Bharti Airtel reported a strong 3.6% Q-o-Q growth in Total Income for Q4-FY'16, mainly on the back of 4.8% Q-o-Q growth in it's India Wireless business, which alone contributes to around 59% of the company's Topline. But unlike many of the recent quarters, this strong 4.8% Q-o-Q growth was not powered by it's Wireless Data business, but by it's Voice services business.
In the last 8 to 10 quarters, Airtel's Wireless Data business was posting a double-digit Q-o-Q growth, which was single-handedly driving the company's Topline growth in it's India business. But there has been a very sharp deceleration in Airtel's Wireless Data Revenues growth during the March'16 quarter. This wasn't expected to happen, especially because the long-delayed commercial launch of RelJio's 4G service is still in 'Coming Soon' mode. The Q-o-Q growth in Bharti Airtel's Wireless Data Revenues has dropped to a lowest ever figure of just 5.4%. This is despite the fact that the company managed to grow it's 3G/4G Data subscriber base, which now stands at over 35 million, at a healthy rate of almost 15% Q-o-Q. But despite this strong growth in Mobile Broadband user base, the volume of Data consumed grew by just 9.6% Q-o-Q. This lower growth in volume coupled with further 3.8% erosion in Average Rate per MB led to a very disappointing growth of just 5.4% in Bharti Airtel's Wireless Data Revenues.
Now the question is: Why is Bharti Airtel's Data consumption not growing fast enough? If you look at the stats, the Average Data consumed by a Data user of Airtel is just around 850 MB per month. Even in case of 3G/4G customers, the average consumption must be around 1 GB to 1.2 GB per month. With this kind of low usage, most customers are still not using much of Wireless Data for things like watching Videos or Live TV, Video Calling, etc., which will ultimately propel Average Data consumption in the country. And the primary reason most people are not even trying to use these services is the COST. Even after the recurring drops in Average Rate per MB charged by Airtel, 1GB of Data still costs over Rs.220/-, which is quite exorbitant for large scale Data usage. Many of the smaller 3G players like BSNL, Tata Tele, Aircel and RCom are offering plans which are 30 to 40% cheaper than those of incumbents like Airtel, Vodafone or Idea. Hence a portion of the heavy Data users have shifted their consumption to operators which suite them in their region. Most of them also have a sim card of the larger operators, to be used as a back up option.
In many cases, users start to experience high-speed Data service with the larger operators like Airtel or Vodafone or Idea. But as their consumption starts going up and the high rates start pinching them, then they quietly shift their usage to one of the smaller operators. Remember....many of these smaller operators may not have extensive Nationwide 3G coverage, but they do have good coverage in their operational 3G circles. And their networks are almost on par with that of the incumbents in all major cities & towns in those respective circles. I think that severe competition from all existing operators too is pinching Airtel and hence the company is not able to grow the Data consumption on it's network at a rapid pace.
Bigger Worry still lurking around: The bigger worry for Airtel and all other existing operators is still the 'Upcoming' launch of RelJio's 4G service. The continued delay in it's commercial launch has allowed more breathing space for all existing operators. Operators like Airtel & Idea and to some extent even Vodafone, are doing their best to protect their customers & revenues. But if the soft-launch stats announced by RelJio during the recent result announcement are anything to go by, then it's going to be a very very Big Thing to Worry for all existing operators. RelJio already has about half a million (friendly) users on it's network and the Average Data consumption is around 18 GB per user per month!! And RelJio now wishes to add a few more million (friendly) users to it's network in these 2-3 months and then upgrade this soft launch to a full commercial launch. Apart from these (friendly) users, RelJio has put up WiFi Hotspots are several public places across the country, where usage is currently free. All this is also indirectly hurting Airtel as well as all existing operators, atleast to some extent. RelJio is promising to offer a high-quality experience to it's users. And since they are targeting to reach millions of users across the country, they cannot price it at a premium. RelJio is planning to offer not just Data service, but the whole package of Information + Communication + Entertainment alongwith things like e-commerce, digital wallet, e-education, etc. at competitive prices. If rumours are to be believed, RelJio has already built a huge repository of content & apps for most of it's services that it intends to offer.
Players like Airtel, Vodafone & Idea, as well as all other operators, are certainly going to find it difficult to avoid a small portion of their user-base shifting to RelJio with every passing month post the latter's commercial launch. Even though they might be able to bring down their tariffs to something closer to what RelJio offers, but they will need time to match the rest of the services package. Imagine this: Even if just about 1% of Data user base of all existing operators starts shifting to RelJio every month, it will start impacting the traffic on their networks. Couple this with sharp reduction in tariffs and it's a scary few quarters for all existing operators. Forget about growth in Data Revenues, most operators will be facing erosion in their quarterly data revenues for the initial few quarters. Though the Data traffic may not decline as sharply lower tariffs could lead to substantial increase in usage from subscribers who remain with these operators.
The Only Question is WHEN will RelJio start commercial operations?? Till then Airtel has to battle it out with the existing competition, which in itself is giving it headaches.
In the last 8 to 10 quarters, Airtel's Wireless Data business was posting a double-digit Q-o-Q growth, which was single-handedly driving the company's Topline growth in it's India business. But there has been a very sharp deceleration in Airtel's Wireless Data Revenues growth during the March'16 quarter. This wasn't expected to happen, especially because the long-delayed commercial launch of RelJio's 4G service is still in 'Coming Soon' mode. The Q-o-Q growth in Bharti Airtel's Wireless Data Revenues has dropped to a lowest ever figure of just 5.4%. This is despite the fact that the company managed to grow it's 3G/4G Data subscriber base, which now stands at over 35 million, at a healthy rate of almost 15% Q-o-Q. But despite this strong growth in Mobile Broadband user base, the volume of Data consumed grew by just 9.6% Q-o-Q. This lower growth in volume coupled with further 3.8% erosion in Average Rate per MB led to a very disappointing growth of just 5.4% in Bharti Airtel's Wireless Data Revenues.
Now the question is: Why is Bharti Airtel's Data consumption not growing fast enough? If you look at the stats, the Average Data consumed by a Data user of Airtel is just around 850 MB per month. Even in case of 3G/4G customers, the average consumption must be around 1 GB to 1.2 GB per month. With this kind of low usage, most customers are still not using much of Wireless Data for things like watching Videos or Live TV, Video Calling, etc., which will ultimately propel Average Data consumption in the country. And the primary reason most people are not even trying to use these services is the COST. Even after the recurring drops in Average Rate per MB charged by Airtel, 1GB of Data still costs over Rs.220/-, which is quite exorbitant for large scale Data usage. Many of the smaller 3G players like BSNL, Tata Tele, Aircel and RCom are offering plans which are 30 to 40% cheaper than those of incumbents like Airtel, Vodafone or Idea. Hence a portion of the heavy Data users have shifted their consumption to operators which suite them in their region. Most of them also have a sim card of the larger operators, to be used as a back up option.
In many cases, users start to experience high-speed Data service with the larger operators like Airtel or Vodafone or Idea. But as their consumption starts going up and the high rates start pinching them, then they quietly shift their usage to one of the smaller operators. Remember....many of these smaller operators may not have extensive Nationwide 3G coverage, but they do have good coverage in their operational 3G circles. And their networks are almost on par with that of the incumbents in all major cities & towns in those respective circles. I think that severe competition from all existing operators too is pinching Airtel and hence the company is not able to grow the Data consumption on it's network at a rapid pace.
Bigger Worry still lurking around: The bigger worry for Airtel and all other existing operators is still the 'Upcoming' launch of RelJio's 4G service. The continued delay in it's commercial launch has allowed more breathing space for all existing operators. Operators like Airtel & Idea and to some extent even Vodafone, are doing their best to protect their customers & revenues. But if the soft-launch stats announced by RelJio during the recent result announcement are anything to go by, then it's going to be a very very Big Thing to Worry for all existing operators. RelJio already has about half a million (friendly) users on it's network and the Average Data consumption is around 18 GB per user per month!! And RelJio now wishes to add a few more million (friendly) users to it's network in these 2-3 months and then upgrade this soft launch to a full commercial launch. Apart from these (friendly) users, RelJio has put up WiFi Hotspots are several public places across the country, where usage is currently free. All this is also indirectly hurting Airtel as well as all existing operators, atleast to some extent. RelJio is promising to offer a high-quality experience to it's users. And since they are targeting to reach millions of users across the country, they cannot price it at a premium. RelJio is planning to offer not just Data service, but the whole package of Information + Communication + Entertainment alongwith things like e-commerce, digital wallet, e-education, etc. at competitive prices. If rumours are to be believed, RelJio has already built a huge repository of content & apps for most of it's services that it intends to offer.
Players like Airtel, Vodafone & Idea, as well as all other operators, are certainly going to find it difficult to avoid a small portion of their user-base shifting to RelJio with every passing month post the latter's commercial launch. Even though they might be able to bring down their tariffs to something closer to what RelJio offers, but they will need time to match the rest of the services package. Imagine this: Even if just about 1% of Data user base of all existing operators starts shifting to RelJio every month, it will start impacting the traffic on their networks. Couple this with sharp reduction in tariffs and it's a scary few quarters for all existing operators. Forget about growth in Data Revenues, most operators will be facing erosion in their quarterly data revenues for the initial few quarters. Though the Data traffic may not decline as sharply lower tariffs could lead to substantial increase in usage from subscribers who remain with these operators.
The Only Question is WHEN will RelJio start commercial operations?? Till then Airtel has to battle it out with the existing competition, which in itself is giving it headaches.
