Tuesday, October 20, 2009

Vodafone Essar, BSNL Launch Low Tariff Bill Plans

NEW DELHI -- Vodafone Group PLC's Indian unit said Friday it has launched a plan to offer some calls at as low as 0.20 rupee ($0.004) a minute, while state-run Bharat Sanchar Nigam Ltd. introduced plans at 0.50 rupee a minute, further heating up a tariff war in a country that already has the lowest rates in the world.

While Vodafone Essar Ltd.'s plan is for southern Andhra Pradesh, BSNL's rates apply to all local and long-distance calls to any telecom network within the country, under the India Golden 50 plan.

Mobile phone tariffs in India are on average less than 1 rupee a minute for local calls and about 1.50 rupee a minute for national long-distance calls.

Existing operators are cutting tariffs to gain or maintain market share as at least four new companies - including Etisalat DB Telecom Pvt. Ltd. and Unitech Wireless Ltd. - are gearing up to start mobile phone services in the world's fastest growing telecom market by subscriber additions.

The new plans by Vodafone Essar, India's third-largest mobile phone company by subscribers, and BSNL, the fourth largest, come within days of smaller rival Idea Cellular Ltd.'s launch of a plan that will charge its mobile phone users in Mumbai 0.40 rupee a minute for local calls.

Idea had followed an offer earlier this month by Reliance Communications Ltd., India's second-largest mobile phone company, which offered a flat rate of 0.50 rupee for all calls and text messages.

In mid-September, Bharti Airtel Ltd., India's largest mobile phone company by users, also offered calls at 0.50 rupee per min for local or long-distance calls on its own network.

In separate reports released earlier in the day, both Credit Suisse and Macquarie Research said Bharti Airtel has further lowered in the Mumbai service area.

"We expect such or similar schemes (by Bharti) to be launched in different shapes and sizes shortly in all the other circles as well," Macquarie said.

Bharti officials didn't immediately respond to queries.

Macquarie doesn't expect these offers to lead to a sharp spike in user additions, but expects average revenue per user - a key operational parameter - to continue to be under pressure.

"We should see a significant decline (of more than 600 basis points) in margins for these companies and possibly a negative EPS/EBITDA growth before they pass this phase," Credit Suisse said.

In other call-rate related moves, Vodafone-Essar said Friday it is testing a per-second billing plan in the Madhya Pradesh telecom service area, and BSNL said it started offering per-second billing from Oct. 15 for basic pre-paid users across all its telecom service areas.

Earlier in October, the country's telecom regulator had said it was considering making it mandatory for operators to offer a per-second billing plan along with other schemes, which analysts said may hurt revenues already facing intense competition from new and incumbent companies.

Most mobile phone operators in India currently only offer per-minute billing plans, which means they charge subscribers for a full minute even if the call lasts for less than 60 seconds.

Per-second billing was triggered by the entry of Tata DoCoMo Ltd., a joint venture between India's Tata Teleservices Ltd., and Japan's NTT DoCoMo Inc., which started offering such a billing plan in June.


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