Mahanagar Telephone Cuts 3G Tariff, Signals New Price War
05/30/2012| 03:18am US/Eastern
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Mahanagar Telephone Nigam Ltd. (500108.BY), the state-run company that provides telecommunication services in India's two largest cities, has cut the tariff for Internet usage on its third-generation network by about 70%, signalling a new wave of price war in the sector.
Mahanagar Telephone's price cut comes after market leader Bharti Airtel Ltd. (532454.BY), second-ranked Reliance Communications Ltd. (532712.BY) and Idea Cellular Ltd. (532822.BY) slashed their rates by 62%-70% over the past few weeks to entice more people to use 3G services that allow fast data transfer.
The price cuts are an attempt to boost revenue amid a stagnation in demand for voice services and slow growth for 3G services. The development comes just when the industry was expecting an end to a price war in the second-generation segment that pulled down the profit margins of most telecom operators.
The intensity of competition in the 2G segment has eased in recent months after a Supreme Court order to cancel more than 120 telecom licenses issued in 2008, citing corruption in their allotment. Although the affected companies can continue services at least until Sept. 7 and reapply for the permits, the order and the resultant uncertainty in the sector have made most of them to stop aggressive market-expansion programs.
According to tariff details on the website of Mahanagar Telephone, which provides services in Delhi and Mumbai, the company now offers 1.1 gigabyte of data for INR250 a month. At that price, it earlier offered 650 megabytes.
Mahanagar Telephone had launched its high-speed 3G services in January 2009, after paying INR110.98 billion to the government for the bandwidth.
The company had 5.83 million telecom users as of March 31. It doesn't give the figure for 3G customers.
Mahanagar Telephone and the other state-run telecom company, Bharat Sanchar Nigam Ltd., got 3G bandwidth before the government sold spectrum to private operations in 2010 through an auction that fetched it about INR677.19 billion.
-By Kenan Machado, Dow Jones Newswires; +91 22 6145 6107; kenan.machado@dowjones.com
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