Airtel may cut data prices by 25% next fiscal: Goldman Sachs

Airtel remains well placed even following Jio’s launch as it can offer 4G data services on similar spectrum as Jio while having a better 2G/3G fallback.
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Bharti Airtel may cut data prices by 25% in the next financial year as a result of Reliance Jio launching services, a report by Goldman Sachs said.

The report by global financial major though said Airtel remains well placed even following Jio’s launch as it can offer 4G data services on similar spectrum as Jio while having a better 2G/3G fallback.

Goldman Sachs said one key investor concern regarding the upcoming Reliance Jio launch has been the impact on data pricing.

It, however, said there is enough demand elasticity to offset any pricing cuts. In other words, consumers decide on data spends as an absolute spend and are likely to use more data if prices are cut.

“In our model for Bharti, we assume a price cut of 25% in FY17E as a result of Jio s launch. However, we assume that increased consumption will offset the impact of price cuts on revenues,” the report said.

The report further said Airtel also has a much larger subscriber base allowing it to push more network opex than new entrants and moreover, the company already has a base of fixed line and DTH subscribers.

Airtel has commercially launched LTE over 60 cities and has its network rolled out in 296 cities, either on the 1,800 MHz or 2,300 MHz bands or on both. It has launched LTE in each of the four metros and in seven of the top 10 cities in India.

The report said Bharti has significantly bolstered its spectrum position following the auctions conducted in March, with total spectrum increasing by 31% to 947 MHz across all the circles put together.

“We expect Bharti to continue outspending incumbents on non spectrum capex leading to a further increase in network capacity,” it added.

The financial firm said Airtel had the highest revenue market share in the past five years in first quarter of FY16.

“Between FY15-FY21E, we estimate the revenue market share to rise further to 31.2% (despite Reliance Jio’s launch) due to better spectrum than peers and lead in launching LTE,” it added.

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