India's Mobile ARPU on the Slide

It's already well known and documented, but the latest quarterly Indian Telecom Services Performance Indicators report from the Telecom Regulatory Authority of India (TRAI) , which covers the final three months of 2009, shows how intensifying competition is hitting the ARPU (average revenue per user) levels at India's mobile operators.

According to the report's statistics, the monthly ARPU levels for GSM service users in India decreased by 12.4 percent to 144 Indian Rupees (US$3.26), compared with the aggregate ARPU level of INR164 ($3.71) in the three months to the end of September. During the first three months of 2009, the GSM ARPU level was INR205 ($4.64).

The CDMA service ARPU level also dipped during the fourth quarter, by more than 7 percent to INR82 ($1.86).

ARPU levels have been in steady decline for some time as more and more operators entered the market and subscriber numbers grew (there were more than 525 million mobile lines activated at the end of 2009), but this sharp drop can be attributed to the tariff war started by Tata Teleservices Ltd. in June 2009.

And ARPU levels aren't set to stabilize any time soon, according to a recent report from Pyramid Research . It estimates that ARPU levels will continue to decrease during the next four years, though the rate of decline will tail off as each year passes.

The news comes just as the country's operators wait to see which of them will emerge from the 3G spectrum auction with new airwaves, and attempt to find the right data services strategies to help boost their ARPU levels. (See India 3G: And They're Off! and MTS India Puts Its Faith in Data.)

But it's not only ARPU levels that are dropping: There has also been a decline in the monthly average minutes of usage (MOU) levels too. For GSM it declined by 2.8 percent to 411 minutes per month in the fourth quarter of 2009 from 423 in the previous quarter.

The GSM operators had been expecting the average MOU to rise as tariffs fell, but as this isn't happening it's likely that there has been in increase in the use of multiple pre-paid SIM cards, which means a growth in the number of people using more than one SIM to make and receive calls. The practice is common in India, with some industry sources estimating that while there are more than 525 million activated lines, there are possibly only 350 million to 400 million unique mobile service users.

Among CDMA users, MOU levels grew during the final quarter of 2009, by 3.2 percent to 318 from 308 in the previous three-month period.

Another metric set to rise is the mobile penetration level. With 525 million lines, mobile teledensity stood at 45 percent at the end of 2009, and this has already increased to 47.9 percent at the end of February 2010. The team at Pyramid Research expects the mobile penetration rate to reach nearly 80 percent by the end of 2014.

— Gagandeep Kaur, India Editor, Light Reading