All telecom operators in India are currently dependent on the increasing Wireless Data usage to see their Revenues grow. The last 12-18 months have been the most exciting for all operators, especially the ones who have 3G operations in a decent number of circles. Until about 2 years ago, the CDMA operators (i.e. Reliance Communications & Tata Teleservices) were enjoying a rapid increase in their revenues from Wireless Data services because they were able to launch high-speed internet services using EVDO technology, which was primarily used via USB dongles. The subscribers of these services were giving reasonably high monthly revenues, mostly in the range of Rs.500 to 1000/- and their monthly usage was in the range of 2GB to 10GB. But the CDMA operators had introduced the EVDO network in limited number of urban centres in every circle and the monthly subscriber additions were only in a few thousands.
Over the last 2 years we have seen all 3G license holders expand their networks at a ferocious speed. Now we have 3G networks in hundreds of cities & towns in every circle and even major highways have been covered. People started using 3G services for PCs via USB/WiFi dongles as well as in their Smartphones. Every month lakhs on subscribers started using 3G services and now we have nearly 20% of the total mobile subscriber base of all 3G operators using the Data services. Initially the Average Monthly Data usage per subscriber was less than 400 MB, but it has been rising with every quarter and it is close to 700 MB now. This trend of increasing usage will continue for a long time to come. The Smartphone penetration is increasing and people have started using it not just for communication & social networking, but also for entertainment via watching videos, TV shows and live matches. All this added to the fact that Internet usage is quite addictive in nature, we will see more & more people using more & more Internet with every passing quarter.
Coming to the Revenues part, FY'15 was quite a landmark year, where most operators posted nearly 60-75% increase in their revenues from Data services on the back of near doubling of Data volumes on their networks. As per my estimates, the mobile industry generated around Rs.35,000 crores in Total Data Revenues in FY'15, translating in over 15% of it's overall Total Revenues. A year ago this number was well under 10%. Bharti Airtel leads with around 22% market share and FY'15 Data revenues of about Rs.7800 crores. Vodafone mostly holds the 2nd position with about Rs.7000 crores and 20% market share. These 2 operators along with Idea Cellular, together command over 55% market share currently. Other details as per my Estimates are mentioned in the Table alongside. Let us now focus on how things could progress over the next 2 years.
The biggest change that will happen in FY'16 for the Wireless Data business is the entry of Reliance Jio Infocom with it's 4G services. It has been delayed to quite an extent, but the company will have to introduce the services latest by Q2 of this fiscal. Initially the services will be launched in limited number of cities across the country, but will be rapidly expanded to take it to nearly 5000 cities & towns over the next 12-24 months. Since the company will have limited urban coverage and action for less than 9 months of this fiscal, I have estimated RelJio to capture about 8% market share in FY'16 with Total revenues of about Rs.4000 crores. With the entry of RelJio, it is widely expected that all the existing operators will experience a substantial slowdown in their growth as a section of their subscriber base will certainly shift to the new 4G operator. RelJio is expected to have the widest 4G coverage in India and also offer the most competitive tariffs, which will certainly attract the usage of heavy Data users across the country.
Coming to tariffs, operators like Airtel & Idea have declared in their quarterly reports that the net realisation is close to 25 paise per MB, which translates into a rate of about Rs.250 per GB. The same must be true for Vodafone. These three operators together offer 3G services almost across the country with the widest coverage in every circle and best quality subscriber base and hence charge slightly premium rates. The 2nd rung of operators like Reliance Communications, Aircel and TTSL (RAT) are now trying to play catch-up with the trio of larger operators (AVI). They are enhancing 3G coverage rapidly in their respective circles and are also looking at tying up internal roaming agreements to offer a near All-India 3G coverage to compete with AVI. The trio of RAT is trying to attract subscriber attention by offering an effective rate of well under Rs.200 per GB. With increasing coverage, they are certainly seeing success with traffic & revenues shooting up in recent quarters.
When RelJio launches, we could see further aggressive pricing with effective rates of under Rs.150 per GB for lower plans and going down to under Rs.100 per GB for higher plans. Initially RelJio is expected to target households with good Smartphone presence. Imagine a family with 4 members with almost everyone using a Smartphone. If RelJio offers them WiFi routers with plans like 10GB for Rs.1000/- or less per month, will the family not consider it as an attractive offer? I am sure there are lakhs of such households which will grab such offers. Then there are lakhs of SMEs which need internet connectivity for their business operations, which will also take to RelJio's services via WiFi routers. Initially the WiFi routers will form the biggest business segment for RelJio because their sim cards will not work in over 95% of the Smartphones currently in use as they don't work on 4G LTE networks. 4G LTE smartphones are now getting launched at a rapid pace, but for it's penetration to increase to respectable levels will take another year or two easily.
By the end of FY'17, we could see RelJio's subscriber base to be anywhere between 20 to 40 million with an ARPU anywhere in the range of Rs.400 to 700 per month. Depending on the success of RelJio's services, competition will have to react and reduce their effective tariffs to avoid most of their premium users from shifting to the new operator. This will certainly have an impact on their growth rates. The Industry's total Data revenues is estimated to grow from Rs.35,000 crores in FY'15 to about Rs.50,000 crores in FY'16 and to Rs.66,000 crores in FY'17. And I am expecting RelJio to go from 0% market share in FY'15 to over 20% market share in FY'17. I think the trio of AVI to manage the increased competition in the best way amongst all other operators. Going by the spectrum holdings that these three operators have managed to pile up, they will still manage to grow by about 10% to 15% even in FY'17, when RelJio's aggression is expected to be much higher than in FY'16. All other operators, including the trio of RAT, are expected to struggle for growth in FY'17. Some of them could even be looking at their survival chances depleting. We could see some substantial M&A deals happening during FY'17, if not earlier.
Pls remember, all the thoughts mentioned above are My personal Estimates. It will be really interesting to see how things progress once RelJio's services are launched.
Following are the links to the Easy Results Summary pages of the listed Telecom operators:
Bharti Airtel Ltd.
Idea Cellular Ltd.
Reliance Communications Ltd.
Tata Teleservices (M) Ltd.
Over the last 2 years we have seen all 3G license holders expand their networks at a ferocious speed. Now we have 3G networks in hundreds of cities & towns in every circle and even major highways have been covered. People started using 3G services for PCs via USB/WiFi dongles as well as in their Smartphones. Every month lakhs on subscribers started using 3G services and now we have nearly 20% of the total mobile subscriber base of all 3G operators using the Data services. Initially the Average Monthly Data usage per subscriber was less than 400 MB, but it has been rising with every quarter and it is close to 700 MB now. This trend of increasing usage will continue for a long time to come. The Smartphone penetration is increasing and people have started using it not just for communication & social networking, but also for entertainment via watching videos, TV shows and live matches. All this added to the fact that Internet usage is quite addictive in nature, we will see more & more people using more & more Internet with every passing quarter.
Coming to the Revenues part, FY'15 was quite a landmark year, where most operators posted nearly 60-75% increase in their revenues from Data services on the back of near doubling of Data volumes on their networks. As per my estimates, the mobile industry generated around Rs.35,000 crores in Total Data Revenues in FY'15, translating in over 15% of it's overall Total Revenues. A year ago this number was well under 10%. Bharti Airtel leads with around 22% market share and FY'15 Data revenues of about Rs.7800 crores. Vodafone mostly holds the 2nd position with about Rs.7000 crores and 20% market share. These 2 operators along with Idea Cellular, together command over 55% market share currently. Other details as per my Estimates are mentioned in the Table alongside. Let us now focus on how things could progress over the next 2 years.
Coming to tariffs, operators like Airtel & Idea have declared in their quarterly reports that the net realisation is close to 25 paise per MB, which translates into a rate of about Rs.250 per GB. The same must be true for Vodafone. These three operators together offer 3G services almost across the country with the widest coverage in every circle and best quality subscriber base and hence charge slightly premium rates. The 2nd rung of operators like Reliance Communications, Aircel and TTSL (RAT) are now trying to play catch-up with the trio of larger operators (AVI). They are enhancing 3G coverage rapidly in their respective circles and are also looking at tying up internal roaming agreements to offer a near All-India 3G coverage to compete with AVI. The trio of RAT is trying to attract subscriber attention by offering an effective rate of well under Rs.200 per GB. With increasing coverage, they are certainly seeing success with traffic & revenues shooting up in recent quarters.
When RelJio launches, we could see further aggressive pricing with effective rates of under Rs.150 per GB for lower plans and going down to under Rs.100 per GB for higher plans. Initially RelJio is expected to target households with good Smartphone presence. Imagine a family with 4 members with almost everyone using a Smartphone. If RelJio offers them WiFi routers with plans like 10GB for Rs.1000/- or less per month, will the family not consider it as an attractive offer? I am sure there are lakhs of such households which will grab such offers. Then there are lakhs of SMEs which need internet connectivity for their business operations, which will also take to RelJio's services via WiFi routers. Initially the WiFi routers will form the biggest business segment for RelJio because their sim cards will not work in over 95% of the Smartphones currently in use as they don't work on 4G LTE networks. 4G LTE smartphones are now getting launched at a rapid pace, but for it's penetration to increase to respectable levels will take another year or two easily.
By the end of FY'17, we could see RelJio's subscriber base to be anywhere between 20 to 40 million with an ARPU anywhere in the range of Rs.400 to 700 per month. Depending on the success of RelJio's services, competition will have to react and reduce their effective tariffs to avoid most of their premium users from shifting to the new operator. This will certainly have an impact on their growth rates. The Industry's total Data revenues is estimated to grow from Rs.35,000 crores in FY'15 to about Rs.50,000 crores in FY'16 and to Rs.66,000 crores in FY'17. And I am expecting RelJio to go from 0% market share in FY'15 to over 20% market share in FY'17. I think the trio of AVI to manage the increased competition in the best way amongst all other operators. Going by the spectrum holdings that these three operators have managed to pile up, they will still manage to grow by about 10% to 15% even in FY'17, when RelJio's aggression is expected to be much higher than in FY'16. All other operators, including the trio of RAT, are expected to struggle for growth in FY'17. Some of them could even be looking at their survival chances depleting. We could see some substantial M&A deals happening during FY'17, if not earlier.
Pls remember, all the thoughts mentioned above are My personal Estimates. It will be really interesting to see how things progress once RelJio's services are launched.
Following are the links to the Easy Results Summary pages of the listed Telecom operators:
Bharti Airtel Ltd.
Idea Cellular Ltd.
Reliance Communications Ltd.
Tata Teleservices (M) Ltd.
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