ICICI Direct: Telecom Sector Outlook - Postpaid — New Tariff Battleground
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ICICI Direct Report
The rollout of postpaid tariff by the new operator has multiple ramifications for it as well as the incumbents.
The plans, while at similar tariff levels of incumbents (except for base tariff that is 20% cheaper than Bharti Airtel Ltd.’s offering), largely have the benefits of three major over the top (Netflix basic, Amazon Prime and Hotstar VIP) subscription as the key attraction, apart from family packs and international roaming in higher plans.
We see the offering having potential to drive at least some churn from incumbents, unless they match the OTT offers.
Matching of the offering, on the other hand, could result in additional annual costs to Airtel and Vodafone Idea Ltd.
However, a large chunk (more than two-thirds) of postpaid category in our view, is driven by corporate connections in India (more sticky and mutual terms based).
Thus, response of non-corporate segment will be key to churn. The announcement, however, puts Vodafone in a spot, as it would have to weather churn through cost increase as well as strive to raise tariff for survival.
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