When the going gets tough, the tough lower their prices. The leading players in the mobile prepaid card segment lock horns in a bid to stay 'on the line'
The slow down in the growth rate of additional mobile subscriptions - in both code division multiple access (CDMA) and global system for mobile (GSM) players - in the first half of the year has led to an all out price war in the mobile prepaid card segment.
The main players slugging it out to garner a greater market share as well as ensuring higher growth of the large prepaid segment in cellular phones are Bharti Cellular and Reliance Infocomm. And it won't be long before other players join in the slugfest.
Last month, on August 14, Reliance Infocomm launched its 'Independence Day Special' offer by reducing prepaid tariffs by 40-60 per cent, and therefore doubling the talk time available, compared to other competing prepaid services. Reliance cut its pre-paid tariffs by 60 per cent for calls within its own network (to other Reliance subscribers, both mobile or FWT/FWP) and by 30 per cent for calls to other GSM, CDMA and landline users. The changed tariffs mean that a Reliance to Reliance call will cost 99paise per minute, while calls to other mobiles and landlines will cost Rs1.79 per minute compared to the Rs2.49 per minute to mobiles and Rs2.99 per minute to landlines, charged earlier.
RIM prepaid customers can also roam on new home tariffs across India. When roaming, outgoing calls will be charged at home tariffs of Rs1.79 per min. SMS will be charged at Re1 within the circle and Rs2 for national messages. The R-Connect tariff for Internet access will remain unchanged at Re1 per minute, while voice mail retrieval is charged at reduced home tariff rates of 99paise.
Price warrior Bharti Cellular has responded by announcing price cuts while Idea Cellular a few days earlier announced price cuts in its prepaid segment.
AirTel has slashed local call tariffs by 60 per cent to Re1 per minute and STD rates by 30 per cent to Rs 2 per minute within its own network (AirTel-to-AirTel only) for prepaid users. New AirTel prepaid users will also get free airtime worth Rs50 on the first recharge. The recharge will, however, have to be for a minimum of Rs324 and will have to be availed of within a period of 96 hours of purchase. Already mobile STD calls from AirTel phones anywhere in India are lower than STD calls made from a fixed line phone.
At the heart of the matter is the nationwide slow down in mobile subscription growth rates and secondly the fact that prepaid cards constitute the largest mobile phone segment nationwide and a reliable revenue-earning proposition with no collection and billing problems.
In February this year there were a total of 30-million subscribers in the country. Further, what was heartening was that the figure had almost doubled in the last nine months. The wireless-in-local-loop controversy was resolved in December 2003 and the industry had hopes that there was a potential to add 2.5 to 3 million subscribers every month over the next two years.
However, in April 2004, the Cellular Operators Association of India (COAI) announced that subscriber additions were not rising to the extent hoped. Further between April and June this year there were net additions of 1.3 million mobile subscribers in each of the months compared to an average of 1.7 million in the earlier six months.
India at present has about 39 million mobile phone users, up from just 10 million a couple of years ago. Roughly 75 to 80 per cent of all mobile subscribers use prepaid cards.
By slashing its prepaid charges Reliance has upped the ante and is trying to increase penetration in a slowing market. To look at the growth in Reliance's subscriptions; post the monsoon Hungama offer in July 2003, Reliance added 1.1 million subscribers against 0.43 million in June 2003. The company added 0.6 million subscribers on an average in the next three months.
Against this, between April and June this year the company has added 0.3 million subscribers on an average. In July, Reliance added 0.26 million subscribers. Even Reliance's prepaid offer in February this year has had a limited impact on mobile subscriber additions so far.
Reliance seems to be making all out efforts to replicate the success of its Monsoon Hungama offer of July 2003, which garnered 1.1 million subscribers. Reliance at present is the largest mobile player (among GSM and CDMA players), with over 8 million subscribers.
According to the most recent numbers released by COAI, GSM-based operators added 1.38 million users last month taking the accumulated GSM subscriber base to 30.5 million.
Among GSM players, Bharti has a 26.15-per cent market share, with a subscriber base of 8 million, followed by State-owned Bharat Sanchar Nigam Limited (BSNL) with a subscriber base of 6.2 million.
Reliance has been growing the fastest among all players. The CDMA subscriber base stood at 8.3 million in July compared to 8.06 million the previous month, mainly due to Reliance adding on subscribers. Tata Teleservices, the other CDMA player, added only 9,154 new users in July.
Bharti Cellular, which was quite some way behind Reliance in terms of subscribers last year has caught up with the latter, growing on the basis of constant innovations in pricing, new schemes, heavy promotions etc.
It is also true that in the last one year GSM players taken together have added more subscribers than CDMA players. One of the factors is there being three CDMA players against five GSM players.