Romal Shetty does not expect Bharti's move to raise VoIP prices to ensue a pricing war between operators because over the last few years they had decided not to play the price game and have in fact tried to improve pricing.
With an unexpected move by Bharti Airtel to take the data usage for the Voice Over Internet Protocol (VoIP) calls outside the data allowance under the bulk data packs, Romal Shetty, national leader telecom, KPMG thinks other operators could follow suit because most of them are loosing money on services like Whatsapp, Viber etc., which have minimal charges.
According to Bharti's website – "All Internet/data packs or plans (through which customer can avail discounted rate) shall only be valid for internet browsing and will exclude VoIP (both incoming/ outgoing). VoIP over data connectivity would be charged at standard data rates of 4p / 10 KB (3G service) and 10p / 10 KB (2G service)."
Shetty does not expect this move to ensue a pricing war between operators because over the last few years they had decided not to play the price game and have in fact tried to improve pricing.
The expected big competition from new entrants like Reliance Jio would surely come in but may not be related to pricing, feels Shetty.
Shetty says the intent of the move seems to be to mitigate the risk of serious voice revenue cannibalisation.
Below is the transcript of Romal Shetty's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: What do you think the repercussions would be for Bharti's moves and do you think other service providers like Idea, Vodafone etc could follow suit?
A: Firstly, this concept today of Whats App or Viber can basically provide a service without any charges, it is not free because there is still a data charge but it is at a very low. So to give you an example, I might give a call to US for about maybe Rs 8-10 whereas in this probably it will be twenty five paisa or even less than that.
So the telecom companies are losing money on every call made and there is a cannibalization of their international or their other services revenue and Whats App and Viber are not paying any money to Airtel or Idea or anybody. So the whole idea of this is to ensure that they are losing a lot of revenues to now have some kind of charges, which compensate for the loss of revenue. So that is the first thing. Telecom companies are going to lose money and they are going to lose more money as these services become more and more popular.
So I think beyond a point of time, other carriers will follow suit because you suddenly cannot have international revenues coming down by 50-60 percent. It is just that the magnitude of the rise in prices would be different for each operator.
Latha: What are the chances that one of the competitors doesn't pull because you just want to conserve your customers, once you get angry with your service provider and walk out, winning back that customer maybe tough. So one of them could play a spoilsport?
A: It is possible but over the last three years, at least the large operator have consciously said that we will not play too many price games and have decided to consciously improve prices. If you see the increase in prices, it has happened slowly over the last two-three years.
more to come
Bharti Airtel stock price
On December 26, 2014, at 14:10 hrs Bharti Airtel was quoting at Rs 353.70, down Rs 0.5, or 0.14 percent. The 52-week high of the share was Rs 419.90 and the 52-week low was Rs 282.10.
The company's trailing 12-month (TTM) EPS was at Rs 27.40 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 12.91. The latest book value of the company is Rs 166.93 per share. At current value, the price-to-book value of the company is 2.12.
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