With increasing penetration of 3G networks across the country & rising percentage of subscribers with a Smartphone in their hands, the usage of Wireless Internet services was bound to grow at a very very fast pace. Almost all telecom operators in India, including BSNL, have seen a staggering growth in the monthly consumption of Giga Bytes on their networks, which has translated into an almost similar staggering growth in Revenues from the Wireless Data service over the last 2 years.
I have information from Quarterly reports shared by Bharti Airtel & Idea Cellular, which are two of India's Top-3 Wireless carriers in India. Between Sept'13 and Sept'15, Bharti Airtel's Quarterly Data Revenues have seen an almost 180% jump. During the same period, the company's Quarterly India Telecom Revenues have grown by just 20%. About 80% of this incremental growth over this period of 8 quarters has come from Data Revenues alone. Data now contributes 21.2% of Airtel's Quarterly revenues compared to just 9.1% two years ago.
The quarterly volume of Data carried by Airtel's networks has increased by more than 230% over the last 8 quarters from under 35 million GBs to 115 million GBs. During the same period, the Average Rate per MB charged has come down very gradually from 30 paise to 25.2 paise. This slow erosion in rate is not because of increased competition, but primarily because of increased proportion of subscribers now opting for a Data pack instead of being charged on pay-as-you-use basis.
Coming to Idea Cellular, the company's Quarterly Data revenues have grown an even stronger 211% between Sept'13 and Sept'15. On the other hand Idea's Total Quarterly Revenues have grown by about 38%. Data business has contributed about 48% to Idea's incremental growth over this period of 8 quarters. Data's contribution to Idea's Quarterly revenues has jumped from 8.6% in Sept'13 to 19.3% in Sept'15.
In case of Idea Cellular, the growth in Quarterly Data volumes between Sept'13 and Sept'15 has been even more staggering. From about 17.5 million GBs, the quarterly volume has more than quadrupled to 72 million GBs over the period of 8 quarters. The Average rate per MB has seen a slightly faster erosion for Idea as compared to Airtel. Idea's Average rate per MB has fallen from 31 paise to 23.4 paise over the last 8 quarters. Despite faster growth in volumes and revenues from Data services, the contribution of Data to Idea's Total Quarterly revenues at 19.3% still lags Airtel's figure of 21.2%. This is mainly because Idea has done better with it's Voice business over the last 8 quarters, as compared to Airtel.
Conclusion:
As per my estimates & gut feeling, the Indian Telecom industry is at the cusp of a very dramatic change in it's composition. From being a Voice-dominated industry, it will soon take big strides towards being a Data-dominated one, over the next 2-3 years. It will all start with the launch of nationwide 4G services from Reliance Jio Infocom Ltd, which is a subsidiary of Reliance Industries Ltd. Expected to start by the end of this year, Reliance Jio will herald a new wave of communication services, not just Data service. I am expecting Reliance Jio to try & capture even the traditional Voice business by offering VoIP based services. Reliance Jio may or may-not offer the traditional Voice service, where we are charged on a per-sec or per-min basis. Everything could get counted in terms of Mega Bytes & Giga Bytes, even the Voice Calls.
Many of us have already experienced VoIP, either via Whatsapp calling or Google Hangouts or Video/Voice calling via Skype or Facebook Messenger, etc. These things work well only when there is good reliable high-speed internet service at both ends of the conversation. 3G networks have enabled us to have a glimpse of such VoIP services, but the experience has not always been very smooth. Hopefully with 4G speeds, there should be no problem even with HD-voice & HD-video services. Just like the way the use of Mobile Internet shot up with increasing population of Smartphones with subscribers, the use of Voice & Video calling over Internet services will shoot up with increasing penetration of 4G networks across the country. My prediction is that the mobile operators will start experiencing an erosion in their Voice revenues right from the first half of the year 2016, something which they have never experienced in the last 20 years.
All leading operators, including Airtel, Vodafone, Idea, have already started testing their 4G networks in various cities across the country. Airtel has already launched it's 4G service in over 300 cities, but the network coverage currently isn't like full-blanket coverage, but more patchy. Hence the user experience has been quite mixed. But things will improve as all operators are working on war-footing to have some kind of good 4G coverage, atleast in the crucial markets, so that they don't lose too much of revenue-generating customers to the upcoming new competitor. Vodafone has been repeatedly announcing that it will launch it's 4G service in important cities like Mumbai, Kolkata, etc. in December'15 itself and then expand further to other large cities in the following months. Idea Cellular too recently announced plans to launch 4G service in about 150 cities/towns between January & June of 2016. Unfortunately, none of these three big operators have All-India 4G-compatible spectrum and hence they will ultimately get into Roaming Agreements amongst themselves to offer maximum coverage to their subscribers.
Another thing that the existing incumbent operators will be worrying about is: rapid erosion in the Average Rate per MB they are able to charge after Reliance Jio starts commercial operations. At the moment the Big-3 are able to charge around 23 to 25 paise per MB. But I am expecting that the rates will rapidly fall to something like 10 to 15 paise per MB within 6 months of Jio's launch. So we can call it a double-whammy for all the existing operators. On one hand a part of the existing as well as incremental Data consumption will start shifting to Reliance Jio, while on the other hand the rates will also fall at a rapid pace in the initial few months. We could see some knee-jerk reaction in the first few months from all operators as they try to protect their revenues & market shares as much as possible. Things might start stabilising about 3 quarters after launch of Reliance Jio's operations.
Until now the combined 3G network capacity of all operators has been falling short of the market demand. Hence the user experience has been like 'kabhi khushi...kabhi gham'. Once Reliance Jio opens it's gates, a Huge Empty Network capacity will become available, which will try & pull subscribers from all angles. It might take a couple of quarters to analyse how long before the surging demand is able to completely consume the available supply (capacity). We will see rate corrections happening until the supply (network capacity) is substantially more than the demand. Things will only stabilise after that. As per my guess, we are barely 6-weeks away from getting to experience Reliance Jio's 4G services. So let's just spend these 6-weeks in anticipation of some big excitement!!
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