Rohan Dhamija
Partner, Head – Middle East & India (South Asia)
Analysys Mason

Mobile Operators Moving Toward a Data-Centric Play


Sameer Gupta,
Analysys Mason

Disruptive entry of a 4G-only mobile operator has completely transformed the telecom industry in India. On one hand, this has resulted in consolidation, forcing weaker players to exit, and put significant financial pressure on the incumbents, but on the other hand, it has resulted in a major shift in operators’ strategies and focus areas. In this new era of industry evolution, instead of focusing just on subscriber additions and voice services, operators have now started focusing on pushing data consumption through several initiatives such as building network capacity, developing digital services capabilities, and targeting all users including low ARPU customers. 

Building network capacity to support the exponential growth in data traffic going forward has been a focus area for the major operators over quite some time. Though all the recent mergers and spectrum trading deals were driven by the inability of weaker operators to continue in this hypercompetitive market, from larger operators’ perspective, these mergers provided them access to the additional 4G spectrum, which is a key driver for increasing capacity. For example, Bharti Airtel got access to additional 800MHz, 1800MHz, and 2300MHz spectrum through various mergers and spectrum trading deals, while Reliance Jio got access to additional 800MHz spectrum through similar deals with RCom. This is further reinforced by other initiatives being taken by operators around fiberization of towers and deployment of Carrier Aggregation, and MIMO technologies – all of which have been successfully used by operators globally to increase network capacity and offer better throughputs.

Availability of content (particularly, video and music) is key toward driving growth in data traffic. As per Nokia MBiT report 2018, video streaming and consumption of OTT content contribute to two-thirds of the mobile data traffic in India. Further, such services help operators  retain their customers and reduce churn. Realizing such importance, operators have now started playing a significant role in the digital services space – through both developing in-house offering as well as investments or partnerships with third-party service providers. The recent investments by Reliance Jio in content providers Eros International and ALTBalaji, and music streaming app Saavn, and the recent announcement by a leading operator around the importance of content in its long-term strategy prove that the operators’ positioning in digital services space would continue to grow going forward.

Another big shift in the industry has been the push to drive internet adoption across user segments including low paying subscribers. The decrease in data tariffs from >Rs. 225 per GB in 2016 to <Rs. 50 per GB now has already addressed service affordability concerns but the impact remained limited to users who could afford an Rs. 3,000 smartphone and pay minimum Rs. 199 pm on services. Appreciating that, operators have launched few initiatives recently including launching 4G featurephones at a price of Rs. 1,500 and offering low denomination data packs (e.g., Rs. 49 pm with unlimited voice and 1GB data) to target the users across income segments. Though the impact of such initiatives might not be visible immediately, we could expect a significant growth in internet user adoption as user awareness improves in the short to medium term.

To conclude, such initiatives along with many others will drive mobile internet growth in the country and hence help operators overcome the current issues around lower margins, high financial stress etc. to emerge as strong contributors to the country’s economy in the long term.

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