'s (532822.BY)
launch of a plan that will charge its mobile phone users in Mumbai
INR0.40 a minute for local calls.
Idea had followed an offer earlier this month by Reliance
Communications Ltd. (532712.BY), India's second-largest mobile
phone company, which offered a flat rate of INR0.50 for all calls
and text messages.
In mid-September, Bharti Airtel Ltd.(532454.BY), India's largest
mobile phone company by users, also offered calls at INR0.50 per
min for local or long-distance calls on its own network.
In separate reports released earlier in the day, both Credit
Suisse and Macquarie Research said Bharti Airtel has further
lowered in the Mumbai service area.
"We expect such or similar schemes (by Bharti) to be launched in
different shapes and sizes shortly in all the other circles as
well," Macquarie said.
Bharti officials didn't immediately respond to queries.
Macquarie doesn't expect these offers to lead to a sharp spike
in user additions, but expects average revenue per user - a key
operational parameter - to continue to be under pressure.
"We should see a significant decline (of more than 600 basis
points) in margins for these companies and possibly a negative
EPS/EBITDA growth before they pass this phase," Credit Suisse
said.
In other call-rate related moves, Vodafone-Essar said Friday it
is testing a per-second billing plan in the Madhya Pradesh telecom
service area, and BSNL said it started offering per-second billing
from Oct. 15 for basic pre-paid users across all its telecom
service areas.
Earlier in October, the country's telecom regulator had said it
was considering making it mandatory for operators to offer a
per-second billing plan along with other schemes, which analysts
said may hurt revenues already facing intense competition from new
and incumbent companies.
Most mobile phone operators in India currently only offer
per-minute billing plans, which means they charge subscribers for a
full minute even if the call lasts for less than 60 seconds.
Per-second billing was triggered by the entry of Tata DoCoMo
Ltd., a joint venture between India's Tata Teleservices Ltd., and
Japan's NTT DoCoMo Inc. (DCM), which started offering such a
billing plan in June.
-By R Jai Krishna, Dow Jones Newswires; +91-11-4356-3333;
krishna.jai@dowjones.com