The stock of telecom service providers Airtel and Idea fell 6.5 per cent and 10 per cent as Reliance Jio announced that its services will begin from September 5.
The bulk of the revenue for existing telecom operators is from voice and this segment is now likely to be under stress following Jio announcement that its customers will get domestic voice calls for free. Voice realisation per user though has been trending lower for telecom operators.
According to a KPMG Advisory Services report, over 87 per cent of total mobile subscribers access internet through phones and hence revenue expansion will be driven by data applications rather than traditional voice and text services.
Data which was expected to drive the next phase of revenue growth for telecom operators is also likely to come under increasing strain. The largest operator – Airtel – now derives almost 24 per cent of its mobile revenues from data. Idea improved its data revenue share to 20.6 per cent in the recent June quarter.
Operators now have to contend with the Reliance Jio data plan which has an effective rate of 5 paise per MB or Rs. 50/GB on its network. All of Jio’s plans include unlimited 4G usage at night time.
Airtel’s Indian operations has seen slower additions to its customer base in the quarter ending June 2016 which stood at 25.57 crore. Data usage by customers grew 28 per cent year on year but has seen a 13 per cent slide in realisation per MB at 22.31 paisa.
Anticipating the Reliance Jio arrival, under a special scheme Airtel recently cut its mobile internet charges by 80 per cent to about Rs 51 per GB. Earlier in July, the company offered up to 67 per cent more data under its 3G and 4G plans. Idea and Vodafone too followed suite.
Idea Cellular the third largest operator has a customer base of around 17.62 crore. Its average data realisation too has fallen from Rs 147 to Rs 142 while data usage has increased from 599 MB to 674 MB in the same period.
With the entry of Reliance Jio, existing operators are likely to face pressure on realisations as they try to retain customers through promotional offers. Although the transition to accessing data through mobile is increasing, falling tariffs are expected to put pressure on top-line growth. Airtel is likely to emerge stronger as it is the leading player in the Indian market and has a pan-India spectrum presence. The expected October 2016 spectrum auction is also likely to stretch balance sheets of telecom service providers seeking to buy spectrum.
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