3G price cuts reveals telcos preparing for 4G war

Telcos cutting 3G tariffs to grab market share before 4G launch by RIL

As mobile handsets are upgraded from the traditional ones to smart phones, usage pattern is slowly moving from voice to data. Free applications like chatting and voice chats are making consumers shift to services offering better data packages. 
 

While telecom players had upgraded themselves to tap this opportunity technologically, the services were still not attractive for the price conscious consumer. Data accounts for only 5-6% of the revenue for telecom companies. 
 

But data is the fastest growing segment in the telecom space. Upgradation of service from 2G to 3G and now 4G is mainly to provide better and faster data. After stagnation in customer acquisition and average revenue per user (ARPU) in voice, the only segment that has posted super normal growth is data. 
 

Take the case of Vodafone, its voice traffic increased by only 7% in FY13, but its data traffic increased by 165.1%. The trend is similar in most of the leading telecom players. Little wonder than that everyone is shifting their focus to data. 
 

Another important reason for aggression is to grab as much market share as possible before the launch of 4G services across the country by Reliance Industries. News reports say that the company is expected to launch its services at ridiculously low prices. 

However, as data services are bundled with voice services, companies are using 3G prices as a tool for customer acquisition. There is not much money to be made from data services. Vodafone which posted a 165.1% jump in data traffic saw an increase of only 19.7% in data revenues. This will be going down further as rates are slashed. 
 

On an average, a telecom company earns Re 0.35 per minute as voice revenues and Re 0.30 per MB in data before prices were slashed. For Reliance Communication, data would now fetch around Re 0.12 per MB. 
 

There is another reason for telecom players to go aggressive on data services. New applications have been launched which provide free voice chats. Companies have clearly seen the writing on the wall. Contribution of voice is expected to go down further as new applications like free voice chats are increasingly being used. 
 

Telecom companies are clearly playing the volume game as data traffic increases at breakneck speed. However, the real price war will start only after the launch of 4G services by Reliance Industries.Till then the existing players can engage themselves in smaller battles.