After 3G, Vodafone slashes 2G data rates 80%

After voice calls and SMS, it looks like data has become the latest pawn in the telcos’ price-war game. In a surprising move on Tuesday, India’s number two telco, Vodafone, slashed 2G data rates for both prepaid and postpaid customers by a sharp 80% in Karnataka, UP West and Madhya Pradesh and Chhattisgarh circles.

2G data usage will now cost 2 paise per 10 kb, as opposed to 10p/10 kb earlier, on a pay-as-you-go basis.

Similar data rate cuts will be rolled out in other circles in a phased manner, the company said, describing it as a move to take mobile internet to the hinterland.

“The overall internet penetration in India is low while the mobile penetration is very high. Most consumers will discover the power of the internet via the mobile. We are confident that this move will facilitate faster adoption and better usage,” said Vivek Mathur, chief commercial officer, Vodafone India.

Analysts said Vodafone’s move may have been triggered by stiff competition in the 2G market in the country, where data usage is growing faster than 3G – accounting for almost 3-4% of operators’ revenues.

Rumit Duggar of Religare avers, “Voice growth is slowing and 3G isn’t catching up as expected. However, since Vodafone has slashed rates only in three circles, the development will not have much impact on Vodafone’s margins. Price elasticity remains the key after such a steep price cut. Another important consideration is the fact that with Reliance Jio Infocomm’s launch, telcos may be forced to slash tariffs, so Vodafone may be trying to capture as much market share as possible before that happens.”

In case volumes do not pick up after such a steep price cut, Vodafone stands  to take a 70-80% hit to its revenues, and then may not extend this tariff cut to other circles, said an industry source, requesting anonymity.

In May last year, India’s number one telco – and Vodafone’s closest competitor – Bharti Airtel had slashed 3G data tariffs by around 70%, following which other operators, including Vodafone, had slashed tariffs by up to 70%. Another round of reduction in 3G data prices was seen in May this year.

On 2G data tariffs, Vodafone has moved first, pricing both 2G and 3G data tariffs at 2p/10 kb. Others are expected to follow in the next week or two.

Meanwhile, a day after the Telecom Regulatory Authority of India announced a cap on roaming tariffs effective July 1 and left the arena open for telcos to offer roaming offers within the specified cap, Uninor on Tuesday announced the lowest industry rates for local and STD calls in Maharashtra at 25 paise per minute.