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Bharti Airtel (BHARTI)
Telecom
GPRS tariff increase – marginal impact, but wider connotations. Bharti has
announced sharp increase in GPRS/WAP tariffs – browsing through its mobile office
service (GPRS/EDGE) will be charged at 30p/20KB w.e.f. Jan 5, 2011 versus 30p/50KB
earlier (effectively a 150% hike), while browsing on its Live WAP portal will be charged
at 30p/20KB w.e.f. Dec 28, 2010 versus free of charge earlier. We discuss our take on
the potential rationale behind the move in this note. Low data (internet browsing)
contribution to revenues (<5%) and the fact that pricing of data packs (2 GB at Rs66-
98 for a month) remains unchanged would mean only a marginal impact on financials.
Sharp increase in pay-as-you-go GPRS/WAP charges
Bharti has raised its GPRS/WAP usage charges for pay-as-you-go users (those using mobile internet
but not subscribing to monthly data packs) substantially - internet browsing through its mobile
office service (GPRS/EDGE) will be charged at 30p/20KB w.e.f. Jan 5, 2011 versus 30p/50KB earlier
(effectively a 150% hike), while browsing on its Live WAP portal will be charged at 30p/20KB w.e.f.
Dec 28, 2010 versus free of charge earlier. We note that the pricing for monthly data packs
(1/2 GB of usage for Rs98 per month) remains unchanged although usage beyond the free
limits would attract the revised higher charges. We note that Bharti’s effective pay-as-you-go
pricing was the cheapest in the market earlier and this could just be a market parity
adjustment; nevertheless, a tariff increase does appear a bold and risky move to us with nationwide MNP launch round the corner. We look at the likely rationale or thought process below
` Comfortable on competitive scenario – the timing of tariff increase, with nation-wide MNP
launch round the corner could suggest that Bharti feels comfortable with the competitive
scenario in the market and is willing to risk potential subs churn to rival networks.
` Crunched for capacity – rise in data tariffs could also be a move to actually reduce data usage
on the possibly capacity-constrained network in specific circles/cities, while maintaining
revenues.
` Driving 3G off-take – the date announced for the tariff revision is coincidently (or maybe not)
very close to the possible 3G services launch by Bharti. Bharti possibly is trying to kill the
substantial data pricing differential between 2G and 3G, thereby incentivizing (in a rather odd
manner) its customers to try their 3G services and thereby drive rapid off-take.
` Just another way to squeeze the casual, non-discerning customer. Possibly – we have no means
to prove or disprove; TRAI has taken note of indiscriminate push-based VAS subscription and
billing issues (across operators, not just Bharti) in the past.
We see the immediate earnings impact of this move limited for two reasons – (1) low data,
and in this case mobile internet browsing contribution to total revenues; this is less than 5%,
in our view, and (2) pricing of larger data packs (1/2 GB of data for Rs98 per month) remains
unchanged. Nevertheless, it is an interesting development and could pose – (1) upside risk to
our thesis on sector competition if this move is driven by Bharti’s comfort on competitive
scenario, (2) downside risk of increased subs churn – across data users who are directly
impacted, as well as other users who do not want to risk future ‘tariff shocks’ from Bharti.
We remain Cautious on the sector and retain our REDUCE rating on Bharti.
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