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Indian Operators Battle Brutal Market

India's mobile operators are signing up plenty of customers, but their ARPU levels are being eroded by a savage price war

January 22, 2010

3 Min Read
Indian Operators Battle Brutal Market

The impact of India's brutal mobile services price war is starting to tell on the operators' financial performance, with market leader Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and Idea Cellular Ltd. the first to report their financials for the final three months of 2009. (See India Passes 500M Mobile Mark.)

Bharti's ARPU feels the heat
Bharti Airtel today announced a 1 percent year-on-year increase in revenues to 97.7 billion Indian rupees (US$2.1 billion) for its fiscal third quarter (October to December 2009), and a 2 percent rise in net income to INR22.1 billion ($478 million), despite having tens of millions more customers than it did a year ago. (See Bharti Airtel Reports Q3.)

At the end of December, Bharti Airtel had: 118.9 million mobile customers in India, giving it a market share of 22.7 percent, up 39 percent from 85.6 million a year earlier; nearly 3 million fixed-line customers, up from 2.6 million a year earlier; and just over 2 million digital TV service subscribers, up from 149,000 at the end of 2008.

The impact of intense competition and price erosion is clear to see in Bharti Airtel's average revenue per user (ARPU) numbers for its mobile business, which dipped by 29 percent to INR230 ($4.98) per month from INR324 ($7) a year ago.

The operator's chairman and managing director, Sunil Bharti Mittal, noted that Airtel "continues to ensure a robust market share despite the hyper competition."

Now the carrier, which has just struck a content delivery network (CDN) deal with Limelight Networks Inc. (Nasdaq: LLNW) in an effort to attract more media sector and enterprise business, is looking overseas for growth and may even announce an IPO for its mobile towers business, Bharti Infratel, during the next financial year, according to The Hindu Business Line. (See Bharti Teams With Limelight, Bharti Forms International Unit, Bharti Buys Stake in Warid, and Bharti Touts Wholesale IP Offer.)

Mixed fortunes for Idea
Idea Cellular, India's fifth largest mobile operator, saw its revenues and subscriber base grow year-on-year but its profits and ARPU dip.

The operator reported revenues of INR31.5 billion ($681 million) during the final three months of 2009, up from INR27.3 billion ($591 million) a year earlier, while its customer base (including Spice Telecom ) grew to 57.65 million customers (52.3 million at Idea, 5.35 million at Spice) by the end of last year, up from 38 million at the end of 2008. (See India's IDEA Buys Spice for $750M.)

But, like Bharti Airtel, it saw a dramatic dip in the amount of money its customers spent each month. The ARPU level at Idea Cellular dipped to INR200 ($4.32) from INR268 ($5.79), and dropped at Spice to INR214 ($4.62) from INR284 ($6.14) a year earlier. It also reported an increase in taxes and operational costs (as it launched its services into five new circles), sending its profit after tax down to INR1.7 billion ($36.7 million) from INR2.2 billion ($47.5 million) a year earlier.

The operator noted in its earnings report that "the Indian telecom market, with already the world’s lowest tariffs, witnessed savage competitive price cuts" during 2009, but added that now that its network rollout is all but complete -- it is operational in 20 of India's 22 circles -- "the peak funding period for 2G operations is now behind... [The balance sheet] provides a solid base to support future investment and any level of competitive pressure going forward." (See IDEA Cellular Uses NSN, IBM Wins at IDEA, and IDEA Deploys NSN.)

— Ray Le Maistre, International Managing Editor, Light Reading

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