Why RCom’s 3G Price Cut will Create Pressure on Incumbents : Our Take

In a surprising move Reliance Communications, country’s one of the largest telecommunications company has reduced the 3G data tariff lower than their 2G packs. The new 3G data packs from Reliance Communications are available for Rs 123 for 1 GB, Rs 246 for 2 GB and Rs 492 for 4 GB and available for smartphone and tablet users only.

This move will push Reliance in a better place in the market where 3G got lukewarm response. The big question is: Does RCom start a tariff war on data front?Reliance Mobile Launches Talk STD and Talk LOCAL Prepaid Plans

If you are following Indian telecom for last few months, operators are hiking voice and text tariff but the data offering is showing cut on the tariff. Airtel, Vodafone, Idea, Tata Docomo has slashed the Pay-As-You-Go data tariffs. Airtel revised their 4G plans – they are now cheaper than Airtel’s 3G plans.

Though many experts are saying Reliance’s move may not create pressure on incumbents, I like to say different. First of all Reliance has 3G presence in 3 metros – Delhi, Mumbai and Kolkata where 3G adoption will be higher than other places. Secondly RCom has 3G presence in some low ARPU circles including Assam, North East, Bihar, Orissa, Himachal Pradesh, West Bengal and Madhya Pradesh where 3G is to be pushed to break the price barrier.

One thing goes against RCom, that’s they have few no. of 3G BTS compared to Airtel, Vodafone and Idea, who work as cartel to share the BTS to cut down the cost. But with money from the deals with Reliance Jio, Rcom can deploy more 3G BTS in circles where the demand is high with this newly launched plans.

Airtel responsed immediately, and now offering 1GB data for Rs 124, but with a catch that this plan is available for once in a mobile number. Basically Airtel is looking for the market feedback. In coming days I will not be surprised to see similar plans from Vodafone, Idea and Tata Docomo have been launched.

With the continuous revision (read, reduction) of 3G/HSPA data pricing, I think CDMA operators are in a great threat. Though Reliance and Tata has quite good high speed EVDO plans for mobile users, MTS fails to lure me with their HSD data plans. Currently RCom is offering 1.5GB data (or 2GB in certain circles) with SMS benefits for just Rs 94; while Tata Docomo CDMA has cheapest high speed plan 4.5GB for Rs 95. MTS is going against the tide – they don’t allow HSD data access unless you are buying a smartphone from them. You simply can’t use your imported smartphone with MTS to get HSD data. Also HSD data plans from MTS are way costly and often confusing with so many plans.

From the very first I am saying about low cost, affordable plans which would ultimately help to consume more data by the customers and therefore the profitability of the companies will be increased. RCom has finally learnt the lesson. But it would be nice if they come up with unlimited plans like Aircel, say 1GB 3G+ UL 2G at 128kbps for Rs 150. I am looking forward to Aircel’s moves unless Reliance withdraws these plans out of sudden, just like they brought them.

This Article Was Written By: Rudradeep Biswas

Rudradeep Biswas - Senior Telecom Analyst

The happy guy RDB (stands for Rudradeep Biswas) has been writing for Telecomtalk since 2009, covering mobile operators, 3G, broadband, WiFi, 4G, LTE, telecom policies and what-not related to Indian telecom. He is by profession a doctor, did his MBBS from R.G.Kar Medical College, Kolkata.

{ 36 comments… add one }

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  • harbhajan July 31, 2013 1:20 pm, 1:20 PM

    If other companies will not soon reduce 3G rates they will watch their customers moving to Reliance.

    Reply
  • Sudar July 28, 2013 2:54 pm, 2:54 PM

    Very good and attractive move and packs by reliance are wonderful hope airtel follow the same where they are very very costly 3G providers alone with Vodafone, Idea etc…

    Reply
  • Mukul Jain July 26, 2013 1:17 pm, 1:17 PM

    Reliance Communications has started converting non 3G users into 3G users….
    Voda and Airtel can’t counter as their stake on Mobile Internet is very high…
    It really makes sense for the user to move to Reliance in that scenario….

    Reply
  • Souradip July 22, 2013 7:55 pm, 7:55 PM

    Ha same happened with me got 3g speed for a month or 2 after that i got 2g speed and the connection for net is not sucessful many a times i.e it’s fail to connect to net many a time and some time the net speed suddenly goes 0kbps infact no speed on reporting it to coustumer care there is no response

    Reply
  • Abijit Dhir Deo July 22, 2013 7:38 pm, 7:38 PM

    Rudradeep has pointed out some points of importance here. The price cut move by RCom would definitely make some dent in the market. But, the point is how long they can sustain that. Because, RCom is not at all a customer centric or friendly operator. How they managed to get ET Best Trusted Brand is a matter of controversy / investigation. Their 3G BTS presence is pathetic, what ever they may claim in advertisements or in various media briefings. Again, I personally use a 3G connection which is quite horrible in terms of speed, connectivity, signal strength. Then the price reduction may bring a customer to their fold, but can’t sustain. Airtel in comparison to that is quite better placed. The only benefit different telecos are going to get from the fact is all don’t have 3G license in every circle. But, that dream run may last long, as 4G is coming.

    Reply
  • Prithvi July 22, 2013 4:32 pm, 4:32 PM

    Try to introduce affordable UL plans with FUP ideally not less than 128kbps (and not 40 = paltry 5 Kilobytes on a good day).

    Reply
  • sakthi July 22, 2013 10:11 am, 10:11 AM

    Reliance give 1GB (2g) data at 125 rupees and 1GB(3g) data at 123 rupees, this shows 2g is more valuable than 3g or 2g is better than 3g.

    Reply
  • Sathish, Gobichettipalayam July 22, 2013 12:58 am, 12:58 AM

    For customers , This is one of the unexpected 3G data offer! With this move, there is more chances to taste the 3G SPEED for first time 3G users. Its a long term strategy. Anyway Lets we enjoy with this great offer! Finally its looks like a Trial pack, atleast for some time. . . . For 3G operators and markets, with this move there is nothing extra loss to operators, because all 3G operators are already made one time investment as bulk amount in 3G BTS and infrastructure, which is all come under fixed cost for them. Till now only 5% of mobile users are using 3G Service. Rest of them still in 2G service in india. currently average 3G BTS utilization is come around 20% to 35%. With this move, Operators will get some extra revenues from using their unused 3G BTS capacity. Already 3G Operators has started to using their all 3G BTS for its 2G voice calls (because of more availability without usage). In India, 3G adoption is very slow because of more than 80% of indians come under middle income or low income category it leads to more price sensitive. Apart from this heavy licence fee it leads to the costly 3G services along with smart and 3G phone is not reached like 2G phone. Before Tata Docomo had pioneered the per second tariff, For this time reliance make 3G data penetration takes into next level. But worrying factor is non availability localised applications, quality content and poor 3G coverage across india. This time operators looking more revenue from data. Atleast 10,000 cr investment is need of the hour for indian telecom industry.

    Reply
  • chandra July 21, 2013 7:48 pm, 7:48 PM

    Who needs these offers when you can get 3G speed in BSNL with GPRS packs. I recharged my BSNL 2G sim with a GPRS pack of Rs.219 which gives 8GB( 4GB Day + 4GB Night[11pm to 7 am] ) for 30 Days. Then when i started to surf the internet using my data card( Beetel BG-64 Modem ) i was amazed to see that i was getting average speed of 3 Mbps . It has been 15 days since i recharged that pack and i’m still getting the same 3G speed.:)

    Reply
    • aks July 21, 2013 10:23 pm, 10:23 PM

      Which Circle BSNL Sim are you using? Are you using Kolkata/West Bengal BSNL SIM ?

      Reply
      • chandra July 22, 2013 11:30 am, 11:30 AM

        I’m using WB circle BSNL sim.

        Reply
        • Ashok July 22, 2013 1:03 pm, 1:03 PM

          :D wait for the next month..they gonna cap ur speed..i also got around 3mbps all-time when i purchased new bsnl sim,but after 1 month i cant get that speed again :(

          Reply
          • chandra July 23, 2013 10:44 am, 10:44 AM

            That is why i will recharge another Rs.219 pack before the previous pack ends.

            Reply
        • aks July 23, 2013 7:00 pm, 7:00 PM

          Thanks man……. I tried this on BSNL West Bengal Number and it works.

          Reply
    • Nitin July 22, 2013 12:46 am, 12:46 AM

      It’s just a technical glitch. One of my friends told me that but when I recharged my mobile with 98 for a GB, I did not get 3G speed. It decreased to 2G after some hours.

      Reply
      • CHAITANYA DAS, KRISHNANAGAR , WEST BENGAL July 23, 2013 6:38 pm, 6:38 PM

        Which sim are you using for BSNL 2g sim or 3g sim?
        THEY give the 2g sim and the 3g sim, the price is also different and FRC is also different. And if you use the 2g sim then it may not catch the HSPA (WCDMA) net work.

        Reply
  • Gavin Mathos July 21, 2013 5:17 pm, 5:17 PM

    For Reliance 3G Speed at 2G Prices log on to the Website rcom.co.in/Rcom/personal/3G/HTML/3G-2G.html

    Reply
  • h rajpoot July 21, 2013 12:06 pm, 12:06 PM

    mts ceo says that they want to increase their data users!!!!!!!!!…….but their ridiculus plan (eg 500 mb at 193)won’t let them to do so…….veryy cheap operator for calls ………..but verrrry costly operator in terms of mobile net

    Reply
  • Anil July 21, 2013 11:56 am, 11:56 AM

    It’s a long term decision because they are marketing it very aggressively. They’ve simply doubled the data offerings. You guys are making a mountain out of a mole. Reliance already has the bandwidth to give more data but do not expect the same from vodafone or idea. Both aircel and airtel run a side broadband internet business so they can give more data in those areas where they have wired broadband business.

    Reply
  • Saurabh July 21, 2013 11:22 am, 11:22 AM

    I’ve already said that this move will not help Reliance or any other company who reduces it to get more revenues as their revenues from 2G in 3G areas will not come and that will balance the revenues to where it were. Take an example: A user before this plan was using 2G plan for Rs.125-1GB. Now if s/he has 3G in their area, they will shift to it by paying Rs.123. So it will lesser the revenue by Rs.2.

    I’m using Airtel’s 125-1GB plan these days and also getting extra benefit of Rs.125 as core talktime. If Airtel also brings a permanent plan @Rs.124 with 1GB 3G, they will stop getting the revenues they are having from me for 2G and get Rs.1 less. Also I won’t go for it if I’m getting that extra benefit of talktime in 2G plan. So it won’t change the situation much.

    Any price cut in 3G will halt revenues from 2G as there will be a user shift. This is the dilemma companies are in since they launched 3G. If they price 3G near to 2G their revenues from 2G will be stopped as a user won’t go for 2G as well as 3G at the same time. Looking at this Aircel and Airtel too launched 2G+3G in a single plans but Aircel ones was better. Nothing like that was seen from others.

    From the consumer perspective it has been said that with price cut more consumers will come but there is always a user shift and nothing else. Those who were using 2G will shift to 3G. It can be beneficial if someone was not using 2G and start using 3G i.e as a new mobile Internet user.

    So it would be better if they emphasize more on 3G+2G plan instead of bringing 3G prices equal or lesser to 2G. For e.g- 1.5GB 3G + 1.5GB 2G @Rs.200/month or 2GB 3G +2GB 2G at Rs.250 instead. An uptake in 3G will bring down-take in 2G.

    As a consumer I will applaud this thing but as an analyst I would call it the worst decision taken by Reliance that can only sink their revenues more. Another option for them is price 2G @Rs.98/99 for 2-3GB data and then see how the consumer and the market reacts to it.

    I hope AVoID won’t do such kind of stupid things as done by Reliance. The telecom sector needs strict decision at this point of time than the price war.

    Reply
    • Shuvam July 21, 2013 1:50 pm, 1:50 PM

      Hey saurabh! You somewhere made your point. You are right. With labelling 2G price with 3G their will be a shift and they will loose the 2G revenue. But, here’s the twist! How many times were you able to finish your 2G data allowance within the validity period? I guess only during the vacations! But with 3G, 1GB is a matter of minutes. A customer who has long awaited to watch movies without buffering will live to his hearts extent! There’s whr RCom will make money doubling or sometimes tripling its revenues in a month coz a Customer will recharge once the free allowance gets over even if the validty remains and 3G is real fast to finish off 1GB. Hope you got my point!

      Reply
      • Saurabh July 21, 2013 7:56 pm, 7:56 PM

        I understand the points you made but I’m taking in the data ARPUs which suggests that average spending on Internet by a mobile data user is less than Rs.150/month. There are users who are spending over 500 a month and there are who uses 1 day or 3 day packs in a month and average revenue is too low. So do you think they will start spending more than Rs.150 if they get more data. Not at all. They have a budget set and they won’t go beyond that.

        I’ve seen many users on TT who says that they will use 3G only when prices will come to Rs.100 for 3GB data for a month which suggests that they not gonna spend more than 100 and they will do their work in that 3GB and who are they? They are the ones who currently are active on 2G.

        Price cut will bring in some users but not allow operators to get more money out of it if new users i.e first time users (who buy a new 3G handset and dongle for using data) remain absent.

        One of the commentator Mr. Mukul Jain has stated that 75% of 3G handset owners are not using 3G because of high prices. This 75% are actually 5-10% of the total mobile users who owns a Internet enabled handset and 50% out of it have a basic 3G handset with speed upto 3.6Mbps. Vodafone CEO also said the same that they don’t see adoption picking up as subscribers will not be able to enjoy true experience of 3G as most of the users on their network have a basic 3G handset with low speed capabilities. Most of them don’t even know the difference between UMTS and HSDPA/HSPA/HSPA+ and they buy a basic handset by just looking at 3G in specs. As I said 3G will not pick up until unless subscribers don’t become aware and start spending on hardware.

        Some people feel that if just only data prices come down it will make people to buy new handset but it happens on small scale only. After few days LTE will be out in the market and those people spend now they take another 2-3 years to spend on LTE handset.

        Reply
    • Esmail July 21, 2013 2:01 pm, 2:01 PM

      It is clear from the moves by most Operators possessing 3G licences of hiking 2G data tariffs and lowering 3G data rates, that they are only aiming at a mass adoption of 3G and a drastic drift in usage patterns from 2G to 3G data in a price sensitive market like India can only be brought about this way. Accept it or not, once a person gets the taste of 3G with those instantly loading web pages and the zero buffering in video streaming, going back to 2G data seems near impossible. That is the strategy that Reliance is aiming for. Reducing the basic entry level 3G data pack tariff is only a bait to catch the big cash fish in the long run. As is visible from the 3G market penetration trends and uptake from 2010 to 2013 it has been nothing substantial, and this move is a well thought out one by Reliance. It will tempt people with 3G capable handsets in 3G circles who have been refraining to use 3G due to high tariff to give it a try and then get hooked on.
      The whole excitement created by these entry level 3G packs by Reliance has drawn attention away from what the company has done with the tariffs of existing long duration 3G packs and FUP based unlimited 3G packs for its existing customers behind the scenes. I bet no one has taken the time to go check this aspect which is being hidden under the glitter of these new low priced packs. Those of you who have a my services account with Reliance can check, they have withdrawn the long validity 90 day Rs.1500 and 180 day Rs.3000 plans, the latter used to offer 32.4GB data bringing the per GB cost to lower than 100Rs. also the 5GB unlimited pack has been revised from Rs.800 to 850, 10GB unlimited revised from 1099 to 1399 and 15GB unlimited pack revised from 1300 to 1750. Now do you get what the company is trying and aiming at accomplishing?

      Reply
    • Rudradeep Biswas July 21, 2013 2:24 pm, 2:24 PM

      From my personal experience I often do 2-3 STV95 recharge on my Tata Docomo CDMA no. to get 4.5GB HSD data with each recharge.

      Reply
      • DS July 21, 2013 3:16 pm, 3:16 PM

        will u use that data in mobile or pc…. because in DOCOMO website they told that “Mobile Browsing and mobile tethering benefits will be given to CIMO 1X customers for these packs.” and “Only Mobile Browsing benefits will be given to CIMO 3X/HSIA/EVDO/OMH customers for these packs. ” so please tell me hw u using this…@ rudradeep biswas

        Reply
        • SS July 22, 2013 4:34 pm, 4:34 PM

          use ur tata sim in reliance cdma unlocked modem

          Reply
          • SS July 22, 2013 9:50 pm, 9:50 PM

            he dude, pls note that SS is my name on this site. (Look at the right side of this page in critics/analysts) so you are requested not to comment using my name.

            Telecomtalk- thats really ridiculous why don’t you introduce a username password based system?

            Reply
            • Tarun July 23, 2013 12:09 am, 12:09 AM

              Check ur mail !!!!

              Reply
      • Ankit July 21, 2013 6:47 pm, 6:47 PM

        false you are lying…as far as i know the data balance does not gets added to previous balance.it lapses with new recharge.Please clear

        Reply
        • Saurabh July 21, 2013 7:25 pm, 7:25 PM

          He’s not lying. He actually meant that whenever he finishes off 4.5GB, he recharges again. 2-3 times doesn’t mean 2-3 recharges on same day. :P

          Reply
    • Mukul Jain July 21, 2013 3:28 pm, 3:28 PM

      Your comments reflect, limited knowledge on the usage pattern of Industry. 75% of 3G Mobile device owners don’t use it for 3G data as they found 3G prices prohitive enough not to use 3G.
      the situation was like buying Ferrari and using is only for commuting to the workplace to save fuel cost.
      This move should start a revolution in data usage in India and will be a very big factor in increasing the sale of 3G devices in India.

      Reply
      • Saurabh July 21, 2013 7:24 pm, 7:24 PM

        You misunderstood my comment. What I’m trying to say is until now 3G prices were high and i.e why users were not showing much interest and were happy to spend 100-200 odd bucks on 2G. Now prices are equal or even lesser compared to 2G but at the same time operator can’t make more money out of it. They will earn at one end and lose at other. Don’t take my comment as a user perspective. I;m not talking as a user here. As far as 3G handset sales are concerned, when 2G data prices hit rock bottom in 2009-10, it did made a difference but not the one which brought joy to companies. Telcos have 90% of their users on voice and rest 10% on data which are also not regular users. Vodafone CEO recently commented that we have only 5-7% revenues from data (Mobile Internet 2G/3G) and voice is still a big revenue generator for them then why should they invest more on data at a time when the adoption is not increasing at an expected rate? Data market will take another 5 years to touch 30-40% of the revenue to a telco. He also cleared that data ARPU from users is at Rs.90 in 2G areas and Rs.120 in 3G areas i.e 3G users are not regular at all and they still prefer to use 2G because of less price. They have already invested in 2G and still awaiting break-even. Spending on 3G infra and reducing prices will hit the company so badly that it will be difficult for them to even survive.

        We have already witnessed that how cheap tariff due to price wars had affected companies. Some of them like Aircel, Tata scaled down operations. Some exited the market. Another tariff war will just make them to exit.

        I’ve already stated that revenue from one service will halt revenue from other and only consumer will be benefited. Actual win-win situation will arise when companies will start getting new data users (not the one who shift from 2G to 3G) at a good rate. For that there is a need of awareness and patience as it will take time. If doesn’t mean if you and me are using Mobile data or dongles for Internet then everyone else also using it.

        In past TRAI reported that only 3.26 crore users were using Internet using Mobile phones and dongles which is not even 5% of the total mobile subscribers. I even doubt this as they take unique users of different operators. I’ve 7 SIMs of different companies and they count me as 7 customers using data. So real figures are even less.

        So I don’t know what kind of market reading and knowledge you are talking about here. As far as revolution is concerned, when first wave brought only <5% users, don't expect second wave to bring in 30, 40 or 50%. First read than understand and than make a comment.

        Reply
    • Idrees July 22, 2013 1:39 pm, 1:39 PM

      don’t forget the speed will be more in 3g plan so the data will consume more rapidly as compared to 2g so if thinkn litrely,3g will bring them more revnues bcoz a user may endup using 3g plan twice as compared to 2g

      Reply
  • SS July 21, 2013 11:08 am, 11:08 AM

    This company is well known for its policy of withdrawing plans immediately which i hope so company would not do in this respect.

    Well, there seems to be a problem in airtel billing system for internet as the company has washed of my entire balance even when my data pack was active. But good part of it is that they refunded all my balance. :-)

    Reply
  • saiesh July 21, 2013 10:34 am, 10:34 AM

    Mr. Rudradeep Biswas, I guess reliance has not learnt any lesson but will teach customer lesson later as they do always by withdrawing their plans

    Reply
    • Harsh July 22, 2013 7:51 pm, 7:51 PM

      Saurabh you forgot 1 thing and that is MNP.
      3G rates have not been dropped keeping reliance existing customers in mind, it is intended at acquaring new customers.
      New customers will bring extra revenue to company which otherwise may have not joined Rcom.
      Now talking abt competetion.. every circle has around 3 to 4 3G players, and 3-4 2G players, now when 3G prices come at par with 2G why whould some1 use 2g, they will shift to 3g, the 3G players might drop their price to compete with Rcom but what abt 2g, how will they offer faster speed, they may cut down their 2g data prices but as an common experience person who once get use to 3g will find it difficult to go back to 2g.
      And 123 is a price point at which most of the customers are ready pay for data, as most of the 2g packs revolve around the same price point, so i guess its a smarter move.
      Voice market is alredy exhausted..with very little scope for addition of new customers, data seems the only way where we have not seen price cuts..and heres the 1st move.
      This may also be to take an upper hand before the Launch of 4G services.

      Reply

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