Airtel Magic - Selling a Pre-paid Cellphone Service

Many new players (national as well as international) had entered the segment and the competition had become quite severe. Besides Magic, the major players in the pre-paid card segment in 2002 included Idea (Tata, AT&T and Birla Group), Speed (Essar), Hutch (Hutchison), Wings (RPG), Cellsuvidha (Fascel) and Yes (Usha Martin). In October 2002, Magic led the market, with 30% of the market share. Bharti claimed that its strategies were one of the most ambitious experiments ever in the Indian pre-paid cellular telephony market. However, given the increasing competitive pressure, doubts were being expressed regarding the ability of Bharti's marketing initiatives to help Magic retain its 'Magic' in the future.

This was primarily due to the high tariff rates charged by the companies (about Rs 16 per minute for outgoing calls). Indians who were used to paying much lesser amounts (Rs 1.20 for 3 minutes) for landline telephone calls found these to be very expensive.

However, as there were only two players, a monopoly regime prevailed. The tariff rates as well as the prices of cellular phone handsets (instrument) available in that period continued to remain high. Hence, cellular phone services during that period were regarded as a luxury and companies mostly targeted the elite segment of the society. Moreover, these services were mostly restricted to the metros.