As Per ‘Data’, Jio may Make Life Much Tougher for Tel­cos

As data growth slows Jio’s en­try poses a big­ger threat to tel­cos

The Economic Times - - Companies: Pursuit Of Profit - Kalyan.Par­bat@ times­group.com

Kolkata: Grab­bing pre­mium mo­bile broad­band cus­tomers ap­pears to have be­come a real chal­lenge for mar­ket leader Bharti Air­tel and No. 3 car­rier Idea Cel­lu­lar, as their re­cent re­sults re­flected slow­ing data busi­ness growth. The en­try of Re­liance Jio In­fo­comm into the space may now make mat­ters worse for them, say in­dus­try ex­ec­u­tives and an­a­lysts.

Bharti Air­tel’s data earn­ings as a per­cent­age of mo­bile ser­vice rev­enue in the fis­cal fourth quar­ter have crept up se­quen­tially to 23.3% in the Jan­uary-March quar­ter from 23.1% while Idea’s has shrunk a tad to 20.1% from 20.2%. This sug­gests a wor­ri­some trend for both listed car­ri­ers in the lead up to Jio’s likely com­mer­cial launch later this year, in­ten­si­fy­ing com­pe­ti­tion even fur­ther.

Bharti Air­tel’s data re­al­i­sa­tion per megabyte of data con­sumed has plunged 15% on year to 22.87 paise, while Idea’s has seen a near11% yearon-year slide to 22.9 paise in the fourth quar­ter. For Idea, data rev­enue growth has de­cel­er­ated to 34.2% dur­ing Jan­uary-March from 45.2% in the pre­vi­ous quar­ter. At Air­tel, this has slowed to 44.5% from 50.6%.

“Low traf­fic growth in data is an emerg­ing con­cern, as both in­cum­bents and Re­liance Jio are bring­ing large ca­pac­i­ties on stream,” said JM Fi­nan­cial. Deutsche Bank was also con­cerned about the slow­ing pace of rev­enue in­crease for both tel­cos from data ser­vices, a seg­ment that is ex­pected to be the main­stay for growth in the years to come.

While Idea’s strat­egy of cut­ting dis­counts to in­crease re­al­i­sa­tions from data may have hurt vol­umes as well, Bharti didn’t tin­ker with the pric­ing.

An­a­lysts feel the con­cerns around data growth is ac­cen­tu­ated with the ex­pected Jio’s en­try, which would fur­ther in­crease com­pet­i­tive in­ten­sity, wherein data price re­al­i­sa­tions could fall fur­ther. But for now, ex­cess ca­pac­ity seems to be the main con­cern, es­pe­cially with more data spec­trum com­ing up for auc­tions this July and the pace of sub­scriber ad­di­tion not keep­ing pace. Idea man­ag­ing di­rec­tor Hi­man­shu Ka­pa­nia blamed the fall in data re­ali- sa­tion to the sharp mis­match be­tween ca­pac­ity cre­ation and de­mand for mo­bile broad­band ser­vices. Though Idea added sig­nif­i­cant 3G and 4G ca­pac­ity, con­sump­tion de­mand, he said, had re­mained slug­gish. The com­pany’s to­tal data vol­umes have in­deed grown, but the pace was much slower than the pre­vi­ous quar­ters. Gopal Vit­tal, Bharti Air­tel’s MD (In­dia & Sri Lanka), said the com­pany’s data pen­e­tra­tion had flat­tened ma­te­ri­ally across In­dia, and at­tract­ing high-end data con­sumers could pose a chal­lenge in com­ing months in a fiercely com­pet­i­tive mar­ket.

At an earn­ings call a day af­ter it an­nounced fourth-quar­ter re­sults ear­lier this week, Sunil Mit­tal-founded Bharti Air­tel said it had not been able to in­crease data pen­e­tra­tion for the past three to four months.

Bharti and Idea, be­sides un­listed No. 2 telco Voda­fone In­dia, have al­ready launched 4G ser­vices and are try­ing to max­imise high-end data cus­tomer ac­qui­si­tions be­fore Jio launches op­er­a­tions com­mer­cially.

Prashant Sing­hal, global telecom­mu­ni­ca­tions leader at con­sul­tancy firm E&Y In­dia, how­ever, isn’t too wor­ried about the slug­gish de­mand for wire­less broad­band ser­vices, as­sert­ing that 4G re­mained in its in­fancy in In­dia, and it would take at least an­other six months to a year to fully evolve, de­spite tech­nol­ogy cy­cles short­en­ing and adop­tion trends get­ting faster. “One mustn’t for­get that 3G took three years to evolve. So, we mustn’t jump to con­clu­sions about poor 4G up­take since fast mo­bile broad­band net­work roll­outs and ex­pan­sions have started pick­ing up only over the last six months,” Sing­hal said.

PRASHANT SING­HAL Global tele­com leader, E&Y

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