Leading India Mobile Operators Could See 40-50% Drop in Revenues from Best Customers

With Reliance Jio saying it will meet and beat any other mobile data offers from its competitors, the Indian mobile market is in at least a momentary race to the bottom, in terms of mobile data pricing. Acting as the market disruptor, Reliance Jio has said it will beat any new public competitor offers, in terms of usage allowances, by 20 percent.

Some predict that  Bharti Airtel, Vodafone India and Idea Cellular revenues  from its best customers might plummet 40 percent to 50 percent as a result. That 30 percent of the customer base typically generates 70 percent of an incumbent’s total revenue, according to Kotak Institutional Equities.

Two decades ago, some observers of the Internet argued that was exactly what should happen, and would happen. “Information wants to be free,” many argued, a development with clear implications for media companies and content providers.

These days, zero rating of video and other content is a live issue. Other related activities, including Wi-Fi access, free use of software, retailing and transactions, open source computing and software, as well as much internet content show the trend is rather extensive.

Some have argued that mobile wants to be free, technology  wants to be free, For communications service providers, “communications wants to be free” is the fear.

That is a rational fear, as it turns out. Skype and WhatsApp provide examples of “free” (no incremental cost) substitutes for carrier voice and messaging. In many other areas--long distance calling, international calling, under-ocean capacity--prices have plummeted, on a cost-per-bit basis, and often also in absolute terms.

To be sure, many trends globally have driven down prices, ranging from deregulation and competition to technology improvements (Moore’s Law and its application) to the emergence of the internet.

To this point, retail telecommunications service prices have not plummeted, despite all those trends. But as the mobile marketing wars in India illustrate, margin compression is the rule, not the exception.
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