After slashing call tariffs, mobile telecom companies have started offering SMS (short messaging service) at dirt cheap rates. Dual technology player, Reliance Communications (RCom), has triggered a tariff war in the SMS space by pricing a text message at an unbelievable 1 paisa, for both pre- and post-paid, GSM and CDMA users.
To get the benefit of the offer, one must pay a monthly fee of Rs 11 though. The other offer from the RCom stable is unlimited SMSes by paying Re 1 a day, with the rider that the number of SMSes should not exceed 15,000 in a month — that’s a cool 500 messages per day, per rupee.
“RCom, with its first in the industry initiative, aims to revitalise SMS usage in the country,” RCom president Mahesh Prasad said. The latest data from the Telecom Regulatory Authority of India (Trai) shows the average number of outgoing SMS per subscriber per month for GSM (global system for mobile communications) players was 28 in the quarter ended June, down from 30 the previous quarter. In the case of CDMA (code division multiple access) firms, the average number of SMSes per subscriber per month was 11 in the quarter ended June, a little over 10 the previous quarter.
Other telcos refused to comment on their respective strategies in response to the RCom move, though they are all studying and analysing the business impact. Most companies are expected to make announcements on reduction of SMS rates soon.
An industry source told DNA Money on the condition of anonymity that free SMS on the same network is likely to be the next gameplan in the industry. “Only when you send an SMS to the network of another telco would you need to make a payment.”
Value-added services (VAS) constitute 8-10% of the total telecom industry revenue at present. SMS is a part of VAS. According to industry estimates, SMS contributes around 4-6% of GSM revenues and 2-3% of CDMA revenues.
An industry insider said the reduction will not have too much of an impact as telecom has become a voice-driven industry as call tariffs are at a record low. “Slashing of SMS rates may not have that big an impact on the industry as voice tariffs.”
PricewaterhouseCoopers associate director and telecom advisor Arpita Pal Agarwal called the RCom move “an extension of a tariff war that the telecom industry is currently witnessing.” Going by her, the low-tariff trend would continue till consolidation sets in.
Ernst & Young partner Prashant Singhal said the cut in SMS rate may not be a significant driver for a subscriber to change the service provider. High SMS usage is seen among the youth, but on the whole, an SMS rate cut will not have as pervasive an impact as a reduction in voice or call tariff. “People are not so sensitive to SMS cost,” he said, adding, the SMS volume may go up by 15-20% though the rate cut is much higher. Turn to Page 24
The telecom tariff war was triggered by Tata Docomo’s per-second billing. As mobile number portability is set to be introduced in the four metros and ‘category A’ circles like Maharashtra, Karnataka and Madhya Pradesh by the end of this year, and the rest of the country by March 20, 2010, tariff war is expected to only intensify. This is despite most telcos arguing that tariff is only one of the considerations for the subscriber.
With number portability coming cheap to customers, at Rs 19 or below for changing the service provider while retaining the same number, telcos would want to continue playing the tariff card for sometime so they can win over their rivals’ subscribers. In the backdrop of the revenue de-growth that many telecom companies are already facing in India, the tariff war may have serious implications for the sector.
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