Saturday, January 31, 2009

What Would Signal The Upturn In The Economy?

Today for a change I am not going to write on Telecom. Rather, I would touch upon a subject that is very topical and is of interest to everyone across industries. It is the economy that is being discussed in all social forums, blogs, office water coolers, parties and anywhere where two or more people meet. I am not going to make a forecast or analyze the current situation but would focus on the lead indicators that would indicate any upturn in the economy.

There are many indicators that give us sense on the state of the economy. Unemployment, business investment, GDP growth are all lag indicators which are not pointers to the future of the economy. We end up focusing on the lag indicators as they are easily available and measurable. Unfortunately, the media carries stories about these indicators and we are not able to predict both the uptrend and downtrend in the economy. For example the US economy was in recession since last quarter of 2007 but we got to know about the condition of the economy as late as September 2008. Similarly, I am sure we will not be able to identify the uptrend if we continue to focus on the lag indicators. But the problem is that the lead indicators are far fewer and difficult to measure. Few consider consumer sentiments as a lead indicator but I think the sentiments are based on the lag indicators and hence are not the right measures. I have identified two lead indicators which are not only measurable but are also very pertinent in the current situation.

Baltic Dry Index (BDI)

BDI provides "an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a time charter and voyage basis, the index covers Handymax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain”. The supply of cargo ships is generally both tight and inelastic — it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in the California desert. So marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. Thus the index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers. Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production

On 20 May 2008 the index reached its record high level of 11,793 points but hit a low of 663 points on 5 December 2008. These low rates move dangerously close to the combined operating costs of vessels, fuel, and crews. The fall was due to subdued commodity demand on lower production activity but it was compounded by lack of credit that resulted in reduction of Letter of Credits (essentially banks had lost faith on each other. BDI is the perfect lead indicator of increased or reduced physical activity especially in case of an uptrend. The index is available at Bloomberg L.P [quote]. BDI has now started to move up and has now crossed 1000 points but still far away from its record highs.

Case-Shiller Index (CSI)

The current crisis has its seeds in the housing bubble of United States. Since the problem started with the housing sector, the economy is unlikely to see an uptrend till the housing sector stabilizes. Stabilization of the housing sector in the US would also imply that the balance sheets of the banks will also find stability on account of sub-prime assets. Hence, I have selected the Case-Shiller Index (CSI) as one of the lead indicators. The Case-Shiller Home Price Indices [S&P] are quarterly nominal house price indices for the United States. The indices are calculated from data on repeat sales of single family homes, an approach, developed by economists Chip Case, Robert Shiller and Allan Weiss. The indices are normalized to have a value of 100 in the first quarter of 2000. The indices are calculated monthly by Fiserv, Inc.- the company that owns and maintains the index and is published with a two month lag on the last Tuesday of every month. Many would argue that his is a lag indicator. It may be a lag indicator in most of the situations but in the present situation, it is very much a lead indicator. Stabilization in the housing prices would signal to other industries that the worst is over. The national index attained its all-time high of 189.93 in 2006 Q2, and has declined in every subsequent quarter to date. This means that the condition of the economy had started to deteriorate much before September, 2008. On December 30, 2008, the index recorded its largest year over year drop.

There may be many more lead indicators which might be relevant in today’s scenario. I would request the readers of this blog to add their lead indicators in the comments section so that we can prepare a comprehensive list of such indicators which would benefit everybody.

Wednesday, January 28, 2009

Marginalization – The biggest threat to Carriers

Carriers have called the shots in the wireless ecosystem. It is the carriers who have access to the consumers which has led to alignment of other players (handset manufacturers and VAS players) alongside the carriers. In most markets, carriers are the one stop shop for the consumers with carriers sourcing the handsets and content for them. However, now the dynamics of the industry is changing with movement by other players across the value chain (into carrier’s domain) and emergence of new players like Google, Apple and RIM.

With declining voice revenues; the only hope of the carriers is to increase the pie of value added services. Carriers in the past followed the “Walled-Garden” approach to maximize their revenue share and in the process dissuaded the consumers from using 3rd party services. The “Walled Garden” approach worked well when the industry was in nascent stage and the ecosystem was less developed. In this approach, the operator was responsible for providing the platform for services, marketing and billing of services and in return they charged a hefty revenue share (as high as up to 70% in many countries). The high revenue share made the VAS industry unattractive and prevented the content providers from becoming big. However, in the recent past, strong non-operator players are attempting to introduce services like navigation, music, gaming, etc. to garner revenues from this lucrative part of the value chain.

Carriers had many myths that are now being broken. The complexity of delivering services on mobile seamed to offer relevance of Carriers to consumers but now the technology has marched past them. Carriers thought that the location based services could only be offered by them as they own the cell sites and hence the location of the consumer. However, the advent of GPS as changed this thinking. The GPS based services can bypass the carriers and directly communicate with the consumer’s handset. Carriers long held the view that they would be able to provide and market all the services but now they are finding that they have limited resources and it is impossible to focus equally on all the services. With the increasing popularity of 3G, the consumers are demanding a near mirror experience of a PC. As in PC world, no ISP controls the ecosystem, is expected that the mobile services would also evolve the same way. The voice revenues are also under threat due to advent of VoIP. Does this mean that the operator would be reduced to a pipe? Will we see flat fee data plans in the future which would essentially be same as the ARPU of the subscriber as voice would also be over internet?

The carriers can avoid marginalization by focusing on collaboration with other players in the eco-system. The basic principle of collaboration needs to be fair play and equitable wealth distribution. They need to do the following:

* Lower subsidies on handsets and move towards the open market – This would help them save the precious cash that they can use for other activities. With global handset market size of 1.1 billion in 2008 and assuming an average of $40 (it is over $100 in markets like US, UK, etc. but the open markets bring the average down to $50), the annual subsidy bill to the carriers is a whooping over $40 billion. The subsidy bill is likely to increase even further with increasing popularity of the smart phones. Despite bearing the subsidy burden, the carriers are unlikely to benefit from the higher usage of services by smart phone users

* Lower the revenue share for services – Current revenue share levels is not giving the level playing field to the content provider which is forcing them to look at options of bypassing the carriers. Since most of the content providers are small, they are forced to align with either the carrier or a big player (handset manufacturer or Internet players). If they get a better deal from carriers, they are unlikely to align with the other players or at least the business model for the other players would look much worse. Better revenue share to content provider would mean more focus on higher quality content production leading to higher consumption of services

* Do away with the concept of “Walled Garden” – Carriers need to have just one APN and remove the walls of their walled garden. Their walled garden could become just another portal on the internet but the big advantage with the carrier would be its ability put the link to the portal on the SIM (discovery becomes easier). No “Walled Garden” would mean a lower marketing spends on promoting its services which in turn would help the carrier in reducing its portion of the revenue share

* Do not invest in proprietary platforms – Japanese and Korean carriers have invested in their proprietary platforms but are now finding it difficult to expand or integrate their services with other plays. This means that either the new service has to completely bypass the carrier or cannot be offered to the consumers. In either case, it is the loss of revenues to the carriers. The carriers would be tempted to collaborate with handset manufacturers (who do not have services platform) to form proprietary platforms. However, the results are unlikely to be favorable to the carriers as the consumer are becoming more demanding and more exposed in the globalized world

* Collaborate with all players in the ecosystem – Carriers would benefit by collaborating in the ecosystem and focusing on increasing the overall pie of the services. We have currently hit just the tip of the iceberg in realizing the services revenues. The adoption of most of the services is still below 5% and there is a lot on the table for everyone. Collaboration would mean that they would remain relevant and are likely to get their fair share

* Invest in startups in the services space hoping to roll-out compelling services in future. A few carriers have already started to invest in the new venture, e.g. Eventful, a location-based calendar service, announced a $10 million round that included money from Telefonica, Pelago, which is developing a mobile social network called Whrrl, raised $15 million, with some of it coming from Deutsche Telekom’s venture capital arm, T-Mobile Venture Fund

Carriers need to decide on the purpose of their existence. If they are looking to safeguard their profits, they could focus on becoming a really excellent bit-pipe. There will be steady returns for those who focus on reducing costs and increasing efficiency. Alternately, carriers could choose to embrace Internet-based services and become an aggregator, concentrating on facilitating access to Internet content rather than creating it. All I can say is that all is not lost for the carriers and there are exciting times ahead for consumers who might be spoilt by the choice.

Friday, January 23, 2009

Mobile Number Portability – The Unnecessary Hype

Mobile Number Portability (MNP) has been introduced in many developed countries and is now being contemplated in many developing countries. Number portability enables a subscriber to switch between services, locations, or operators while retaining the original telephone number. There are three basic types of number portability: service, location and operator portability. In most of the countries, location portability and service portability are not enforced, and only operator portability is implemented because operator portability is considered essential for fair competition among operators, while location portability and service portability are typically treated as value-added services. When the number portability is only on the mobile platform, it is called mobile number portability (it is a type of operator portability).

The number portability is introduced to remove barrier to switching operators and facilitate competition. In most of the countries, it has been introduced only after the mobile penetration crossed 25%. France, Finland, Greece and US were the first few nations in the world to introduce it in 2003. Established operators dread the introduction of MNP as they feel that suddenly their customer base becomes vulnerable to new operators as the biggest barrier to switching by subscribers is number. In most of the cases a lot of hype is created around MNP and almost all pre-MNP introduction surveys predict that over 25% subscribers would switch. Despite this, as it is evident from the adjoining image, barring Finland and HK, most countries port less than 10% customers in first 2 yrs. In fact, less than 5% switch in first 12 months of introduction of MNP.

The situation in most of the countries (e.g. India) where MNP is now being introduced is very different. A big portion of the base comprises of prepaid who already have a high churn rate. The number loyalty amongst the prepaid subscribers is much lower and they do switch networks often even in the absence of MNP. In India, over 92% of the base is prepaid and have a churn rate of 3-4% per month (~40-45% annualized). Given this high churn, I doubt that the churn would go higher than this after introduction of MNP. MNP involves establishment of central clearing agency and additional equipment at the operator end. The costs associated with the additional operator set-up and the clearing agency needs to be recovered from the porting subscriber unless the receiving operator decides to subsidize and adds it to its acquisition cost. The receiving operator is unlikely to subsidize as there is no guarantee that the subscriber will not churn again given that there are no exit costs. In today’s scenario where the ARPU levels are very low, the porting cost can be as high as one month’s ARPU (In India, the subscriber porting cost is expected to be over $4 whereas the monthly ARPU of over 70% subscribers is below $4). Will the subscriber would be ready to forego a month’s ARPU just to retain their number? It is highly unlikely. Moreover, the telecom industry like the financial industry is based on consumer inertia. There are subscribers who do not change their bill plans for years and continue to pay a high bill for years despite better bills being available in the market by the same operator. Seldom have the operators proactively shifted their subscribers to a more suitable bill plans as it would hit their revenues. I expect the inertia will prevent subscribers from making an extra effort in shifting their operator. Subscribers who do not have inertia are already switching their operators in a predominantly prepaid market as evident from the high churn rate.

There are many exit barriers that the operators can create to prevent their base from churning. A few examples of such barriers are: offer advance rental plans with bundled free airtime before introduction of MNP to lock-in the subscribers; enhance network coverage by providing in-building solution; offer personalized customer care; focus on services like mobile money, navigation, email that would make subscriber think twice before leaving the network.

I sincerely feel that the hype created around MNP is unnecessary and it is unlikely that a large number of subscribers are going to switch operators after its introduction. MNP introduction would help the operators in getting their act together and focus on consumers.

Tuesday, January 20, 2009

Impact of Mobility on Economic growth in Developing Countries

The mobile subscriptions at the end of 2008 were 3.9 billion (penetration of 59%) are likely to cross 4 billion sometime in April-May’09. This means that the majority of the world’s population is already a mobile user. However, the real picture is missed in the averages. Many developing countries still have mobile penetration of less than 50%, e.g. India (30%), China (47%), Cambodia (26%), and Africa (39%). The subscriber base is expected to cross 5 billion by 2011. Majority of the next billion subscribers are likely from India, Africa and China.

There have been many studies conducted in various countries across the globe that show that increasing mobile penetration has a positive impact on the GDP growth of the country. This impact may be twice as large in developing countries as in developed countries

McKinsey in its research to assess the economic impact of the wireless sector in the countries of India, China and Philippines estimates that the indirect impact of wireless is at least three times the direct benefits. According to McKinsey, the total economic impact of wireless as the sum of three elements: the direct impact from mobile operators, the indirect impact from other companies in the wireless business system (hardware and software vendors, handset vendors, and so on), and a second form of indirect impact: the surplus enjoyed by end users. It estimated that by increasing penetration by 10% in China and India would produce tremendous end-user value of at least $10 billion, equivalent to an incremental 0.38%-to-0.61% contribution to GDP.

Vodafone (2005) reported that, in a typical developing country, an increase of 10 mobile phones per 100 people boosts GDP growth by 0.6% (based on research in Africa in 2004). Deloitte in its report ‘Global Mobile Tax Review 2006-2007’ estimates that with every 10% increase in mobile penetration, the GDP growth increases by 1.2%

A yet to be released study 'India: The impact of mobile phones,' conducted by the Indian Council for Research on International Economic Relations (ICRIER), shows that Indian states with 10% higher mobile phone penetration will enjoy 1.2% higher annual average growth rate than those with a lower teledensity. However, the study reveals that the real benefits of telecommunications only start when a region passes a threshold penetration rate of about 25%.

The quantum of economic impact may vary across various studies, though the consensus is that with every 10% increase in mobile penetration, the GDP growth increases by 1%. However, what is important is to understand the various benefits and what can the Government do to ensure that the benefits do trickle down to the lowest strata of the society.

Benefits of increased mobile penetration:
Productivity gains to individuals: Much has already been written and estimated about the productivity gains from use or mobile telephones. Productivity gains are on account of higher efficiency or more business/work to the users. The savings can be quantified in terms of time and money saved due to avoidance of travel. However, it is difficult to say how much addition business can be attributed to the use of mobile phones
Productivity gains to businesses: Mobile phones enable faster and more efficient decision making, improved logistics, etc. They also double up as productivity tools like Sales Force Automation, ERP data input devices, etc. No wonder the businesses (large and small) were the first to adopt the mobile phones
Inclusive financial services: The mobile phones out number the bank accounts by a large distance. Mobile phones can double up as bank accounts. Mobile technology has the potential to expand the reach of financial services to the poor. Branchless banking using mobile phones and a network of third-party agents (e.g. post offices, small retailers) can reduce the two biggest costs associated with providing financial services: building and maintaining a physical presence, and handling small transactions. A new area of interest is micro-finance which has been made popular by Gramin Bank. Micro-finance using mobile phones can greatly reduce the cost of funds to a financial institution
Remittance: Remittances play an important role in the development of a developing country. Mobile phones can play an important role in this market by making it quick, cheap and easy to transfer funds. Currently, sending funds through traditional money transfer operators such as Western Union and MoneyGram is expensive, with fees as high as $16 to send $100.19 Poor migrants send small amounts of money, so these fees are very regressive. In the Philippines, wireless providers like Smart Communications allow Filipinos working overseas to send money home in minutes with a text message for a fraction of the cost of money transfer operators
Empowerment of poor: Bringing easy and affordable access to telecommunications services to rural families will increase access to education and health services, and provide a forum for interaction with government services. Governments across the world are likely to look at mobile industry to fulfill its basic responsibility. M-Governance would also help reduce the corruption as middlemen would not be required for information from government departments
Women empowerment and security: A mobile device is a security device for most women in a developing nation. Women feel more secure at night if they have a mobile phone with them. A country develops faster if its women folks feel more librated and empowered to take decisions about their kids and family. Mobile is their window to the outside world. Many women would get the first experience of internet on their mobile. The knowledge would ultimately unshackle them, liberate them and help them take informed and confident decisions
Emergency situations: There is a more likelihood of an emergency situation in developing nation than a developed country. The emergency response infrastructure is also lacking in developing country. The mobile phones cut down the time to mobilize response teams
Foreign Direct Investment: Willams (2005), The Relationship between Mobile Telecommunications Infrastructure and FDI in Africa study shows that the FDI tends to be higher in countries where the mobile penetration is higher

It is difficult to quantify most of the benefits that accrue to the consumers of telecommunications. However, one thing is certain that the consumers find the mobile services useful and therefore are willing to spend a significant portion of their income on telecommunications. In all developing countries, the average spent on telecommunications is 2% of monthly expenditure. In a sample of Indian villages, the average was 3% of household income. In Chile poor people spend more of their incomes on telecommunications than on water, and even the average household spends more on telecom than on water and electricity combined. Income elasticities are also high: one study in India found a 1% rise in household income almost doubled demand for telecommunications in 2003

What can the Government do?
Government has a significant role in development of any industry and telecom industry is no different. The list below are some of the options before the Governments:
* Ensure that taxes on the industry are reasonable and not disproportionate
* Digitize information in the government departments
* Provide subsidy on M-Governance application development
* Ensure that the ecosystem works in a way that the operators do not have the monopoly over services like education, M-Governance, healthcare, etc. There needs to be a complete collaboration in the efforts of operators, handset vendors and VAS providers. Government should ensure that the applications are available in the handsets and the handset vendors are a part of the revenue share (or share of subsidy)
* Subsidize or encourage rural coverage

Thursday, January 15, 2009

Review of G1 phone (Google Android based platform)

The review of the phone should be divided into two components – the Android Platform and HTC phone.

Never before has any platform drawn so much attention as Android and the new platform is sure to delight the smart phone users. The platform is optimized for the touch screen and has a user friendly user interface. The platform makes the web-based communication applications (email, chat, You Tube) mainstream though Orkut is a notable omission. Google’s mobile strategy is clear – Popularize its online PC properties like search, email, maps on the mobile by providing the same experience across the two platforms. Google wants its user base on PC to use its properties while they are online using the mobile. It also wants to attract new users by riding on its brand equity and its strong position in web based communication applications. The Google id gives automatic access to email, chat and Youtube and there is no separate log-in required at the time of usage.

The response of the system is fast and one never has to wait for the mobile phone to transit from one screen to another. It is not clear if the response is fast due to the processor or the Android platform.

The best part of the new platform is its browser. The browser gives a near PC experience to web browsing. It has the capability of opening multiple browser screens and it is easy to switch between the screens with relative ease. It is possible to zoom in/out the screen to suit the individual preference in terms of the font size. The text adjusts to the screen size at any zoom level. Touch and the track ball enhance the navigation experience (Kudos to the track ball. It mirrors the mouse experience).

The phone lacks the features for business users e.g. there is no Microsoft Exchange Server, no synchronization with Outlook e-mail, Calendar, Contacts, etc.

SMS is a pleasant experience. It provides conversation threads in the same screen. Composing SMS is like composing a mail and it provides the facility of attaching a file to the SMS (converts into MMS). This is similar to Symbian but it allows the users to create slides to be attached to the SMS. However, it is not possible to forward the SMS which is not only surprising but also shocking. Also, there is no facility of delivery notifications. There is no on-screen input and hence the keypad needs to be used for typing any message

Though the platform provides a clear benefit to the web users, it is on a weak wicket when it comes to the call management and contact management. The call management suite of Symbian gives a much better experience e.g. the option of sending SMS/MMS using the call log is not possible in Android. The call log is confusing as it lists dialed, received and missed calls in the same list. In the contact management, it is not possible to send the contact as a business card.

Applications: Android has a Marketplace from where the applications and games can be downloaded (freeware as well as paid). The quality of the applications is good and a number of useful utilities are available for free but the number of such applications is limited. The users can set shortcut keys for the application launch. However, it is not possible to make folders and hence management of applications and multiple files is a problem.

HTC Phone
The phone has an excellent touch screen and innovative form factor. The track ball on the phone for navigation takes the experience up several notches. However, the phone lacks a good speaker. The signal quality is poor and the keypad is hard to use. The battery life is poor and does not do any justice to the functionalities that Android has to offer. The GPS did not work properly during the test period. Camera quality is poor and taking pictures is a challenge. There are no camera settings like focus, zoom, etc. and video recording is also not possible. No option for video call.

Verdict: Go for this phone only if you want a good web experience. The platform still needs to improve on basics of a good phone but it is a good start by Google and it seems that the next battle would be fought on the platform – who will be the winner Symbian, Android and Microsoft?

Tuesday, January 13, 2009

Impact of Economic Slowdown in Telecom Industry

Telecom industry is considered to be immune to the economic conditions to a large extent. In fact, it is said that the ARPU should increase as the subscribers will talk more than travel. We have observed that the subscriber addition has not come down (in fact it has increased in the last few months). Will it be fair to assume that there has been no impact of slowdown on the Telecom industry?

I believe that the credit crunch is hitting the telecom industry which will ultimately impact the subscriber addition and quality of service in the long run. The new operators have not even placed the equipment order and are still banking on arranging money from stake sale. Companies like Unitech and Swan that managed to sell the stake are not sure when the money would arrive. This has certainly impacted the new network roll-out.

Independent tower companies are facing the heat in terms of liquidity crunch and low occupancy. They are forced to abandon the roll-out plans or tie up with the hived off tower companies of the telecom players. The existing operators have also scaled down the roll-out.

The impact of the slower network roll-out would be felt in next 6-9 months when the capacity utilization would start to hit the ceiling, the quality of service would deteriorate.

However, the credit crunch could be a boon for the 3G tariffs. With the foreign players staying away from the auctions, the other players are also not expected to be aggressive in bidding. This would mean lower 3G tariffs.

Would like to get comments from the readers on their views of the impact of economic slowdown on the telecom sector in India.

Will the 3G spectrum be auctioned by the current Government?

3G spectrum auction in India has had many false starts in the last 3 years. The non-availability of spectrum for 3G (defence had to vacate the spectrum before it could be issued to operators) ensured that India remains the only large economy without 3G licenses. China issued the licenses last week after its own troubles with its proprietary technology.

Till a few days back, it was almost certain that the 3G auctions would take place in India in Jan'09. However, due to difference in opinion on the base price for auctions, between the Finance Ministry and DoT, it is unlikely that the auctions can be held before Feb'09. Any further delay would mean that the auction would be postponed indefinitely till the new Government is installed at the center as the moral code of conduct will come into play after the announcement of general elections.

I do not think anybody is going to shed tears on the postponement. The operators themselves are not interested in the auctions right now due to credit crunch and in this economic situation, they do not want another uncertainty. The low spectrum availability would have ensured that there would have been a few operators who would have been first among equals. The Government is also not sure of the money that they can rake in from the auctions. Apart from the top end users, there are very few consumers who have interest in 3G or even know about 3G. All in all, I would not be surprised if the auctions are indeed postponed till the later part of the year. By that time the entire debate on 3G vs 4G (LTE) would make a comeback.

Monday, January 12, 2009

GSM adds 8.1 mn New Subscribers

GSM added 8.1 mn (excluding Reliance GSM) new subscribers in the month of Dec'08 which means that including CDMA and Reliance GSM, the monthly net additions is likely to surpass 10.5 mn in Dec'08. Different sources tell us that the active base of subscribers is increasing. This means that the operators may in fact be reporting lower net additions than actuals. The reason behind this is that operators prefer a cleaner base and gives them the leeway in months in which they do not do well. Currently, the number of days of reporting for Airtel and Vodafone is much less than 90 days of grace (could be as low as 10 days).

It is indeed interesting how the operators are adding over 10 mn subscribers though the world is going through difficult economic conditions. It seems that the operators are adding big numbers in the lower tier towns and the rural areas. This is evident from quarter ending Sep'08 data of TRAI. The rural subscriber additions had doubled to over 19 mn in the quarter and the urban subscriber additions had declined significantly. Does it mean that the economic gloom is yet to touch the rural areas and smaller towns? How long will the operators continue to add new subscribers?

Reliance GSM Offer

Reliance has launched its GSM services in many parts of the country and is looking to acquire new subscribers as well as churn subscribers from the competition. The offer is on payment of Rs 25, the subscriber gets a SIM card and for 1st 90 days, he gets Rs 10/day for calling. Also, local calling within the Reliance network (CDMA + GSM) is free in the night (11 PM to 6 AM). Beyond Rs 10, the subscriber needs to pay Rs 1 per min for local calls. All STD calls are at Rs 1.5 per min.

The above tariff means that the subscriber can theoretically get the benefit upto Rs 900 over 90 days. The maximum cost for Reliance is expected to be Rs 270(@30 paise interconnect assuming all calls are made to other networks) plus the acquisition cost. There is a great possibility of this card becoming a use and throw card unless Reliance comes up with a compelling offering at the end of offer period.
Competition has already started to react with lifetime offers. The strategy is to bind the subscriber to their network. The lifetime plan is now being offered by Airtel and Idea at Rs 99 only requiring recharge of Rs 200 every 180 days. This means that the new price war has started. The consumers are in for a good time.