Idea hopes to see higher margins from slashed data rates

Idea Cellular was last in the news when it slashed its 2G data rates by 90 percent. The company, according to the Business Standard, now hopes that the move will help improve margins. While the current numbers of data users are low, telecom operators who have slashed their rates should benefit as more people start using data services.

While talking to the source, Ambrish Jain, Deputy Managing Director of Idea, said, “Whenever data tariffs are cut, more customers get added and existing subscribers increase their usage, too. Within a short period of time, decrease in data tariffs gets covered by increase in usage. So, revenues get protected.” This basically means that as data usage increases, the overall average revenue per user (ARPU) will also increase in the long term, adding to the company’s margins.

Idea hopes to gain better margins from 2G data rates slash

The operator, according to the source, is trying to cultivate a “data-using culture” among its subscribers. As the number of subscribers shifting to data services rises, its networks will get optimally utilised. The company has also brought down 3G data rates in the 10 circles it provides the service to match its 2G data rates. According to Jain, “The 3G networks are high-speed and designed for data.” Reduced rates will also allow Idea 3G users to save 30 percent on their monthly usage bills, according to the executive.

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Currently, Idea’s data rates stand at two paise per 10 KB on a pay-as-you-go model. The operator has 33 million data subscribers out of a total subscription base of 127 million. According to Jain, “Subscribers who use internet packs already have lower rates. We have just reduced the ones for pay-as-you-go where new users will come in and try data without inhibitions as the rates are low. Our data rates are already the lowest in the world, just like voice rates.”  

Idea is not the only operator to have slashed its data rates. Back in June, telecom rival Vodafone also slashed its data rates by 80 percent in some circles. Reliance Communications is another operator that brought its 3G rates down to match 2G rates last year. Currently, 25 percent of all cellphone subscribers in India make use of data services. While talking about this, Jain said that, “In the next couple of years, data-using subscriber base should grow to 70-80 per cent of the total subscriber base. This will happen as data users, application usage and smartphone usage increase. That is the industry phenomenon, not our customer base.”