Bundling of handsets is not a new concept in India. And even though the earlier attempts cannot be dubbed as failures, they weren’t resounding successes either. This time around, these schemes are likely to stick on, if not succeed.
On Friday, Reliance Communications and Bharti Airtel launched subsidy schemes for the new Apple handsets, iPhone 5S and iPhone 5C.
A norm in the matured telecom markets, bundling is the process wherein an operator joins hands with a handset maker to provide both mobile phones and connections on a discounted rate. There would be a lock-in period under the agreement, with penalties clauses for breach of contracts.
Sustainable in long run
“Bundled offers are sustainable in the long run for both the operator and customer as long as they stick to the agreement. For operators, these schemes are usually opted for by richer-than-average customer, giving them an opportunity to scale up at a later point in time,” Mohammad Chowdhury, Leader-Telecom at PwC India, said.
Under a two-year contract, RCom is offering 16GB iPhone 5C and iPhone 5S at zero upfront cost. The company, which straddles both CDMA and GSM technologies, is offering unlimited voice calls, SMS and 3G data for a fixed monthly fee ranging between Rs 2,599 and Rs 2,999. This also includes the handset cost.
Without the discounts, the 16 GB iPhone 5C is priced at Rs 41,900. A user, under the Rs 2,599 scheme would end up paying about Rs 62,376 (an additional Rs 20,476) by the end of his term contract. Ditto, is the case with other tariff plans.
“But then the subscriber is getting free data and voice, depending on the opted plan, for the next two years,” Chowdhury added. However, operators would have to tread the subsidy path carefully.
“Telecom companies in Europe, which is a mature market, are bleeding due to excessive subsidies,” Kamlesh Bhatia, research director at Gartner said, adding that subsidies account for a “sizeable” component of an operator’s capex.
Biggest challenge
“There are a set of consumers who aspire to own these high-end devices and this is one way of ensuring mass adoption of these handsets. The biggest challenge for service providers is churn (a subscriber discarding existing operator for another) and these initiatives would help in addressing this to a great extent,” Bhatia added.
Bharti Airtel also launched special discounts, enabling customers save up to 50 per cent on monthly rentals and Rs 12,000 a year. With other operators expected to follow suit, the industry expects bundling to be the norm in coming years.