As Users Dip, Data Drives Growth In India’s Telecom Sector

While the mobile user base has shrunk to 1,146 million connections in April-June 2018 from 1,187 million in April-June 2017, the number of data subscribers has expanded to 491 million from 409 million in the same time period.

After grappling with falling revenues over the last two years following the entry of Reliance Jio Infocomm Ltd 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 focus on driving 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 from 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 Ltd having to shut wireless operations, while Tata Teleservices and Telenor were acquired by Bharti Airtel Ltd, and Vodafone India and Idea Cellular merged.

With Reliance 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 overall number of wireless users is declining, the number of wireless internet subscribers has seen an uptick for the last five quarters, rising 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 Reliance 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 market-oriented 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 and analyst (tech industry) at Gartner. “They must focus on improving the quality of service because it is important for their content strategy also. The manner in which data is exploding on the network, the content strategy will fail if they don’t fix networks.”

This comes at a time when the top line of all operators, except Reliance Jio, is shrinking and industry revenue has dropped.

“It could be that some inactive connections were being counted earlier. Or maybe it is a manifestation of crisis in the telecom sector since the adjusted gross revenue is also on a decline,” a senior industry official said on condition of anonymity. “For example, in any economy, if automobile sales show a slowdown, it is an early warning signal for the economy. Perhaps, now the increase in the number of users may mean nothing and increase in usage per customer will be a better metric to ascertain growth.”

The Cellular Operators Association of India (COAI) believes that telecom firms now need to evolve from just being companies selling SIM cards to offering more enterprise solutions.

“Earlier, the benchmark was the subscriber number as it was globally prevalent and also because in the past, spectrum used to be distributed based on the subscriber growth,” said COAI director general Rajan Mathews. “Even though there are a billion connections, about 650 million of them would be unique subscribers. So there is a small market left to sell SIMs, but it would not yield big margins as this is the bottom of the pyramid.” – Live Mint