The Indian mobile price war is getting ridiculous

Indian mobile operator Reliance Communications (RCom) has announced a new price for sending SMS. It is 1 paise. Which is 0.0002 dollars. To put it another way, it now costs 2 cents to send 100 SMS through Reliance. How do you reckon that’s going to pan out in the long run?

What’s the reason for this?

Indian operators are going through a pretty substantial price war. The Indian mobile telecoms market has been one of the most explosive worldwide. Indigenous networks, along with foreign investors, are trying to scoop up as many Indian subscribers as possible before they get to the consolidation phase. So far the price slashing has mainly been in the area of voice calls, but now SMS is entering the fray.

How does the RCom offering work?

It’s not quite as simple as 1 paisa per SMS. There are two new SMS plans that RCom is offering its subscribers. The first plan costs 11 rupees a month (about 24 cents) and that gives you access to the 1 paisa SMS. The second plan costs 1 rupee per day (about 2 cents), which gives you unlimited daily texts - although RCom fair usage policy asks consumers not send more than 15,000 SMS in a month. Compared to the market average of 50 paisa per SMS, that’s a lot cheaper.

What we think?

Other Indian operators won’t comment on whether they’ll be following RCom or not. But if their behaviour during the voice price war was any indication, they probably will. But there are a lot of reasons to question whether or not this tarriff slashing behavior is a good idea. India simply doesn’t have a large enough audience for mobile data yet… there isn’t much revenue potential there. Currently SMS and voice are the reliable earners, and operators are decimating the amount of money they can make there. What happens when consumer acquisition slows? Number portability isn’t all that difficult in India, and the first operator that finds itself forced to pull up out of the price nose-dive could see its subscriber base vanish overnight.