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India’s telecom sector’s revenue rose by 9 per cent on quarter-on-quarter basis in the third quarter of FY20 (Q3 FY20), supported by tariff hikes, which has more than offset the decline in the subscriber base in the given quarter.
After almost two years, revenue grew across all the major telecom companies in Q3 FY20. However, this momentum needs to be monitored, according to a report by India Ratings and Research.
This is because apart from tariffs, revenue depends on subscriber base, which declined in November and December 2019. Moreover, even after the tariff hikes, the competitive pressure for telcos remains elevated since Reliance Jio Infocomm’s (RJio) data tariffs remain 25 per cent lower than those of Bharti Airtel and Vodafone Idea, it said.
RJio largest player
After becoming the largest telecom player by subscriber and revenue market share in November 2019, RJio maintained its position in December 2019 with a subscriber market share of 32.1 per cent and a revenue market share of 35.4 per cent.
This is significantly higher than its subscriber market share of 23.8 per cent and revenue market share of 29.8 per cent a year ago. The increase in RJio’s market share is largely at the cost of reduction in VIL’s market share.
VIL shed 100 basis points revenue market share and 20 basis points subscriber market share on q-o-q basis, largely to RJio in Q3 FY20. The growth in subscriber base of RJio moderated in December 2019. Against the average monthly increase of around nine million subscribers in the last one year, subscribers grew by only 0.1 million in December 2019, it added.
Signs of recovery
Telcos’ average revenue per user (ARPU) had started showing signs of recovery since Q4 FY19. The recent tariff hikes by telcos in Q3 FY20 have resulted in an increase in ARPU of 2-7 per cent q-o-q of all three major telcos.
Furthermore, the share of broadband subscribers in the overall subscriber base has been continuously rising. The rising share of data subscribers, along with growing data traffic and stabilising data tariffs, augur well for revenue growth.
Additionally, the release of a consultation paper by the Telecom Regulatory Authority of India to evaluate setting up floor prices for telecom tariffs and extension of the implementation of zero interconnect usage charge regime by a year are positive moves for the telecom industry.
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