January 3, 2017 / 12:28 PM / 8 months ago

India's Bharti offers free data, deepening price war with rivals

A girl checks her mobile phone as she walks past the Bharti Airtel office building in Gurugram, previously known as Gurgaon, on the outskirts of New Delhi, India April 21, 2016.Adnan Abidi/File Photo

MUMBAI (Reuters) - Bharti Airtel Ltd, India's top wireless carrier, said on Tuesday it would offer free data to woo new and existing 4G customers, intensifying a price war in the sector and sending share prices tumbling.

The package is Bharti's latest response to the entry last year of new operator Reliance Jio, backed by billionaire Mukesh Ambani, which shook India's telecom sector by offering free data services until March 31.

Bharti said it would offer three gigabytes of free 4G data per month until the end of the year for customers who switch to some of its plans from other carriers and to existing customers who upgrade to 4G by Feb. 28.

Prepaid users would have to sign up for a package worth at least 345 rupees ($5.05) to get the free data, while other customers would have to sign up for at least a 549 rupees ($8.04) monthly plan.

The new package sparked concerns that intensifying competition will hit profits and margins in the sector and sent shares of Bharti and smaller rival Idea Cellular both down 2.1 percent.

Bharti had previously slashed prepaid tariffs and unveiled cheaper data plans to compete against Jio, and other rivals have also had to offer incentives.

But analysts warn that will extract a cost, with Vodafone forced into a $5 billion writedown of its India business last year because of competition in the country.

The outlook for India's telecoms sector, the world's fastest growing internet services market by users, has further darkened after the country's recent move to ban higher value banknotes sparked a cash shortage that is hurting consumer demand.

"A combination of negatives in the form of demonetization and Jio's free services is likely to result in fairly dismal 3Q FY17 earnings prints for Bharti and Idea," Kotak Securities said in a Jan. 2 research note.

Reporting by Sankalp Phartiyal; Editing by Susan Fenton

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