New handset ecospace. Handset ecospace is likely to evolve toward capitalizing the 500-million feature-phone user base into first-time data users. This will expand the data pie in a more accelerated fashion than seen so far. The number of 4G subscribers has seen a rapid growth in subscriber base in the last nine months after the pan-India launch of 4G services by Reliance Jio. However, a constraint in the path of 4G data subscriber base is the device ecosystem as 4G subscribers are restricted only to the 4G smartphone users, and availability of low-cost 4G handsets is a challenge. To address this issue the telcos are likely to launch 3G/4G feature phones at low cost and at an entry-level monthly tariff. Thus a low-cost data-enabled feature phone bundled with competitive data tariff will lead to faster addition of data subscribers which will also lead to incremental revenues.
Value proposition. The new feature phone device ecosystem is also likely to offer free or very low-cost voice calls, and reasonable data usage at an affordable price. In order to differentiate their offerings the telcos are also likely to offer value-added features viz.: embedded apps for music and video, voice command interface, screen mirroring enabling the users to connect devices on all television screens.
Mean ARPU (Average Revenue per User) shifting up. Feature phone users generate a low ARPU of Rs 50–100 while the industry’s monthly ARPU for the January to March 2017 quarter was Rs 89.3. The lowest category of feature phone users (Rs 50 ARPU) have been reluctant to adopt data usage over phone due to affordability issues. However, a low-cost data-enabled feature phone bundled with affordable tariff plan has the potential to attract 10–15 percent of the users to opt for wireless data in one year despite this segment being highly price sensitive. Nevertheless, the ARPU under this segment is likely to be above industry average and therefore could be instrumental in pushing the mean industry ARPU. Bharti Airtel Limited (Bharti), had ARPUs of Rs 154 in 1QFY18, and Vodafone India Limited (Vodafone) and Idea Cellular Limited (Idea) had an ARPU of Rs 142 in 4QFY17. The low industry ARPU is also reflective of a lowering industry VLR ratio which leads to an inflated subscriber base.
Migration to 4G accelerated. There were 1180 million wireless connections as of May end 2017 out of which 400 million (34%) were data subscribers. The data subscriber base grew at 28 percent Y-o-Y in the quarter ending (QE) March 2017. Out of the 400 million Internet subscribers, 65 percent subscribers (258 million) are broadband subscribers. Remaining 35 percent (140 million) are narrow band users who are likely to adopt hi-speed data if available on low-cost devices at attractive pricing. These customers are more likely to shift to wireless data services in case the pricing of the new device is not an entry barrier.
4G-enabled feature phones are likely to also accelerate migration from 2G to 4G, which will step up the demand for telecom tower sites especially in the unpenetrated areas which are housing the larger piece of the target market. Data capacity viz. spectrum resources and network CapEx will continue to remain differentiators for competitors. So far more focused on protecting the premium customers, telcos will now also have to step up strategies to protect the 2G customer base using newer strategies, focused on bundling of services including handsets.
Data upsurge, required investments. The average industry data usage rose to 1GB per month in QE March 2017 from 884 MB per month in QE December 2016, as data prices plunged to Rs 6.4 per MB (QE March 2017) from Rs 16 per MB (QE December 2016). There is a possibility of average data usage going up 3×-4× with the proliferation of untapped data opportunity, application advancement, and device ecosystem expansion via low-cost VoLTE phones.