We all love freebies. So when Reliance Jio announced that they were offering SIMs with free calling for life and free data (to be charged later) everyone jumped on the Jio bandwagon. Many unquestioningly and unceremoniously abandoned their then service provider to do so. Now, however other service providers such as Airtel and Vodafone Idea have announced tariff hikes and Jio has done the same. As expected, customers are not pleased and have taken to Twitter to express their displeasure.
There was a lot of market buzz about Vodafone posting huge losses, possibly filing for bankruptcy and even exiting the Indian market. However, close on the heels of all the conjecture Vodafone Idea and Airtel announced that they would be increasing tariffs from 1st of December. This saw a sharp spike in the price and the demand for the stocks of these companies; with Vodafone share prices shooting up by 35%.
Right after the other telecom operators made their announcements, Jio also announced tariff hikes to help the industry recover some revenues after years of undercutting each other. This is done in order to ‘work with the government and comply with the regulatory regime.”
The reactions to the hikes from the tweeple are by and large negative obviously.
Bloomberg Quint’s Twitter handle put out figures to show that while Airtel and Vodafone lost subscribers in September, Jio added more that both lost put together.
The tweeple have been left wondering why Jio sees fit to increase tariffs; particular in the view of the fact that the company as posted profits and not losses like the others.
With Airtel and Vodafone posting combined losses of Rs 74,000 crore for the second quarter of the financial year, the two companies have issued similar statements about tariff hikes. This attracted charges that the companies are creating cartels to the detriment of customers.
Many of those who had moved to Jio en masse when it first entered the market are now questioning the company’s motives in providing free services to begin with.
There is now the dawning realisation of a clever marketing strategy that first reeled in customers, weakened competitors and then created a monopoly where they could charge as they wished.
Jio is operating from a position of great strength right now. It is in a position to hike tariffs and still not lose subscribers since their competitors are doing the same.
However, there are a lot of tweeple who said that they would be migrating back to the telecom provider that they used before they moved to Jio.
Several experts opine that the price wars meant to undercut the competition have hurt the telecom sector in recent years. Poor call quality and frequency of dropped calls may be evidence of this. The recently announced telecom tariff hike may not be very steep – perhaps as high as 10% - however, it will have the salutary effect of helping to wipe out company losses. This means that more players will continue to offer diverse products it the telecom space and this will be good for consumers over the longer term. Meanwhile, the surge in stock prices may give a much-needed fillip to the stock market as well.
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