The delay in commercial launch of RelJio's 4G services was expected to be a big boon for the incumbent operators, which should have allowed them to post the best-ever figures during the Dec'15 quarter. But even without RelJio's presence, the competition from other existing operators, including the smaller ones, seems to have bitten Idea Cellular's performance quite significantly.
On the subscriber addition side, Idea Cellular did have one of the best quarters in it's history with an addition of 11 million new VLR subscribers, most of the fresh addition is happening in the rural & semi-urban areas. This big subscriber addition helped Idea to increase it's Voice minutes volume, but revenue growth was muted because of continued decrease in Rate per Min, which again is due to competitive pressures.
Coming to the biggest growth driver for almost all operators, the Wireless Data business, the competitive pressure is even more evident. The company continued to increase it's 3G subscriber base at a good pace of around 1 million per month, having added about 11.5 million 3G subscribers in the last 4 quarters and the figure now stands at over 27 million. Atleast 75% of these 3G subscribers can be assumed to be using Wireless Data services. Until the Sept'15 quarter, 3G subscribers were contributing to nearly 75% of incremental Data consumption on Idea's network, with the rest coming from the slower 2G services. But during Dec'15 quarter, 2G Data consumption has clearly shrunk by atleast 5-6% Q-o-Q, while 3G Data consumption has continued it's rapid growth. Have a look at the table below:
During the Jun'14 quarter, 3G contributed to just 48% of Idea Cellular's total Data consumption, which jumped to over 57% in Jun'15 quarter and further up to over 66% in Dec'15 quarter. If we compare the Sept'15 & Dec'15 numbers alone, 3G Data has jumped by around 10,500 million MBs, whereas the Total Data has increased by less than 9,000 million MBs. That means there has been a noticeable Q-o-Q drop in 2G Data consumption for the first time in Idea Cellular's history!! I am expecting this trend to continue going forward. On one hand we will see continued drop in 2G Data consumption and rapid growth in 3G/4G Data consumption for all operators in this business. This should ring alarm bells with operators who do not have any 3G/4G presence in the country, in case they haven't already started working on correcting their strategy for the Indian market.
Even though Idea Cellular has seen it's 3G Data consumption grow at a healthy pace of over 24% Q-o-Q in the Dec'15 quarter and Total Data consumption grow by 12.5% Q-o-Q, it's revenues from Data services are up by just 7% Q-o-Q. The primary reason being the continued fall in the Rate per MB, which fell by another 5% during this quarter. Over the last 4 quarters, Idea Cellular's Rate per MB has fallen by more than 17% from 26.9 paise to 22.3 paise per MB. This continued fall clearly reflects the competitive pressure in the industry. The Top-3 operators of Airtel, Vodafone & Idea have long enjoyed premium pricing compared to all their smaller peers. But the smaller regional players seem to be chewing away into the market dominated by the Top-3 players over the recent quarters, which is forcing the latter to reduce their rates to keep their volume growth momentum from falling off. I am expecting this trend of falling Rate per MB to continue or even gather pace once RelJio's commercial launch finally happens. I won't be surprised if the rate falls to something like 15 paise per MB over the next 3 or 4 quarters.
This is something that is scaring all the existing operators. They will have to drop rates to protect the Data volumes on their network. Hence they are all rapidly trying to introduce 4G networks in all the major cities of importance to them or beef up their 3G networks where they don't have 4G compatible spectrum. There is still no definite word on when RelJio will launch it's services, but hopefully that is not very far. The rumour mills suggest a March-end or early-April launch this year, but there is no certainty on it yet. Every week is highly crucial for the Top-3 trio as they will try to commission their own 4G networks in as many cities as possible till then. Hopefully the battle will have begun by the time next round of results starts.
