Aircel’s free calling with data plan not a threat, say rivals

Two of the company's major competitors, who did not wish to be named, told ET that they were not unduly worried over the scheme that was expected to hurt voice-dependent operators such as Bharti AirtelBSE -0.06 %, Vodafone and Idea CellularBSE 1.02 %, particularly in metro cities.

The scheme is just a teaser from the company to attract customers, yielding higher revenue and market share, but it did not imply a lower call rate, said an executive with one of Aircel's rivals. Aircel's chief marketing officer Anupam Vasudevan, however, said that the customers still stood to gain from the scheme. "It is not discounting, it is actually giving the customer extra," Vasudevan said, explaining that the company was targeting higher revenue instead of per second profitability through the plan.

The data offering, which lowers the company's realised rate per minute on its network, is part of a larger promotion of freebees linked to usage that is expected to run for at least six months.

A competitor pointed out that the GSM technology network — used by most major Indian operators — is not suited for data consumption. For voice, companies make Rs 0.35-0.50 per minute while for similar capacity consumption at current data prices the GSM 2G and 3G networks get Rs 0.06-0.07, the competitor said. Gartner's research director, Kamlesh Bhatia, said that a similar offer from an LTE (long-term evolution) or 4G operator would be much more disruptive because its key usage is data and its network would not be clogged by voice consumption. "A plan like this will affect call rates across the industry if rolled out by an LTE player because you (existing GSM players) will lose a chunk of high telephone service users."

Another of Aircel's competitors said RILBSE -0.20 % or any other operator could not viably bring down data prices any further, pointing out that such a ploy had been tried and abandoned in developed markets such as the US and Europe. AT&T, for example, had falling voice rates but rising data prices and amid the transition used one to offset the other. In India, argued one of the competitors, the voice and data prices have already hit rock-bottom.

Besides, Aircel's offer has several caveats. A data user has to spend Rs 10 to get Rs 10 worth of local calling and use the free 10 minutes in a single call within the next day. "We have a similar plan with bundled free minutes along with the rental rather than linking it to the actual usage. Overall cost and revenue per consumer remains the same," said the competitor, who did not wish to be named.

RIL was planning to offer a free voice connection with a data connection on the LTE network that is still to be launched. But that may no longer be necessary, with voice options emerging on LTE and Internet, provided it is approved by the telecom regulator Trai. "The only thing to worry about is RIL saying that it will reduce data prices to a sixth, but even they would know that cannot lead them to profitability," said a competitor.

Telecom operator Aircel's competitors have shrugged off potential threat from its recently-launched plan offering free calling with data usage which was touted as a market transforming scheme that Reliance IndustriesBSE -0.20 % would unveil with its 4G launch.