Telecom biggies emerge stronger from their trials

What doesn’t kill you makes you stronger. This applies perfectly to India’s telecom biggies. After being hit by scams, huge spectrum payments and bruising competition for the past five years, leading operators are now emerging stronger. Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications have all seen a sharp increase in 3G and data usage, boosting revenues and margins. A focus on active customers has also helped lift telecom companies’ fortunes.

Indian telcos now have 6-7 per cent of users signed up for 3G, up from almost nothing two-three years ago. The market leaders have been the biggest gainers. The 3G subscriber base of Idea Cellular and Vodafone has doubled, while that of Bharti Airtel and R Com spiked in 2013-14. Although telcoscontinue to add 2G subscribers as well, 3G users help raise their realisations (ARPU or average revenue per user) and data usage. With the competition for market share in mobile telephony abating, players have also begun to hike tariffs gradually for old-fashioned ‘voice’ users. But they are wooing upmarket 3G and data users via attractive deals. This has led to a spike in data revenues in the past one year. Data as a proportion of revenues is now 10-13 per cent for the larger players.

With the increasing penetration of smartphones, the Indian telecom market is seeing an explosion in mobile data usage. Some studies say data revenues would grow at 85 per cent annually to rake in ₹36,000 crore for mobile operators by 2016.

Simultaneously, leading telcos are also going slow on churning out new SIM cards and are retaining active users instead. Irregular and dormant users are being edged out of networks. As a result, the active user base that recharges regularly has improved significantly — 96-100 per cent of the user base for large operators, and 50-75 per cent for the rest.

Thanks to these factors, ARPUs of operators have started to improve in 2014 after declining steadily between 2010 and 2013. Though the increase in ARPUs may seem mild, it signals a trend reversal and is now at 42-45 paisa per minute for most operators.

The regulatory regime is also easing up. With the telecom tribunal recently allowing the top three players to enter spectrum sharing arrangements to provide 3G services, they should be able to expand their national footprint.

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