Bharti Airtel Ltd. (Mumbai: BHARTIARTL), India's biggest operator, has clearly made its latest pricing move in anticipation of the imminent arrival of new entrant Reliance Jio in the 4G market on August 15, India's Independence Day. RJio has already launched services for employees of parent company Reliance Industries Ltd. (RIL) , plus family and friends, and is providing bundled services with Samsung devices and gadgets sold under its own Lyf brand. It is also offering free voice calls to customers as part of that trial.
Airtel evidently hopes to dissuade customers from defecting to its new rival. Keen to shore up its services, it has also recently added to its spectrum holdings by acquiring frequency licenses from Videocon Telecommunications Ltd. and Aircel Ltd. .
It is not the only operator to have cut tariffs. Idea Cellular Ltd. , India's third-biggest mobile operator, recently announced massive reductions to its 3G and 4G mobile Internet rates to ward off the RJio threat. "Idea Cellular has now slashed the rates of its 4G, 3G BIG Internet packs by up to 67%, providing more value to heavy Internet users who consume data packs of 2GB to 10GB," said the company in a press statement.
The rivalry between the incumbents and RJio is unlikely to end anytime soon. In a sign of ongoing wrangling, RJio has written to the Department of Telecommunications complaining that incumbent operators have not been providing enough interconnect bandwidth.
While the tariff war itself might please consumers, and even improve mobile broadband penetration, it seems unlikely to benefit service providers. Telcos are already struggling with narrow margins and further pricing reductions will add to the pressure on profitability at a difficult time, with a major spectrum auction scheduled for next month.
There is some cause for concern, however. Several years ago, Tata Teleservices Ltd. launched a one-paisa-per-second scheme when it switching on its GSM network. Other telcos were forced to offer similar tariffs, but doing so drove the entire industry into debt. Borrowings stood at INR3.8 trillion ($56.3 billion) at the end of December 2015, according to the Telecom Regulatory Authority of India (TRAI) . (See India Preps for Mega Spectrum Auction in September.)
— Gagandeep Kaur, contributing editor, special to Light Reading