India’s leading telecom operator- Airtel has rubbished the possibilities of offering free voice calls for lifetime even though the new entrant, Reliance Jio is aiming to capture market share with its free voice offering.
It is worth noting that, as of now the telecom operators get about 80% of their revenue from voice, so moving to free voice business models might not be so easy for the incumbents. Reliance Jio on the other hand, is banking on the revenue generated from its data packs for sustenance and market penetration, as data has higher profitability than voice.
Gopal Vittal, MD & CEO, India and South Asia, Bharti Airtel, mentioned the telecom sector as “brutally competitive market” and said that the competitors kept Airtel at it toes, but it never got “obsessed” with them.
Since Jio is a new entrant into the immensely competitive telecom market, it is bound to have ‘market penetration’ as its pricing strategy which will erode the margin of the incumbents.
“If the question is are you going to see price erosion…I think given that you have a new entrant on the horizon, yes, you will see some price erosion. Because that is the game new entrant will play,” said Vittal.
Jio is offering free voice and data to its subscribers under its ‘Welcome Offer’, valid till 31 December 2016, for those who get a Jio SIM before 3 December. Post that, the users would still be able to make free voice calls for life as long as they are subscribed to any of the Jio’s tariff plans.
It is worth noting that as a result of this free data offering, Jio’s average data speed has dropped considerably.
Airtel is also offering unlimited voice calls on its Infinity pack priced at Rs. 999 but it is not offering it for free.
A telecom operator needs to make money from one way or the other. If it is making good amount of money from one offering then it can offer the other at a reduced rate or may be for free.
“There will be a large number of customers who are on basic feature phones and low end smartphones who will want to buy services differently. They will want to de-couple voice and data. Equally, there will be a set of market where they will want (it) bundled…If a guy is not paying for data at all, he will pay for something,” Vittal added.
Airtel also made it clear that it will not be offering standalone free voice plans.
“If you are only buying voice, how will one do that?” Vittal explained.
It doesn’t come as a surprise to us as offering very affordable free voice plans won’t make sense for any telecom operator. Jio might be able to pull it off, by the economies of scale and with a huge base of loyal customers subscribed to monthly packs starting from Rs. 149 and above.
As we earlier reported, Airtel is also upgrading its LTE network to VoLTE, so we can expect to see VoLTE voice packs priced very competitively, but certainly not for free.