4G at 3G rates: Are we heading for flat data pricing regime?

Sharath Kumar
New Update

INDIA: When telecom major Bharti Airtel announced deep cut in its 4G tariffs recently, it signaled a new price war in the industry and shift in focus of operators toward data.


The Indian telecom industry, which has seen much bleeding due to similar price war for voice services, seems to have no alternative this time due to voice saturation and the imminent entry of Reliance Jio Infocomm into the 4G league.

Analysts even see the industry headed for a flat data pricing regime across 2G, 3G and 4G bands, respectively.

Here is a recap of tariff revisions announced by major telecom operators:


* Tata DOCOMO announced a cut in its 2G and 3G data volume based charging (VBC) tariffs by 90 percent. The reduced rates will be applicable from 1st July 2013.

* Bharti Airtel has slashed 4G tariff by 31 percent (second price cut since it started 4G service in April, 2012). Airtel's basic monthly now starts at Rs 450 (2GB).

* Bharti Airtel also announced a cut in mobile data usage charges by 90 percent for prepaid subscribers in Punjab and Haryana.


* Vodafone lowered data charges by 80 percent for its prepaid and postpaid customers in Karnataka, W.Bengal MP and Chhattisgarh.

* This May, Aircel launched its new budget packet Internet 24 plan for mobile subscribers, which offers Internet usage of 100 MB for a 30-day period.

"Though Airtel has 4G services in four Indian cities with a modest subscriber base, the move to cut 4G data rates suggests that the company is gearing up for battle with the upcoming 4G players," says Tarun Pathak, telecom analyst with Cyber Media Research (CMR).


"Offering 4G data services at 3G prices may not result in the immediate expansion of Bharti's 4G base due to the insufficient device ecosystem, but it will give an indication that even in a new space like 4G, the price war will start from the very beginning, which might reduce the profitability of the operators when they enter 4G market in India."

According to Rohan Dhamija of Analysys Mason: "2G data slashing is a gimmick as it is only the additional top-up data rates that are being reduced, after a customer has exhausted his existing limit. When 4G picks up two years down the line, those tariffs could become similar to 3G across the board, which is the case globally as well. Even at a similar price point to 3G, 4G average revenues per user(ARPUs) will still be more for operators on a per unit basis, due to higher speeds and thus, more consumption."

Analysys Mason predicts that 3G users in India will rise to 272 million by 2017, from 35 million in 2012. Currently, 2G data users in the country are estimated to be around 100 million, while a recent media report pegs 4G users at around 15,000