Mobile services

Speed Breaker Ahead for Indian Telcos

Data growth seems to have plateaued at India's top service providers, with most of them reporting subdued numbers in the quarter ending March 31, 2016.

Idea Cellular Ltd. , the country's third-biggest operator, recorded just 1.5% growth in data volumes, with usage on its network rising from 80,994 million megabytes in the October-to-December quarter to 82,236 million between January and March. Vodafone India , the number-two player, also reported almost negligible growth in data volumes.

While Bharti Airtel Ltd. (Mumbai: BHARTIARTL), India's largest telco, recorded record growth in data volumes of 9.6%, this marks a considerable slowdown compared with the average rate of 14-15% at which volumes have grown in recent quarters.

Gopal Vittal, Bharti Airtel's managing director and CEO for India and South Asia, drew attention to the issue during an analyst call last month. "There is some underlying concern around the fact that our data penetration on a national basis has kind of flattened a little bit over the last three to four months," he said.

In tandem, the average revenue that Bharti Airtel generates per megabyte fell by 15%, to 22.87 Indian rupees ($0.34), in the January-to-March quarter, compared with the year-earlier period. Idea suffered an 11% year-on-year drop in average revenue per megabyte, to INR22.9 ($0.34), over the same period.

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It is possible that data consumption is plateauing simply because the consumers with the greatest appetite for data are already on board. That could force telcos to put more effort into educating and informing the next wave of subscribers about the benefits and attractions of data services.

This is further reflected in Vittal's remark on the data consumption habits of consumers. "Remember that 80% to 90% of the use of data in this country is still around basic applications, whether it's Facebook, WhatsApp and maybe video. And at 1.5 Mbit/s on a small screen, a 3G network delivers video pretty seamlessly without buffering," he said during the analyst call.

This puts a new light on the future of 4G in India. While operators are pushing consumers to adopt 4G, the reality is that take-up has been relatively modest so far and could remain that way in the foreseeable future. The incumbents are aggressively rolling out 4G services even as data consumption has slowed down.

Operators are now in a position of having lots of capacity on under-utilized newer networks. As a result, it may be some time before they can generate a return on investment, which raises questions about the large sums they have spent on acquiring spectrum. If this trend continues, authorities might not be able to generate as much revenue from forthcoming spectrum auctions as they are expecting.

The plateauing of data consumption could force operators to reduce their prices. And the rollout of services by new entrant Reliance Jio looks set to put further pressure on those tariffs. With the aggressive rollout of 4G and expansion of 3G that are underway, the last thing telcos want to deal with is a slowdown in data consumption.

— Gagandeep Kaur, contributing editor, special to Light Reading

kec143 6/27/2016 | 6:59:45 AM
Average revenue per MB An interesting read, however it will be helpful if you can provide pointers for data used. Average revenue per MB of $0.34 seems high.
jayakd0 6/22/2016 | 9:23:22 AM
Data (and ARPU) drought? A country where consumer has figured out even a missed call/ring count (without answering) sufficient for basic communication, revenue seem to grow mainly from increased connections. Where else can we see fellow travellers share music from a single mobile head set?  :)

With a promising APP economy and booming startup ecosystem, operators should aggressively findout meaningful local content which attract the average Indian, while incentivising the data plans to convert more and more subscribers as APP consumers (with APPS in local language, of course)!  

Like we connected a billion subscribers in the last decade, hope the operators see the potential to connect a billion things (individually or aggregated) looking at its potential to solve the numerous problems in this country. The earlier the 4G operators here embrace NB-IOT, better the value it will unleash for everybody!

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