A Comeback Star

Uninor made an impressive comeback after having lost all but just one of its pan-India telecom licenses due to an earlier Supreme Court order and having shrunk its presence to a mere six circles. Its fresh operational circles were Andhra Pradesh, Maharashtra, Gujarat, UP (W), UP (E) and Bihar & Jharkhand.

More importantly, it announced having achieved breakeven across all its operational circles, while also noting a 17 percent rise in average revenue per user (ARPU). This also gave the operator further confidence in its Indian subsidiary ry and announce a 30 percent expansion of its network sites, with the aim of reaching 50 million additional population across its circles.

The operator has been much lauded for breaking g even in record time, using lean, l smart and innovative marketing and prom promotional means to achieve h high returns with relatively l low budgets. It successfully attempted innovative means, such as appointing auto drivers as its sales re representatives in the Mahar harashtra region to augment it its market presence. In 2013, Uninor suffered a 21.5 percent decline in its subscriber base, which came down from 41.52 million in December 2012 to 32.78 million at the end of 2013 (as a result of the trim-down). However, a closer look showed it arrested the decline in the April-June 2013 period itself and has been growing steadily since then.

Recently, in the February 2014 auctions, it won additional spectrum for four of its existing six circles, namely Andhra Pradesh, UP (W), UP (E) and Bihar & Jharkhand, while also securing spectrum for a new circle of Assam.

Voice

Voice services continue to be the main revenue contributor in Telecom services. In FY 2013-14, it registered a growth of 5.9% compared to previous year. The main reason attributed to the increase could be due to increase in tariffs and the new subscriber additions. There were 933 million subscribers at the end of March 2014.

In FY 2013-14, it contributed 65.8% to the overall telecom services revenues as compared to 68.3% in the previous financial year. This implies shift in terms of revenue towards other services including data services.

Fixed voice segment continues to register a negative growth and this year it was -11.1%. However, in the mobile voice segment the growth was 10.6% compared to previous FY 2012-13.

Although the TRAI released QoS parameters do not suggest any major quality issues, but customers are facing call drops, etc. In the metro circles this is because of choked bandwidth as the data services consumption is growing and in other circles the network is yet to achieve optimization.

Operators will have to continue investing in improving voice networks as well for few more years as voice will continue to contribute the significant proportion of the revenues although at a slow/declining growth rate. In addition to this, voice is the ‘real time’ service through which a customer tangibly can perceive the network quality.

As the data tariffs continue to decline, particularly on the 3G networks, the voice traffic over radio network will continue to see a drop with the invasion of applications such as Viber, for example, even in the local and NLD segments.

Data

Data services continue to be the key focus of wired as well as wireless operators. The segment drives the investments of the operators into network enhancements and optimizations.

Data services contributed 24.8% of the total revenues for the operators in FY 2013-14 as compared to 22.2% in FY 2012-13.

While fixed as well as wireless data services registered growth in revenues, it was 30.6% in case of wireless services while in fixed it was 13.1%. Overall, data services grew at 22.6% YoY.

In the fixed services, data revenues become very critical as the consumers continue to use fixed line connection mainly for broadband services. However, as the wireless technologies, in particular, broadband wireless access technologies grow and mature in the country, there is going to be a direct impact on the revenues of the fixed line operators affecting their balance sheets adversely.

Looking at the trend of strengthening the broadband wireless access (BWA) network, fixed line operators must focus on fiber rollouts as well as enriching the enterprise services portfolio. Services to be considered by the operators would include SIP Trunking services for the enterprises.

VSAT

VSAT services continued to exhibit a growth of 8.4% in terms of revenue in FY 2013-14, where the key driver is installation of VSATs within BFSI segment.

This year onwards, TRAI revised the threshold speed of Internet to qualify as Broadband Internet by taking it up from 256 Kbps to 512 Kbps.

An estimated 215 million Internet users will be there in India by the end of FY 2013-14, of which over 160 million would access the Internet through wireless technologies including Mobile phones, Dongles, WiMAX, VSAT, etc. Of these users, around 61 million were broadband internet users while fixed narrow band Internet users were estimated at 3.5 million.

Other Services

Value added services and broadcast services continue to grow in terms of overall YoY revenue increase. In FY 2013-14, Other

Services generated revenues of Rs 22,149 crore registering a 10.6% growth as compared to the previous year.

However, in terms of contributing to the overall telecom services, it remained flat at around 9.5%.

VAS is getting badly affected at the cost of increased data services revenue. Although, in case of mobile VAS, it still did register a growth of 10% in FY 2013-14, but more and more apps become available at the disposal of an average consumer, the VAS revenues are unlikely to maintain a growth momentum. Changing communication patterns, like Whatsapp instead of SMS, etc. are bound to hit the VAS revenues for the operators.

VAS exhibited a flat contribution to the overall telecom services revenue in FY 2013-14 at 6.3%.

To continue growth in other services, one of the areas that the operators need to strengthen is broadcast services and roll out high grade video services that could stand the high competition, mainly coming from DTH operators. Also, mobile TV needs a serious attention from the operators to allow the services grow.

In addition to broadcast, operators need to bring in more and more applications, be it for smartphones or for the enterprise use by way of developing them or partnering with the application and software developers.

Enterprise Services

Enterprise services in India are an underserved market. Somehow, due to mobile wave riding on the India Telecom for over two decades now, enterprise services have altogether been ignored and the services being offered by the operators in India to the enterprises are no comparison to what they enjoy in other mature telecom markets.

IP and SIP-based services are yet to see a growth trajectory in India and looking at the composition of the India enterprises, which is dominated by the huge SMB base, such services mean a lot of value for the enterprises. Some of the direct benefits that enterprises are going to reap include, minimal CAPEX investment in equipments, usage-based pricing models, easy scalability and upgradability, etc.

However, the position has improved remarkably in FY 2013-14 compared to the previous financial year. In FY 2013-14, the enterprise communications segment saw 31% growth in terms of revenue.

In terms of revenue contribution to the overall telecom services, it has gone up to 23.5% as compared to 19.8% in the previous financial year. Many operators like Airtel, Vodafone and Tata Communications are bullish about the growth and are expecting to increase revenues by 1.5x to 2x in coming few years.

Increased adoption of Mobility, Data Centres, Cloud Computing, Virtualization, IoT (Internet of Things), Smart Technologies and Enterprises and other such emerging trends for the India Inc. are going to open up new opportunities for operators to serve enterprises and increase their revenue proportion coming out of enterprise segment.