Consolidation, data as primary consumption of telecom services, customer retention rather than acquisition being the primary focus are some of the trends seen during last year
The year 2015 for Indian telecom appeared to be a year that gave us an indication of what is there in store in 2016. The year sowed all those seeds that has the promise to bear fruit in the next year. Consolidation, data as primary consumption of telecom services, customer retention rather than customer acquisition being the primary focus are some of the trends seen during last year. On an overall basis, the 2015 appeared to be dull but it was like the lull before the storm that is waiting to happen in 2016.
By the end of 2015, India’s mobile subscriber base had crossed a billion mark and tele-density was more than 80%. However the disparity between urban and rural teledensity is still there with urban teledensity at 150% whereas rural teledensity lagging at close to 50%. Internet subscriber base of the country just crossed 350 million mark with about half of that on broadband network. Of the 350 million internet users, more than 95% of them are on wireless internet network.
Trends: On a national basis, the focus of almost all the operators was not anymore on new customer acquisition. Rather they focused on retaining their existing customers by offering more value for their money. However, this initiative did not come from some kind of realisation that customers need better service, but they were forced to believe it by the emerging threat from Reliance Jio. Industry watchers including Bharti Airtel Group Chairman also believes that entry of Reliance Jio will disrupt the market.
Call drops was the biggest issue that plagued the industry the entire 2015 and the issue has not settled down yet. Lots of conflicts and confrontation occurred between the service providers and the authorities over the issue. The sector regulator had directed the operators to compensate the customers for call drop amounting to Rs 1 per call drop reported payble to customers by the operators. However the operators’ lobby group COAI contested the same at the Delhi High court and then in Supreme Court. In a recent hearing the apex court struck down the TRAI recommendation terming it as ‘unreasonable’.
The minister had appealed the telecom operators to increase capacity by investing more on their networks. Almost all the telecom operators have claimed to have invested and upgraded their network to a significant level. Bharti Airtel had announced to invest Rs 60,000 crore to upgrade its entire network under project ‘Leap’.
Financial Performance: For the reported period of FY 2015-16, India’s top telecom operator Bharti Airtel posted revenue of Rs 96,532 crore with net profit of Rs 5484 crore. The company’s mobile data revenue grew by almost 45% year on year contributing 23.3%.
Vodafone India, country’s second largest operator in terms of revenue as well as subscriber base posted revenue of Rs 44,490 crore compared to Rs 42,378 crore registering a 5% growth. Data revenue grew 45 per cent to Rs 8,263 crore in financial year 2016 as compared with Rs 5,690 crore a year back.
The third largest operator, Idea Cellular has posted revenues of Rs 35980 crore for the financial year 2015-16 reporting net profit of Rs 3078 crore for the same period.
Seeds of Consolidation: Globally as well as in India, industry watchers believe India can sustain only 4 to 5 players in a long run. Though the country is being served by over 10 operators for quite some years, the developments in last year offered some indication that the time has come for consolidation.
In November last year Reliance Communication announced to acquire Sistema Shyam Teleservices or MTS. Though financials of the deal was not disclosed, according to the agreement, Sistema would take 10% stake in Reliance Communications and pay Rs 392 crore per year to the government for the spectrum MTS acquired during the last spectrum auction.
There are also industry whispers that Aircel is in talks with multiple operators for a possible sell out. In a recent deal, Airtel announced to acquire the 4G spectrum of Aircel in 8 circles for Rs 3500 crore. In a similar development the Sunil Mittal led firm has also acquired Videocon’s 4G spectrum in 6 circles for Rs 4428 crore.
In an older deal, Bharti Airtel had acquired another 4G license holder – Augere Wireless for undisclosed amount. The company had 20 MHz of 4G spectrum in Madhya Pradesh.
Wait For Reliance Jio Goes Longer: Reliance Jio is the only operator to have pan India license to offer 4G services and the company, though got the license in 2010, has so far failed to launch the service even in 2016. However, the expectation of the industry from the Mukesh Ambani firm is huge as the company has been building one of the world’s largest telecom networks. Reliance Jio had forged infrastructure sharing pacts with all the major network providers like Bharti Airtel and Reliance Communications. Though the company had started offering some of its services, that too on a trial basis, it is still working to link all the dots before it starts offering a full scale commercial service. The company that has invested more than Rs 80,000 crore on its telecom infrastructure claims to offer a gamut of telecom services including VoLTE, VoVDE and high speed data services.
Outlook: Despite of the comparatively less happening 2015, the year 2016, it is expected, will bring some dramatic changes to the Indian telecom services scenario. To start with, India might witness Reliance Jio to launch its 4G services commercially on a national scale. If that happens, high speed wireless broadband with 4G LTE could be main stream by the end of this year.
The year 2016 will also see one of the biggest spectrum auctions in Indian telecom space. In the July-slated auction, the government is planning to sell airwaves in the spectrum bands of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz, and expects revenue Rs 5.36 lakh crore. One more development can be seen in Indian telecom space in 2016. If analysed properly, the year 2016 could be the year for consolidation though the seeds of this have been sowed in 2015.