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Telecom Subscriber Base To Fall For The First Time In Eight Years

The country’s mobile user base is set to fall for the first time in eight years this calendar with many people likely to give up their second or third connections due to rising cost of ownership, experts said.

In fact, the country’s active mobile user base — or, the actual number of customers using mobile services on a network — may have shrunk in 2019 itself, after 10 years, going by the data collated by the regulator.

The total active mobile user base had slumped 4% year on year as of end October at 981 million from 1.02 billion a year earlier, as per the latest data collated by the Telecom Regulatory Authority of India (Trai).

And the trend is slated to continue in 2020.

A combination of higher tariffs, costlier minimum recharge plans and rising appetite for bundled 4G offers has raised the cost of owning multiple mobile connections, industry executives and analysts said.

This could initially trigger a 25-30% fall in growth of the dual SIM base, and eventually drive many users to discard dormant SIMs and opt for a single mobile connection, they said.

“Calendar 2020 will definitely see a reduction in India’s mobile user base after several years due to the likelihood of multi-SIM (scenarios) consolidating down to single, primary SIMs,” said Rohan Dhamija, head of India and Middle East at Analysys Mason.

The imminent situation is due to the loss of tariff arbitrage opportunities in a regime of rising prices, coupled with the growing popularity and attractive nature of bundled offers available on a 4G primary SIM, he told ET.

Trai data shows India’s total mobile user base last fell in calendar 2012, while the active user base hasn’t shrunk since calendar 2009.

Sanjesh Jain, research analyst at ICICI Securities, said there is “the risk of SIM consolidation in an environment of rising tariffs” with Vodafone Idea being particularly vulnerable to subscriber losses in 2020 on this score due to “pending network integration in leadership circles”.

SIM consolidation refers to contraction in the number of mobile connections, including multiple ones, which can typically happen when tariffs rise or when telcos merge, get acquired, or wind up operations.

Phone companies attributed the likely fall in active mobile user base in 2019 to the minimum recharge plans launched by Bharti Airtel and Vodafone Idea in November 2018. Both older carriers had taken recourse to such a pricing strategy to weed out non-revenue generating users and boost average revenue per user (ARPU), a key performance metric.

Rajan Mathews, director general of Cellular Operators Association of India (COAI), said he expected “a marginal decrease in India’s active mobile user base in 2020, following recent price hikes that could induce some price sensitive subscribers to move from dual to single SIMs”.

COAI represents Bharti Airtel, Reliance Jio and Vodafone Idea.

In early-December, Airtel, Vodafone Idea and Jio had raised bundled prepaid tariffs by around 14-33%, ringing in the first round of tariff hikes in over three years.

CLSA expects the fall in dual SIM user base to hit mobile subscriber growth starting 2020. “We forecast total (mobile) subscriber growth to be muted at 1% CAGR over FY19-22 as subscribers may increasingly let go their (dormant) SIMs with rising 4G penetration and popularity of bundled plans coupled with the recent rise in the minimum recharge plans from Rs 35 to Rs 49,” Hong Kong-based brokerage said. It estimates that around 250 million dormant dual-SIMs existed as of December 2019.

ICICI Securities, however, expects India’s 4G subscriber base to keep growing in 2020 amid growing smartphone shipments. “Smartphone shipments in nine months of calendar 2019 have increased 9% on-year to 116 million, which should drive higher 4G subscriber penetration, and we expect 4G subs addition should track growth of smartphone usage in CY2020,” the brokerage said in a note to clients.

CLSA, in its note, said it expected the combination of a reduced mobile user base and rising 4G penetration to boost telcos’ ARPUs this calendar.―Gadgets Now

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