The telecom sector didn’t raise any eyebrows when Aircel, the country’s fifth largest GSM operator, launched a pre-paid voucher offering full talk time benefits. A full talk time (FTT) voucher means that the service provider will not deduct processing fees, service tax and other operational expenses from the subscriber.

Aircel is not the first service provider, nor will be the last, to do so. During the past 6-8 months, a number of operators rolled out similar schemes to improve subscriber base and market share. This is despite the launch of 3G services (third generation) in the country, hailed as the new dawn for telecom companies.

“Data is still evolving and it is voice that’s bringing in revenues for operators,” confirms Idea Cellular Managing Director Himanshu Kapania.

In the first quarter of the financial year, Idea Cellular raked in just 14.5 per cent of total revenues from its non-voice segment. This includes revenues from pure data services and value added services (VAS) that include text and picture messaging among others.

This is true for most operators in the country, with the average non-voice data being just 14-15 per cent of their total revenues.

The data revenue market opportunity is likely to grow to over Rs 35,000 crore in next 4-5 years from the present Rs 7,000 crore, Reliance Communications’ President and Chief Executive Officer (Wireless Business), Gurdeep Singh, said in the company’s first quarter earnings call.

Till then, voice will continue to reign.

“In the developed countries non-voice contributes to about 40-50 per cent of the total service revenues and in countries like China, Malaysia and Indonesia this would be about 30-35 per cent. And it will be a while before data revenues from India become significant,” Kapania said.

Anupam Vasudev, Head Marketing-OpCo, at Aircel concurs: “Voice operations would continue to be the focus for telecom operators and reducing call tariffs or providing extra talk time would help in garnering subscriber additions and minutes of usage”.

“Data is growing, so is VAS, and it’s only a matter of time…,” added Vasudev.

So, until data becomes the major revenue churner, telecom companies would have to depend on voice services and launch schemes that might not be revenue accretive immediately.

A testimony to this is Aircel’s FTT, starting at Rs 30 upto Rs 100 and offers like Rs 260 talk time on recharge with Rs 250 vouchers.

Idea Cellular’s ‘Magic Recharge’ voucher of Rs 60 launched in Maharashtra & Goa, provides talk time of Rs 51 to Rs 100, depending on the subscriber’s luck. The Aditya Birla group company also rolled out a recharge voucher with chances to win prizes like cars and bikes, and another enabling STD calls (domestic long distance) for 30 paise per minute.

Almost all the operators rolled out similar schemes to improve subscriber base and revenue market share. This, in turn, increases their dependency on voice services.

DISAPPOINTING 3G SERVICES

The adoption of 3G services in the country has been disappointing, and with subscriber additions not up to expectations, operators have resorted to a series of rate cuts. The rate cuts were as high as 70 per cent, but high handset prices are sill the deterrent to its mass adoption.

Tata Teleservices was the first private operator to launch 3G services in November 2010, with other operators following thereafter. A pan-India launch of services happened in 2011. State-run operators – Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd - were allocated 3G spectrum on preferential basis and had begun rollouts much earlier.

“Adoption of 3G services is still no where close to where it should have been,” Aircel’s Anupam Vasudev said.

According to industry estimates, there are a little over 11 million 3G subscribers in the country, with Bharti Airtel’s 3.7 million, Idea Cellular 3.1’s million, Reliance Communications’ 4 million and rest with other operators.

“As 3G is not picking up, not at least up to expectations, for the telecom operators it’s voice that brings in majority of the revenues. Now with the intensity of competition among players increasing multi-fold, operators are looking at increasing subscriber base and revenue market share,” Ankita Somani sector analyst at Angel Broking said.

“For example, Bharti Airtel had been concentrating on rollout of 3G services and did not concentrate either on its subscriber additions or revenue market share. However, now the company is also focusing on improving its RMS and subscriber base,” Somani said, adding, this is true to most of the companies.

DATA TO BE KING

The 3G services, which were introduced in Europe in 2001, took about 10-12 years to make a significant impact across the world. At present, there are about 1 billion 3G customers and more than 5 billion voice customers.

“It is estimated to take another 4-5 years for data to become a significant revenue garner. We see early signs of mass 3G adoption,” Cellular Operators’ Association of India (COAI) Director General Rajan S Mathews said.

A mass adoption of the services would happen following increase in 3G handset penetration, availability of content and expansion of services and networks.

“We firmly believe that the future of the telecom category is data and that too not just providing access but a whole new world of services riding on the data networks. For the youth, conversations do not start or end with voice but seamlessly extend to various online platforms like Facebook and instant messaging and hence the future of telecom will be driven by our ability to deliver solutions that help consumers enjoy endless conversations irrespective of if it enabled through voice or data,” Gurinder Singh Sandhu, Head Marketing, Tata Teleservices Ltd.

Tata Tele, which sells its telecom services under the brand Tata DoCoMo, will continue launching products such as unlimited plans.

Pre-paid connections account for more than 95 per cent of the total 950 million SIMs issued in the country, and according to industry analysts, pre-paid means low-end users.

While it’s true that 95 per cent of the mobile connections in the industry are pre-paid, it does not translate into these customers not using smartphones or customers who have a high voice consumption do not use smartphones . So it’s a myth,” Tata Tele’s Sandhu said.

All said and done, voice continues to rule, at least for the time being.

rajesh.kurup@thehindu.co.in

(This article was published on September 13, 2012)
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