Wireless Data business - Idea Cellular vs Bharti Airtel.

A few days back, after checking Idea Cellular's Q3 numbers, I had highlighted the point that it's Wireless Data business is already facing competitive pressures with incremental growth rates tapering quite quickly over the last couple of quarters. Now that we have Bharti Airtel's Q3 numbers too with us, I thought of digging deeper to compare the performances of the two companies in the Indian market only. I have only considered Bharti Airtel's Wireless India business numbers for this comparison.

To get an idea of the recent trend, I have collated Trailing-Twelve-Months numbers for Data Revenues and Non-Data Revenues for the period ending Sept'14 to the 12-months ending Dec'15, for both Idea Cellular and Bharti Airtel (India). These numbers help us understand the trend that is developing over the most recent 5 quarters.

Idea Cellular: 

On a T-T-M basis, Idea Cellular's Data Revenues have doubled from Rs.3208 crores to Rs.6434 crores over the last 5 quarters. Data Revenues contributed 11.1% to Idea's Total Revenues in Sept'14. But the same has sharply increased to 18.2% by Dec'15. This is something that is already known. Now here is the interesting part.....have a look at the chart below:

The chart on the left shows the progress of the T-T-M Data and T-T-M Non-Data Revenues with every passing quarter. While the chart on the right is complimentary as it shows the Q-o-Q change in the T-T-M numbers for both Data & Non-Data Revenues. 

As we can see, the incremental growth in Non-Data Revenues peaked in Dec'14 and has been coming down since then. In fact the pace of fall has accelerated in the last 2 quarters. But the Non-Data Revenues growth is still positive for Idea Cellular. On the Data Revenues front, the incremental Q-o-Q growth seems to have peaked in the March'15 quarter, when it hit the Rs.710 crores mark. Since then over the last 3 quarters, the incremental Q-o-Q growth has tapered off gradually to a level of Rs.567 crores in Dec'15. This is the bit that got me worried. Sharp reduction in growth of incremental Non-Data Revenues is understandable, but a consistent drop in incremental growth of Data Revenues is definitely not good. I am sure that Idea Cellular's management too must be worried on this front and hence it is aggressively trying to launch it's own 4G network in 750 cities & towns by June'16 as relying on 3G alone is not going to help in the face of fresh new competition, in addition to existing competition.

A small point to note is that Data Revenues became the bigger contributor to incremental growth for Idea Cellular on a T-T-M basis from the June'15 quarter.

Bharti Airtel (India business):

Bharti Airtel has posted an almost-equally strong 85% growth in T-T-M Data Revenues over the last 5 quarters. The figure now stands at Rs.11,009 crores, a figure that is probably higher than Annual Total Revenues of almost all telecom operators in India other than Idea, Vodafone & BSNL. Still the Data Revenues are just 20.1% of Bharti Airtel's Total India Revenues. Have a look at the charts below for Q-o-Q progress of T-T-M numbers:

Even in case of Airtel, the growth in it's Non-Data Revenues has seen a sharp fall off post the Dec'14 quarter. Infact the T-T-M Non-Data Revenues have started posting negative incremental growth since June'15 quarter. This isn't too surprising to note as we all have been expecting degrowth in Voice Revenues for most operators in the coming quarters. What is heartening to note in case of Airtel's numbers is that the Q-o-Q growth in T-T-M Data Revenues has not started tapering off yet. The incremental growth figure has remained steady above the Rs.1050 crores mark for the last 3 quarters. Airtel's wider own 3G coverage across almost all circles and also a growing 4G coverage in about 7 or 8 circles currently has definitely helped Airtel to keep the growth momentum in Data volumes & revenues on it's networks.

With a good amount of 3G and 4G coverage across most of the circles in India, Airtel is expected to be relatively less impacted due to RelJio's upcoming 4G launch, compared to all other operators. Airtel has 3G spectrum for 21 circles out of the 22 that our country is distributed in. It also has 4G spectrum in 9 circles currently and is trying to take that number to 15 via acquisitions or auctions.

Summary:

From the numbers that I have collated for this study, I can say that Idea Cellular has done better than Bharti Airtel when it comes to Voice Revenues. But Bharti Airtel has clearly done better than Idea Cellular on the Data Revenues front. And the Data Revenues market is what is going to be the most important part going forward for all telecom operators. As of now Voice business contributes about 75% of the Industry's Total Revenues. But in about 3 or 4 years time from now, this proportion will drop to something like 35% or 40%.