The telecom sector has been in the limelight now for the past few days, but for investors it has not been the kind of good news that made the sector their darling a few years ago.
First Tata DOCOMO flagged off a price war which was taken further by RCom. And in the meantime, the MTN-Bharti merger fell through.
To tackle competition, RCom has offered a new 50-paise-per-minute tariff plan for local, STD calls, and SMSes to its customers—a move that can deliver monthly savings of 46 per cent to its customers but one that can cause a near 600 basis points dent in its margins. What's more, the increased competition is likely to see revenue growth for operators coming under pressure but customer acquisition seems top of mind now. Inder Bajaj, president of RCom, said the move is expected to increase its customer base.
In an industry already crowded with 12 operators, Trai's new plan on making per-second pulse mandatory for all operators will only add fuel to the competitive fire.
Trai chairman JS Sharma said, it will examine whether we can make it mandatory but there are no questions of making it mandatory for operators to offer tariff only on per-second tariff.
But industry players are putting up a brave front expecting the consultation process with the regulator to yield a more pragmatic policy decision, even as some opine that given the talking habits of Indians the concerns are overstated.
Manoj Kohli, CEO, Bharti Airtel, said, “Fortunately, the Trai has always provided forbearance— India has seen all kinds of methodology of payment - whether its 1sec, 10 sec or 20 sec pulse. We are very clear that the Indian customer does not want to talk fast. It does not want to talk short; it wants to talk long and in a relaxed fashion.”
RCOM's new tariff scheme is seen as a reaction to the aggressive pricing adopted by Tata Docomo and is a sign of the times to come. The stock prices of leading telecom stocks saw a sharp decline of between 8-10 per cent in acknowledgement of this reality.
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