Feature

Scrambling for growth

Telcos are slashing tariff to shore up revenues from data services. But will it be enough to recover their huge investments in 3G licenses?

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Published 9 years ago on Jul 21, 2012 13 minutes Read
Illustration by Kishore Das

Anirban Sen, a 25-year-old media professional, was happy when his telecom operator slashed 3G tariffs. Like many of his peers, Sen is a chronic Facebooker, downloads movies almost every other day, is hooked to YouTube videos, and checks emails almost every hour. “Doing this on 3G would be prohibitive, especially on roaming,” he says. “I tried it once and burnt my pocket after my bill hit more than Rs.6,000.”

Rajiv Rajgopal, CEO-Broadband, AirtelStill, Sen continues to surf and check emails on his handset — the convenience is undeniable. Telecom operators know this and are betting on it heavily. They have turned to 3G as the next big avenue to shore up their revenues, but even after 18 months of rolling out the services, there’s little to cheer about. The recent spate of tariff cuts across companies, therefore, serves two purposes — to soothe fears of existing users like Sen, and to lure more subscribers.

On the face of it, the rate cuts seem like a windfall for 3G subscribers but, in fact, they are born out of necessity as the telecom sector struggles with the crippling costs of acquiring 3G licences. The 3G auction in 2010 earned the government a whopping Rs.67,719 crore — operators have been battling to fill that expensive spectrum with subscribers ever since.

It was Bharti Airtel that set the ball rolling with a 70% cut in 3G prices in May. Vodafone, Aircel, Idea, RCom and MTNL followed suit and within the next couple of weeks, the cost per 10 KB download slumped to 2 paise. This domino effect in prices is very much in line with the overall trend in the telecom sector — every time an operator (usually, market leader Airtel) cuts tariffs, others follow to prevent users from switching to a rival’s network, something that has become extremely easy with mobile number portability. 

The telcos, though, are insisting this is not a tariff war. “The slashing of prices is not going to cost us because the volumes and increase in usage will more than compensate for the price cut,” says Sashi Shankar, chief marketing of

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