As users dip, data drives growth at telecom companies

NEW DELHI: After grappling with falling revenues over the last two years following the entry of Reliance Jio in September 2016, India’s telecom sector now faces a shrinking mobile user base, signalling the end of the era of runaway growth during which the market grew from 873.36 million to 1.14 billion in number terms over the last five years. It also means operators need to offer more data usage per SIM instead of flooding the market with SIM cards.

The sector regulator, Telecom Regulatory Authority of India (Trai), counts each connection as a subscriber, though there are some overlaps.

With the number of wireless connections falling consistently in four of the last five quarters starting April-june 2017 and telecom density reaching 88%, according to latest data from Trai, the subscriber growth story of the sector seems to be nearing its end. The data shows the number of wireless connections has shrunk to around 1,146 million in April-june 2018, compared to nearly 1,187 million in the same quarter last year.

The trigger for this turn in fortunes has been Reliance Jio’s entry, with smaller operators such as Aircel and Reliance Communications having to shut wireless operations, while Tata Teleservices and Telenor were acquired by Bharti Airtel, and Vodafone India and Idea Cellular merged.

With Jio’s free voice calls and cheap data packs—matched by rivals—consumers no longer feel the need to keep multiple SIM cards for different uses.

“With consolidation among operators, fewer users hold multiple SIMS,” said Mahesh Uppal, director at communications consulting firm Comfirst India. “Moreover, prices have crashed and the price arbitrage between SIMS has fallen considerably. So, market share and revenue are both relevant, the focus is more on usage than number of users. Thus, telcos are keener to convert feature phone users to data subscribers.”

Upgrading old-style feature phone users from voice to data subscribers is seen as an attractive strategy. This is because although the number of overall wireless users is declining, the number of wireless internet subscribers has seen an uptick for the last five quarters, jumping from 409 million in April-june 2017 to nearly 491 million in April-june this year.

Data usage is also on the rise. Airtel is looking to boost its content offering through tie-ups with video platforms Netflix, Amazon Prime and ZEE5, while Jio is looking at producing content in-house. In April-june, Reliance Jio reported 10.6GB of average data consumption per user per month while for Bharti Airtel this was 7.8 GB.

“Telcos have already employed majority of the marketoriented options they had —tariff plans, pricing, buying other operations, etc.—to acquire customers. Teledensity is reaching a plateau. And the small margin left to acquire more customers cannot be the sole strategy of telcos,” said Amresh Nandan, vice-president, analyst (tech industry), Gartner. “They must focus on improving the quality of service because it is important for their content strategy also.”