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Rediff.com  » Business » Telcos cut mobile Internet, data service rates

Telcos cut mobile Internet, data service rates

August 10, 2010 09:13 IST

TelcosMobile Internet and data services are fast emerging as the new front for a rate war among service providers.

Telecom companies are eyeing a piece of the market share where data usage generates a higher amount of revenue, once 3G services are launched later this year.

Operators are attempting to change consumption patterns and pushing up usage, by reducing rates and offering attractive packages like unlimited browsing.

Currently, data services account for around 5 per cent of total telecom revenues, which is dominated by voice services.

Last month, GSM service provider Videocon had announced its new plan to offer unlimited Internet surfing at Rs 96 per month for its subscribers in Mumbai, Tamil Nadu, Punjab and Haryana.

Soon, Reliance Communications followed with its nationwide plan for unlimited internet access at Rs 99 per month for GSM customers.

Aircel, too, offered a Rs 99 per month unlimited package along with introductory plans of a three-day unlimited Internet access for Rs 14.

Similarly, while Vodafone came up with unlimited Internet access for their pre-paid customers with BlackBerry at Rs 15 per day, Airtel joined the race by offering free surfing of the social networking site, Facebook, on the mobile to all its subscribers for two months.

Industry experts said the telecom companies -- after spending a whoping Rs 67,719 crore (Rs 677.19 billion) as 3G licence fee -- are taking steps to ensure that by the time their networks are '3G ready' (in 12-15 months from now) there is an increase in data usage of their consumers.

According to Mahesh Prasad, president marketing -- wireless business, Reliance Communications, this reduction in subscription fees is to create a platform for the roll-out of 3G services and encourage greater adoption of mobile Internet in India.

"An environment that facilitates largescale mobile Internet usage is key to the success of 3G in India. Through our special MobileNet Plan we are gearing up to create an enabling infrastructure that will allow customers to seamlessly adopt 3G services on the move in India."

The company has won a licence to offer 3G services in 13 circles.

Echoing similar views, chief marketing officer of Vodafone Essar, Kumar Ranganathan, said: "BlackBerry offers the most efficient browsing experience and this offering is a preamble to 3G. We will look at Internet at new price points and new landscapes. This is a stepping stone for our 3G rollout."

Some telecom operaters are coming up with plans specifically for younger consumers. When India's largest telecom player, Airtel, launched an offer for free Facebook access on the mobile, it was expecting to attract first-time users.

"We are targeting Internet users across the board. While there is a clear youth slant to the Internet user base, it would be incorrect to say we are only focusing on the youth, as many social networking sites like LinkedIn, have a demographic that is slightly older than the traditional 15-24 age group," said Shireesh Joshi, chief marketing officer-mobile services, Bharti Airtel.

Gurdeep Singh, chief operating officer of Aircel,  shared Joshi's views: "Social networking is very important in the current context.

"This is where the new generation gets latched on to. Earlier we used to have voice-based closed user groups but social networking will be the new push for CUGs and it is a good way to add new customers," he said.

"Telecom operators which are struggling with low average revenue per user, are now looking at data services and one of the ways is to get larger access of internet.

"This will push usage only within the group of Internet users but it will not generate any new users," said Subho Ray, president, Internet & Mobile Association of India.

Experts said other telecom players might follow suit and cut their Internet usage rates but it will happen over a period of time and not as a knee-jerk reaction.

It will not be a tariff war like the one the industry has witnessed on the voice side, where all operators were forced to cut their rates.

 "I would call it a war if there was a cut in voice and SMS tariffs. The revenue in mobile Internet is very limited and a 20-30 per cent cut in revenues will have no impact on the company's financial situation," said Romal Shetty, head-telecom, KPMG.

According to a study by IAMAI, only 27 per cent of consumers have access to mobile internet, which amounts to 127 million.

Of this, only 12 million have used internet on their mobiles. The number of active users of mobile Internet is only two million.

Telecom companies also said that though prices are reducing, they are not eating into each other's market share.

The penetration of mobile Internet is as low as 6 per cent.

"The opportunity for growth is sizeable and all of us are chasing it," said Kumar Ranganathan, chief marketing officer, Vodafone Essar.

However, industry watchers believe telecom companies might have to do more than cutting rates to add to its subscriber base.

Mobile Internet is not user friendly and experts suggest telecom companies should look at developing easy-to-use graphic browsers and improve the speeds of surfing for more consumers to shift to using Internet on mobile.

Katya B Naidu in Mumbai
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