New Delhi, Sept. 1: Telecom giants Airtel, Idea and Vodafone are all set to up the ante in the tariff war unleashed by Reliance Jio.

Analysts, however, cautioned that the high costs incurred by existing operators to expand network and acquire additional spectrum to compete with RJio will increase their debt burden.

Bharti Airtel has already launched a 4G service in Mumbai and Kerala that offers download speeds as high as 135 Mbps. India's No. 1 operator is offering the service in Mumbai and Kerala now and can expand to another 13 circles.

Airtel has started offering free and unlimited voice calls with some postpaid data packs. It is also offering data at rock-bottom prices in some plans to retain high-paying users.

Other players, including Vodafone and Idea, have already slashed data tariffs by 67 per cent for prepaid customers and are now looking at other options to retain customers.

Tariff correction

"Data tariffs are bound to see a major correction because of the disruptive launch of Reliance Jio, while the benefits from higher data volumes as well as subscriber growth will be back-ended," said Tanu Sharma, associate director - large corporates, India Ratings & Research.

The debt profile of existing operators will deteriorate in 2016-17 on account of higher expenditure on network and spectrum, Sharma added.

EY's global telecommunication leader Prashant Singhal said the telecom sector was reeling under financial stress, high debt and revenue slowdown. A further decline in data tariffs may impact profitability and sustainability.

Credit Suisse said majority of RJio's monthly plans were targeted at high-end users having Rs 500 and above average revenue per unit (ARPU) compared with Airtel's ARPU of Rs 196 even as Jio's Rs 149 plan was for the mass.

"The average Bharti customer today spends Rs 196 per month, consumes 414 minutes of voice (incoming+outgoing) and around 200MB of data. Under Jio's Rs149 plan, this average customer can get unlimited voice, 50 per cent more data for 25 per cent lower monthly spend. The only constraint from Jio's perspective is that the customer needs to have a 4G phone," Credit Suisse said.

Long-term benefit

Some analysts, however, see a silver lining in the tariff war.

According to global ratings agency Fitch, while lower tariffs will hurt the margins of existing companies for the next 12 months, they will also benefit from the high data market created by Jio.

"All the players have access to the same technology and are rolling out 4G networks aggressively. Pricing will be under pressure in the nearer term. But the telecom industry in India has been very innovative in the past, whether it is the 'minutes factory' or tower consolidation. It will continue to be innovative to deal with challenges as they arise," said Hemant Joshi, partner at Deloitte Haskins & Sells LLP.

The Cellular Operators Association of India (COAI) today said Reliance Jio's offer was a "compelling proposition" and good for consumers, but its tariffs cannot be termed as "killer" that will do away with competition.

The COAI, which is leading the front in a fight with Reliance Jio over inter-connect issues, said competing operators are already matching the price points in most plans the new entrant announced today.

COAI director-general Rajan S. Mathews said RJio's challenge would be to maintain quality of service on its network once the traffic volumes go up.