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Consumer is very sensitive to increase in data rates: Idea CEO Kapania

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In a call with analysts, Himanshu Kapania, CEO of Idea Cellular explained the company’s decision to roll back data tariffs hikes and the nuances of data pricing in a call with analysts. The main reason: consumers are extremely sensitive to data price changes.

Idea had increased its 3G data tariffs in August which hit its ability to acquire new 3G customers.  A Rs 100 recharge for 300MB of 3G data, with a validity for 21 days, was reduced to 250MB of data and 10 day validity.  Also the minimum amount needed for recharging your 3G data plan for a month’s validity went up by 47% from Rs 170-180 to Rs 250.

“We were trying to increase the price from a level where the customer could buy bundle of 1 GB from Rs 250 to Rs 300, however, there was a lot of consumer resistance which forced us to revert back to a level of Rs 250,” Kapania said. “The consumer is very sensitive to increase in data rates we have learned but we have to live with the situation,” he added.

Idea Cellular, the third largest telecom operator in the country, had reported a net profit of Rs 809.3 crore in the quarter ended September 30,2015 (Q2FY16) which showed a lower growth of 7.06% from the same quarter last year. For context, the company’s net profit was up 27.83% in the preceding quarter and up 60% Q4FY15. Idea had attributed to fall in net profit to increased pressure on data margins and reduced voice minutes use.

Kapania explained that there was continuous increase in data usage from existing users (from around 450 MB per user to 615 MB over the last year on a blended basis) despite the hike in tariffs. “But we are not limiting ourselves to consumers who are the current users of mobile internet. The big future consumption is going to take place from a current large non-user category. India has a penetration under 10% for 3G and penetration under 25% on an overall mobile base. A lot of casual mobile data users enter the category and find it very expensive and leave the category,” he added.

Other notes from the analyst call

– VoIP services not cannibalizing voice: Kapania maintained that Idea still does not see any evidence of cannibalization of voice by VoIP services. Answering an analyst query, Kapania said:

We are not seeing any large cannibalization of voice, users using data mostly use Voice Over IP for international calling. Current penetration of calls on WhatsApp and similar apps is at a low level and we don’t have to worry. We are obviously carefully observing this but at this point in time it is not having a major impact on our voice revenue in local calling, I will obviously not say this for ILD calling as well as for roamers.

Kapania in an earlier analyst call had said that around 0.1 to 0.2% of Idea’s traffic is on VoIP. This is odd considering that Idea still wants to regulate VoIP calls and had called for the same during TRAI’s discussion paper on Net Neutrality citing cannibalization of voice services.

– Expanding Idea Money: Idea said that it is going to increase its operations for Idea Money, its mobile wallet. The company reports as of September 30, it has over active 150,000 wallet users .

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