The second reason is that India is also on the verge of launching mobile number portability on April 1. Many Indian operators, particularly the new ones, will view this as an opportunity to gain market share, particularly in the post-paid segment and a fresh round of price cuts is expected. In addition to these two points, it should be noted that two of India's new entrants - Datacom and Etisalat DB - have not even launched services, and many operators are still competing their nationwide rollouts so the worst is still largely yet to come in terms of competition.
Of course the most pressing question for mobile operators in a price war is how long it will last. The most comparable case to the Indian situation is the price war that broke out in Indonesia's mobile sector in 2007-2008. New competition from the new entrant Hutchison, a rebranded Axis and CDMA players like Mobile-8 and Bakrie Telecom caused aggressive responses from Telkomsel, Indosat and XL. Eventually prices also fell to 1 US cent-per minute range, profitability fell for most operators, multi-SIM card usage mushroomed (there are now 1.7 SIM cards in Indonesia for every user) before operators eventually eased off aggressive price-based marketing and instead looked to further segment their prepaid base and concentrate on the quality of users and some degree of consolidation.
This will also likely happen to a certain extent in the Indian market although it will also likely be more severe and last longer as there are more operators in India coupled with the fact that most operators in the market are backed either by a powerful domestic conglomerate or pan-national operator.
Another pressing question about India's current price war is if it will spill into the mobile data market. India has never had a high mobile data uptake rate, even with SMS, largely due to the fact that the price disparity between voice calling and SMS has never been that great. Mobile data only accounts for 11% of the total mobile revenues, making it one of the lowest ratios in the region.
3G services began in 2009 with BSNL and MTNL, but uptake has been fairly limited with roughly one million subscribers at the end of the year. The country also had about 1.5 million CDMA datacards users. Therefore, the voice price war may be a prime opportunity for Indian operators to showcase their data service offerings, and there are signs that this is already happening as both Bharti Airtel and Reliance Communications have announced their intentions to build their own application stores this year.
Marc Einstein is an industry manager for Frost & Sullivan