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Idea Cellular has cut rates for its 3G data plans by ~50%. According to
ET Now, the rate cut is in a handful of circles including Maharashtra,
Mumbai, Delhi, Madhya Pradesh and Kerala. We view this move as
positive for the sector and the 3G telcos. This is in-line with our view that
data rates in India need to decline to promote 3G services take-up.
Details of the rate cut: When 3G services were launched in early-2011,
most telcos launched plans with similar data rates. At that time Idea
offered plans starting at 100MB for INR 105 (prepaid) or INR 100 (postpaid),
implying ~INR1/MB declining toward INR0.36/MB for the 2GB
plan. Now, Idea is offering 200MB for INR105/INR100 so implying
INR0.50-0.53/MB, a 50% cut. We also note that Idea is now offering
higher data packs at 6-10MB/month. Furthermore, the rate per KB once
the free usage is exhausted has also been lowered for higher data plans
to 2p/10KB. See Table 1 and Table 2 below.
Bharti, Vodafone still at higher rates but expect them to follow: Our
checks on Bharti and Vodafone’s tariffs indicate that they have not
reduced rates at this time. For example, Bharti continues to charge
INR1/MB for the 100MB pack to INR0.38/MB for the 2GB pack while
Vodafone’s rates on post-paid also remain unchanged. We expect other
3G telcos to also reduce their rates to remain competitive. We also
expect Idea to offer its reduced rates across more circles vs. the handful
mentioned by news channels today.
In-line with expectations: Our estimates are based on 3G tariffs for the
industry declining from INR0.8/MB to INR 0.5-0.6/MB in FY12. We
continue to believe that lower tariffs are required to increase both
penetration of 3G services in India but also usage per sub. Device pricing
is declining nicely with several 3G handsets available for $120 and some
tablets too launched at $100-$300. We note that 3G take-up in Q2FY11
(to June 2011) was disappointing with the number of 3G subs increasing
only modestly across some telcos. See Table 3 below for more.
We continue to be positive on the next 2-3 year data opportunity in India
as telcos leverage their coverage design linked capacity. During this time
we expect 3G data to contribute 4% of wireless revenue in FY12
increasing to 16% in FY14 driven by increased penetration and increased
usage which is turn is helped by both lower tariffs and cheaper devices.
We caveat this by noting that the 16% contribution is not necessarily
large and also that any growth beyond this would require substantial
increase in capital intensity or larger spectrum awards. Please see our
note “The Economics of Wireless Data - India Edition” from June 1,
2011 for more.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Idea Cellular has cut rates for its 3G data plans by ~50%. According to
ET Now, the rate cut is in a handful of circles including Maharashtra,
Mumbai, Delhi, Madhya Pradesh and Kerala. We view this move as
positive for the sector and the 3G telcos. This is in-line with our view that
data rates in India need to decline to promote 3G services take-up.
Details of the rate cut: When 3G services were launched in early-2011,
most telcos launched plans with similar data rates. At that time Idea
offered plans starting at 100MB for INR 105 (prepaid) or INR 100 (postpaid),
implying ~INR1/MB declining toward INR0.36/MB for the 2GB
plan. Now, Idea is offering 200MB for INR105/INR100 so implying
INR0.50-0.53/MB, a 50% cut. We also note that Idea is now offering
higher data packs at 6-10MB/month. Furthermore, the rate per KB once
the free usage is exhausted has also been lowered for higher data plans
to 2p/10KB. See Table 1 and Table 2 below.
Bharti, Vodafone still at higher rates but expect them to follow: Our
checks on Bharti and Vodafone’s tariffs indicate that they have not
reduced rates at this time. For example, Bharti continues to charge
INR1/MB for the 100MB pack to INR0.38/MB for the 2GB pack while
Vodafone’s rates on post-paid also remain unchanged. We expect other
3G telcos to also reduce their rates to remain competitive. We also
expect Idea to offer its reduced rates across more circles vs. the handful
mentioned by news channels today.
In-line with expectations: Our estimates are based on 3G tariffs for the
industry declining from INR0.8/MB to INR 0.5-0.6/MB in FY12. We
continue to believe that lower tariffs are required to increase both
penetration of 3G services in India but also usage per sub. Device pricing
is declining nicely with several 3G handsets available for $120 and some
tablets too launched at $100-$300. We note that 3G take-up in Q2FY11
(to June 2011) was disappointing with the number of 3G subs increasing
only modestly across some telcos. See Table 3 below for more.
We continue to be positive on the next 2-3 year data opportunity in India
as telcos leverage their coverage design linked capacity. During this time
we expect 3G data to contribute 4% of wireless revenue in FY12
increasing to 16% in FY14 driven by increased penetration and increased
usage which is turn is helped by both lower tariffs and cheaper devices.
We caveat this by noting that the 16% contribution is not necessarily
large and also that any growth beyond this would require substantial
increase in capital intensity or larger spectrum awards. Please see our
note “The Economics of Wireless Data - India Edition” from June 1,
2011 for more.
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