Ronnie05's Blog

Indian Telecom Net Subscriber Growth Slow Down

Posted in Industry updates by Manas Ganguly on September 21, 2011


The relentless growth rate of Indian telecom subscriber addition finally seems to be tapering off. After 12 quarters of double digit sub adds, most of it in the range of 15 million and above, net subscriber adds have hit a 6.67 million figure in July 2011, which is equivalent to the May 2007 level. The GSM net sub adds have tumbled from a 17.16 mln in November 2010 to 5.34 mln (excluding Tata and reliance numbers) in August 2011. That is a drop of 2/3rds in 10 months. This would be putting serious pressure on the revenues and earnings of Telcos.While they have started increasing tariffs to shore up profits, slowdown in new users may yet affect their revenues going forward. The total GSM users base to 611.75 million at the end of August 2011 and the total mobility figure topped 858 million even as tele-population stands close to 900 million at 892.55 mln. In an earlier report Informa Telecoms and Media had predicted the number of active mobile subscriptions in India to rise to 1.159 billion by the end of 2012 making it the largest mobile marketin the world eclipsing China. The Indian telecom market already has a higher subscription penetration rate (75%) compared to China(69%). However, from a revenue perspective, the Indian and Chinese markets paint a very different picture. Informa Telecoms & Media projects that by the end of 2013, the Chinese mobile market will be worth approximately US$107.5 billion, as compared to India’s mobile market, which is set to be worth approximately US$35.5 billion. China’s mobile data market by the end of 2014 will be worth more than the entire Indian mobile market. The intense competition dominating India’s mobile market has made its impact on mobile ARPU, which is on average nationwide now US$3, as compared to China where mobile ARPU is just over US$10. Informa projects that India’s mobile data market will be worth approximately US$9 billion in 2014, up from US$2.3 billion in 2008 as subscribers in urban areas increasingly use their handsets to access multimedia services, and utility type services such as mobile payments and banking become more widespread in rural areas and smaller towns.

Key strategic initiatives by Telcos in India now revolves around data services – the operator views non-voice services as being intrinsic to its growth strategy as its customer base continues to grow and as it seeks to offset the ongoing fall in voice revenues. The rising popularity of messaging services, future availability of 3G/DO services and strong growth of mobile Internet and broadband will boost mobile data revenues in India during the next five years.

Out of the total 858.37 Million subscribers, 601.73 Million subscribers were active subscribers on the date of Peak VLR for the month of July 2011. The proportion of VLR subscribers is approximately 70.65% of the total wireless subscriber base reported by Telcos. Ever since the introduction of MNP, roughly 2% (15.54 mln subs) of the mobile population have opted out of their older service providers to join others.

Data: Informa, COAI, TRAI

Indian Telecom Industry: A picture in numbers!

Posted in Industry updates by Manas Ganguly on July 28, 2011

Data courtesy: Voice & Data magazine

The Indian Telecom industry grew around 15% during FY11 to post a satisfactory revenue of `166,168 crore compared to the `144,600 crore in FY10. In light of the fact that the environment was not conducive for telecom growth in the country, Revenue as well as growth rate made it all the more satisfying.

In terms of numbers, the industry sold 227 mn new SIM cards (not added that many subscribers), taking the total SIM card base to 812 mn and showing a growth of 39% over the year and monthly average additions of over 20 mn. Interestingly, 800 mn was the target set by the government, to be achieved by 2015, but the industry did it in 2011, four years before the deadline, albeit, in terms of SIM cards and not subscribers.

Other significant segments of the telecom business like NLD, ILD, VSAT and broadband also performed better than expected last fiscal. The total NLD market stood at `22,812 crore in terms of revenue compared to `17,118 crore in FY10 showing a promising growth of 33%.

The ILD market has shown steady growth of 10% with total revenue of `22,607 crore in FY11.

On fixed line, service providers are bundling broadband and IPTV to retain and attract customers but it is not helping; the industry showed a negative growth of 15.6%. Both BSNL and MTNL, which had a monopoly in fixed line services, have been badly affected. In terms of numbers, the fixed line market is estimated to be around `11,206 crore.

In terms of revenue numbers, broadband services was pegged at `6,846 crore in FY11 vis-a-vis `5,591 crore in FY10. Broadband has shown excellent growth of 22.4% thanks to large operators, especially BSNL, which has increased its coverage. The company is present in 100% districts and 98% block headquarters. So, in toto, the broadband coverage is available in more than 5,000 cities and 170,000 villages.

VSAT services industry accounted to `467 crore, thanks to government, education, R-APDRP and RRB.

It is expected that the industry will build upon the growth maintained in FY11 and use BWA and 3G as levers for increased growth in the coming fiscal. 3G will play a bigger role and so will data services as they will have to go hand in hand.

Net Subscriber Growth Slowing down! Telcos need to re-think

Posted in Industry updates by Manas Ganguly on July 9, 2011

Mobile subscribers growth is slowing down. If it was a lingering doubt that i had expressed in my last post, May 2011 subscribers data adds a solid brick of evidence that subscriber growth is decelerating.

Highlights of the May month numbers have been:
1. 13.35 Million new mobile subscribers were added taking total tally to 840 Mln.
2. Wireline subscribers reduced by 0.15 mln – the tally stands at 34.40 mln.
3. As of May 2011, there are 554.75 Million Urban subscribers as compared to 294 million rural ones.
4. Urban Teledensity (154%) is nearly 5 times higher than rural (34%).
5. There are 2 urban subscribers for every one rural mobile subscriber in India
6. Mobile Number Portability requests increase from 85.41 lakh subscribers at the end of April 2011 to 105.70 lakh subscribers at the end of May 2011.
7. Active wireless subscribers in May 2011 stand at 588.13 Million, which is about 70 percent of all mobile subscribers!
8. Broadband subscription reaches 12.12 Million in May-2011 from 12.01 Million in April-2011.

While ARPU has been southbound for a while now, the trend that is building up is a slow down in subscriber acquisition as well as MNP numbers starting to look up. For 2 quarters, Telcos have tried their muscle in trying to stop subscribers from jumping ship. However, with absence of improvement in quality of voice and data served, users are now making the shift. AN example here is that of Videocon which was languishing at an ARPU of Rs.8.5 and now to add to its miseries are customers as they jump ship. A reported 1.86 lakh subscribers exercised MNP in Videocon this month.

The growth now on is to come from the rural segment and there are choices that the TRAI and DoT are considering to encourage operators to travel deeper into rural India. Two options are currently being considered, one of them being subsidies to Telecom operators as an incentive for furthering the rural reach. The other option is about utilizing the Universal Services Obligation Fund (USOF) fund chest which is around Rs.20,000 crore currently to fund rural expansion. I guess we would see something on this front before the end of the year.

Whichever way it is Innovation at reaching out and monetizing telecom services has been a bottleneck and with the wellspring of net subscriber adds slowing down, it will be interesting to see how operators fare on a lot of operational and profit counts!

Updated facts and stats on Indian Telecom: Q1,2011

Posted in Industry updates by Manas Ganguly on June 25, 2011

1. Mobile subscribers in India increased to 861.48 Million at the end of April 2011 from 846.32 Million at the end of March 2011.There are signs of the subscriber growth numbers slowing down over the highs of 22 million in November/December 2010.

2. Overall Tele-density in India reaches to 72.08% at the end of April,2011 from 70.43% of the previous month. The 70% tele-density point should now see a de-celeration of growth and the big numbers now would come for a higher CAPEX in establishing Distribution and Reach. The overall wireless Tele-density in India has reached 69.19%.

3. The overall Urban teledensity has increased from 157.32% to 159.63% and Rural teledensity increased from 33.79% to 34.47%.

4. Of the 15 Telcos operating in India, top 3 account for 50% of the market. Thus the viability of the later entrtants: S-Tel, Videocon, Uninor,Etisalat are questionable. Having invested a combined Rs.13000 crore, the ARPUs being generated by these networks are in the order of:
Uninor: Rs.39
Etisalat: Rs.26.75
S-tel: Rs.25.99
Videocon: Rs.8.5.
Such low ARPUs does not even cover the cost of acquiring a customer, which is Rs 300-400. These numbers foretell unviable operations and it will be very difficult for Telcos to recover their costs.
Ref:New telecom firms’ revenue streams turn into trickle

5. With Teledensity at 70% and Urban teledensity at 150% and 1 paise-per-sec call rates, it is increasingly clear that operators will have to leverage data services and VAS as revenue streams in the future over Voice.

6. More importantly it is the overall quality of service and VAS, content, eco-system partnerships that are going to be the ace for greater profit realization.

7. Costs are going to be chief concern in trying to access the rural 66% teledensity. There is a scope of innovation here in terms of distribution and services. Cracking the rural hinterland is hot going to happen by the same strokes that have been used so far most successfully to get to the 70% teledensity.

8. The Urban wireless teledensity has increased from 150.06 to 152.41 and Rural teledensity increased from 32.75 to 33.44.

8. Less than 5 million subscribers (1% subscribers) have opted for MNP in 6 months. What is evident is like elsewhere, GSM is the more preferred over CDMA as an option for Cellular subscribers.

10. Active wireless subscribers in VLR in April- 2011 is 583.22 million.30% of the subscribers in India are “ghosts” and that raises concern on the issue of 30% dead numbers.

11. Broadband subscription reaches to 12.01 Million in April-2011 from 11.87 Million in March-2011. Broadband refers to 256KBPS + speeds which by itself is a very low benchmark for data access as compared to other regions globally.41% of Internet connectivity in India is Broadband.

12. Average Revenue Per User (ARPU) for GSM service declined by 4.38%, from `110 in QE Sep-10 to `105 in QE Dec-10, with Y-O-Y decrease of 27%. MOU per subscriber for GSM service declined by 2.29%, from 368 in
QE Sep-10 to 360 in QE Dec-10. The Outgoing MOUs (174) declined by 1.61% and Incoming MOUs (186) by 2.92%.

13. ARPU for CDMA – full mobility service declined by 6.38%, from `73 in QE Sep-10 to `68 in QE Dec-10. ARPU for CDMA has declined by 17% on Y-O-Y basis. MOU per subscriber for CDMA-full mobility service declined by 4.73% from 283 in QE Sep-10 to 270 in QE Dec-10. The Outgoing MOUs (137) declined by 0.92% while Incoming MOUs (133) declined by 8.34%

14. The Vista of falling ARPUs and MOUs doesnot bode well for the Indian Telecom industry and places an onus on Telcos to integrate a larger basket of Telecom services to entice the customer to spend more.

Indian Telecom Story (Part XXXV): Of 1 billion connected Mobiles, Burgeoning Dual SIMs and Distribution viabilities

Posted in Industry updates by Manas Ganguly on September 26, 2010

About an year or more back,I had written about a billion Indians connected through Telecom networks. That was a report by Gartner then.A recent report by iSuppli supports the year old theory of a billion subscriptions. Wireless subscriptions in 2014 expected to amount to more than 97% of the country’s population of 1.26 billion. Taking it further from the 652 million connections, the next 350 million mobile connections will really be scrubbing the bottom floor of the pyramid.

The age old axiom of growth from the rural markets is again coming afore. iSuppli has termed rural markets to be “significant and untapped market opportunity”. The other trend that seems to be catching on in Urban markets is that of multiple connections per person (112% mobility), which re-enforces the growth in Dual SIM handsets. Talking of Dual Sims, this has been a category that has seen a significant growth in the last 2 years. From being a “Chinese” handset identity feature, the Dual SIMs are now going mainstream. A recent report by GFK Nielsen, emphasizes the scale, growth and popularity of Dual SIM phones in India

• Dual SIM contributed to 23% of overall GSM handset sales in May.
• Dual SIM Market grown by 45% in 1St half of 2010.
• 2K – 3K price band Dual SIM contributes to 41% of overall dual SIM sales.
• Dual SIM market primary driven by Indian brands or Chinese brands.

• Micromax leads the market with a market share of 18.5% in terms of units share, followed by Spice 14.7%, G Five 12.8% & Maxx 11.6%

Once dismissed as a Fad which would fade away because of problems in quality and absence of strong market players, Dual SIM phones have now gone mainstream with Samsung, Nokia and Motorola beginning to consider Dual SIM handsets in their portfolio (a tad late maybe!)

Dual SIM markets in India have gone up by 45% in 6 months(December 2009- May 2010)

Dual SIM Market sizes as a %age of the Total Market in terms of Price Categories.

As discussed in an earlier post, the next 350 million will be a justifiably difficult segment in terms of viabilities versus realizations. With Call and Data rates scrapping the bottom, connectivity to rural millions will also not come at high ARPUs. In fact, that ARPU for the next 350 million will be about $1 or less. Thus the ability to collaborate and cut costs will be critical differentiators for Telcos. Towards this, Telcos would need to be open to new distribution and marketing paradigms based on collaborating with 3rd parties. Government of India under its rural empowerment program is piloting many such initiatives which offer the last mile connectivity. Similar arrangements of distribution such as Fertilizer companies or e-Choupal constructs will be important and critical for Telcos to incorporate and collaborate in terms of businesses needs.

Indian Telcos need to redefine a few paradigms to milk the 17million/month Indian Telecom Markets

Posted in Industry updates by Manas Ganguly on September 7, 2010

The Indian Telecom Industry continued its massive roll outs unabated in the month of July 2010 adding 17 million new subscribers taking the total tally of Telecom Subscription to 688.38 million of which 652.42 million are wireless customers. This thus takes the teledensity to 58.17%. The Chart below captures the rise, rise and rise of the Telecom Subscriber numbers.

India: Net Subscriber Adds ( A Graphic)

However, a 17 million number may not be all good news for everyone in the market. Another independent Industry survey by JuxtConsult, dishes a slightly contrarian view to the 17 million connection party stating that one out of every three mobile connections in India is not in active use. In fact, JuxtConsult claims that 355 million connections are being used regularly. Here are the details of the study findings:

 There are 304 million mobile subscribers in India, using 355 million connections ‘actively’
 Avg mobile users per household is 2.05 and avg ‘active’ mobile connections per user is 1.17
 Household level penetration of mobile phones is 61% , individual level penetration is 26%. Tele-density at all India level stands at 31%, with urban tele-density way ahead at 54%
 Rural India accounts for almost as many ‘active’ mobile subscribers and subscriptions as urban India – rural users show the same propensity to take up ‘multiple SIMs’ as urban users, but lower propensity to have ‘multiple mobile users’ in the household
 2 out of 3 mobile using households are still ‘single mobile user households’
 4 out of 5 mobile users are ‘single active mobile connection users’. The user base of active ‘multiple mobile connection users’ is around 59 million

This establishes that the actual market is far less promising than the headline numbers.The earlier situation of 14 Telcos bloodying it out for market shares in a hyper-competitive market with .5 paise per second plans was always an unsustainable strategy. I have blogged about the fruitlessness of cost based competition except for ruining the Profit and Loss statements of the incumbents and not providing any teeth to the challengers who don’t have the scale to challenge the incumbents in footprints.

The Thought to take the growth of the telecom sector meaningfully is as follows:

1. Define Telecom services beyond voice and data to items of daily use. (Mobile health, Ticketing, Finance). Voice and Data are commodities and services need to be structured on these which will allow consumers to do more for which they are ready to pay more.
2. Ability to redefine the distribution paradigm. It is always not necessary that the Telcos exert channel control even to the last mile. Alternate distribution channels will be the key here. (Leverage Fertilizer companies channel, leverage choupals, have alternate distribution agreements)