Soon after Reliance Jio's 1st September'16 announcement of commercial launch on 5th September'16 with Welcome Offer, I had presented my estimates expecting a drop of anywhere between 5 to 10% in Total Revenues compared to June'16 quarter numbers. I had also mentioned that the June'16 quarter numbers will continue to remain a benchmark for Quarterly Revenues for most operators for a considerable amount of time. We now have the December'16 Quarter AGR numbers for all Telecom operators in India. While most operators have reported a drop within my expected range, some smaller operators have even exceeded my expectations with over 10%. Let's have a quick look at the Quarterly Progress of AGR numbers for the Top-6 Telecom Operators in India, via the following charts:
Amongst all the Telecom Operators in India, only the Top-3 were posting a healthy rate of growth in Revenues until June'16, which is a well-known fact. It was also expected that the Top-3 operators (Airtel, Vodafone & Idea) will be the least affected by Reliance Jio's onslaught. Hence it becomes even more interesting to check whether these expectations have been met or not.
Let's start with India's No.1 operator: Bharti Airtel, which reported an AGR of Rs.12496 crores in Dec'16 quarter. This is a 8% Q-o-Q drop and 10.6% drop compared to the peak hit in June'16. In fact Airtel's Dec'16 number is nearly 2% lower than even Dec'15 number. For Bharti Airtel, the Top-5 circles which have reported the largest actual drop in AGR number for Dec'16 compared to June'16 are: Karnataka (Rs.223 crores), Bihar (Rs.163 crores), Rajasthan (Rs.133 crores), J&K (Rs.126 crores) and Delhi (Rs.106 crores). Punjab is the only circle where Airtel's Dec'16 AGR is slightly higher than it's June'16 AGR. The Top-5 circles in terms of largest Percentage Drops between the two quarters are: J&K (64.8%), Kerala (20.5%), Bihar (14.8%), UP-West (14.4%) and Rajasthan (14.2%). Airtel's largest circle in terms of AGR continues to be Karnataka despite the 13.9% drop in AGR from June'16 level. The Best-5 circles for Airtel, who have reported least change in AGR since June'16 are: Punjab (+2.1%), North-East (-3.5%), Kolkata (-4.8%), Tamil Nadu (-5.2%) & Andhra Pradesh (-5.9%).
Vodafone India reported an AGR of Rs.8305 crores in Dec'16, a Q-o-Q Drop of 5.1% and a drop of 7.8% compared to June'16 AGR. Vodafone India's AGR drop is certainly a better performance compared to Bharti Airtel, despite having lesser 4G coverage compared to the latter. For Vodafone India, the Top-5 circles which have reported the largest actual drop in AGR number for Dec'16 compared to June'16 are: Delhi (Rs.130 crores), Gujarat (Rs.105 crores), UP-East (Rs.100 crores), Maharashtra (Rs.74 crores) and UP-West (Rs.36 crores). The Top-5 circles in terms of largest Percentage Drops between the two quarters are: Delhi (16.2%), Himachal Pradesh (15.5%), Madhya Pradesh (14.6%), Haryana (12.9%) and UP-East (12.7%). The Best-5 circles for Vodafone, who have reported least change in AGR or reported Growth since June'16 are: North-East (+4.1%), Karnataka (+3.5%), Kerala (+2.2%), J&K (+1.8%) and Andhra Pradesh (-2.3%). Gujarat circle continues to be the highest AGR-contributing circle for Vodafone India, but is closely followed by Tamil Nadu & Maharashtra circles.
India's No.3 operator Idea Cellular reported an AGR of Rs.6958 crores in Dec'16, which is a Q-o-Q drop of 4.9% and a drop of 10.8% compared to June'16. For Idea Cellular, the Top-5 circles which have reported the largest actual drop in AGR number for Dec'16 compared to June'16 are: Madhya Pradesh (Rs.145 crores), Maharashtra (Rs.122 crores), Kerala (Rs.109 crores), UP-West (Rs.91 crores) and Andhra Pradesh (Rs.87 crores). The Top-5 circles in terms of largest Percentage Drops between the two quarters are: J&K (33.7%), Himachal Pradesh (26.9%), Bihar (17.2%), Haryana (16.1%) and Madhya Pradesh (15.4%). The Best-5 circles for Idea Cellular, who have reported least change in AGR or reported Growth since June'16 are: Kolkata (+45.9%), Tamil Nadu (+7.6%), Delhi (+6.8%), Karnataka (3.8%) and West Bengal (-2.9%). The Maharashtra circles continues to remain the largest AGR-contributing circle for Idea Cellular by a large margin.
BSNL+MTNL combine is probably the only operator which has reported no Q-o-Q drop in AGR and an improvement in AGR in Dec'16 when compared to June'16 AGR number. The PSU combine reported an AGR of Rs.3869 crores in Dec'16, which is about 4.9% higher compared to June'16 number. The volatility in Wireline Revenue numbers for BSNL & MTNL seems to have helped the operators to report an improvement in AGR for Dec'16. The spike in March'16 AGR followed by a sharp drop in June'16 number is proof of this phenomenon. Hence there is no point in studying the circle-wise numbers for BSNL & MTNL too seriously. One thing is quite certain, BSNL & MTNL combine is slated to report over 10% drop in AGR for FY'17 compared to FY'16 numbers.
Tata Teleservices was the biggest loser in the October-December'16 quarter in terms of number of subscribers lost. During the quarter Tata Tele lost nearly 8% of it's active (VLR) subscriber base or 3.65 million users. But despite being much much smaller than both Aircel & RCom in terms of number of Subscribers, Tata Tele's AGR for Dec'16 is still nearly 25% larger than Aircel and nearly 125% larger than RCom. This speaks volumes of the poor quality of Aircel & RCom's subscriber base. Tata Tele's Dec'16 AGR of Rs.2209 crores is about 12.7% lower Q-o-Q and about 15.7% lower compared to June'16 AGR. Tata Tele's AGR from 15 out of 19 operating circles has reported a double-digit percentage drops in Dec'16 compared to June'16. It has lost big time even in it's 3G circles. This alarming pace of revenue decline looks extremely scary. Tata Tele
needs to take some swift action towards consolidation or else it will have to die a very painful death. Operators like Tata Tele, RCom & Aircel can come together and offer 3G service in nearly all circles across the country. A good quality 3G service with aggressive pricing can certainly offer a good alternative for several price conscious subscribers across the country.
India is seeing some big consolidation moves in the Telecom sector, something which I had predicted over a year ago. Bharti Airtel has already gobbled up Videocon's Band-3 spectrum, Aircel's Band-40 spectrum and Telenor India's entire business is also being taken over. But the bigger consolidation move is that of Vodafone India with Idea Cellular, which could potentially create India's largest Telecom player, atleast for the time being. Even though the operators will continue to face pressure on Topline, this consolidation will help them rationalise their network resources and save atleast 20 to 30% of their operating costs. The combined entity will also be able to offer wider & stronger 3G/4G coverage across the country to combat competition from Reliance Jio as well as Bharti Airtel.
March'17 quarter is going to be even more painful for all telecom operators, thanks to the continued Free Services of Reliance Jio till 31st March'17. The real competition will start from April'17 onwards when Reliance Jio will finally start charging it's customers for availing it's services. But the new 4G-only operator is expected to remain extremely aggressive with it's pricing in it's effort to pile up large number of paying subscribers in the coming months. The AGR numbers reported by all existing telecom operators in June'16 will continue to remain the peak values for most of them for atleast another 4 to 6 quarters, if not more. I am expecting Reliance Jio to start with a AGR market share of nearly 15% in it's very first Revenue-Reporting quarter of April-June'17. And it will continue to build on it from there with an aim to be the No.1 player in another 3 to 4 years time.
Let's start with India's No.1 operator: Bharti Airtel, which reported an AGR of Rs.12496 crores in Dec'16 quarter. This is a 8% Q-o-Q drop and 10.6% drop compared to the peak hit in June'16. In fact Airtel's Dec'16 number is nearly 2% lower than even Dec'15 number. For Bharti Airtel, the Top-5 circles which have reported the largest actual drop in AGR number for Dec'16 compared to June'16 are: Karnataka (Rs.223 crores), Bihar (Rs.163 crores), Rajasthan (Rs.133 crores), J&K (Rs.126 crores) and Delhi (Rs.106 crores). Punjab is the only circle where Airtel's Dec'16 AGR is slightly higher than it's June'16 AGR. The Top-5 circles in terms of largest Percentage Drops between the two quarters are: J&K (64.8%), Kerala (20.5%), Bihar (14.8%), UP-West (14.4%) and Rajasthan (14.2%). Airtel's largest circle in terms of AGR continues to be Karnataka despite the 13.9% drop in AGR from June'16 level. The Best-5 circles for Airtel, who have reported least change in AGR since June'16 are: Punjab (+2.1%), North-East (-3.5%), Kolkata (-4.8%), Tamil Nadu (-5.2%) & Andhra Pradesh (-5.9%).
Vodafone India reported an AGR of Rs.8305 crores in Dec'16, a Q-o-Q Drop of 5.1% and a drop of 7.8% compared to June'16 AGR. Vodafone India's AGR drop is certainly a better performance compared to Bharti Airtel, despite having lesser 4G coverage compared to the latter. For Vodafone India, the Top-5 circles which have reported the largest actual drop in AGR number for Dec'16 compared to June'16 are: Delhi (Rs.130 crores), Gujarat (Rs.105 crores), UP-East (Rs.100 crores), Maharashtra (Rs.74 crores) and UP-West (Rs.36 crores). The Top-5 circles in terms of largest Percentage Drops between the two quarters are: Delhi (16.2%), Himachal Pradesh (15.5%), Madhya Pradesh (14.6%), Haryana (12.9%) and UP-East (12.7%). The Best-5 circles for Vodafone, who have reported least change in AGR or reported Growth since June'16 are: North-East (+4.1%), Karnataka (+3.5%), Kerala (+2.2%), J&K (+1.8%) and Andhra Pradesh (-2.3%). Gujarat circle continues to be the highest AGR-contributing circle for Vodafone India, but is closely followed by Tamil Nadu & Maharashtra circles.
BSNL+MTNL combine is probably the only operator which has reported no Q-o-Q drop in AGR and an improvement in AGR in Dec'16 when compared to June'16 AGR number. The PSU combine reported an AGR of Rs.3869 crores in Dec'16, which is about 4.9% higher compared to June'16 number. The volatility in Wireline Revenue numbers for BSNL & MTNL seems to have helped the operators to report an improvement in AGR for Dec'16. The spike in March'16 AGR followed by a sharp drop in June'16 number is proof of this phenomenon. Hence there is no point in studying the circle-wise numbers for BSNL & MTNL too seriously. One thing is quite certain, BSNL & MTNL combine is slated to report over 10% drop in AGR for FY'17 compared to FY'16 numbers.
Tata Teleservices was the biggest loser in the October-December'16 quarter in terms of number of subscribers lost. During the quarter Tata Tele lost nearly 8% of it's active (VLR) subscriber base or 3.65 million users. But despite being much much smaller than both Aircel & RCom in terms of number of Subscribers, Tata Tele's AGR for Dec'16 is still nearly 25% larger than Aircel and nearly 125% larger than RCom. This speaks volumes of the poor quality of Aircel & RCom's subscriber base. Tata Tele's Dec'16 AGR of Rs.2209 crores is about 12.7% lower Q-o-Q and about 15.7% lower compared to June'16 AGR. Tata Tele's AGR from 15 out of 19 operating circles has reported a double-digit percentage drops in Dec'16 compared to June'16. It has lost big time even in it's 3G circles. This alarming pace of revenue decline looks extremely scary. Tata Tele
India is seeing some big consolidation moves in the Telecom sector, something which I had predicted over a year ago. Bharti Airtel has already gobbled up Videocon's Band-3 spectrum, Aircel's Band-40 spectrum and Telenor India's entire business is also being taken over. But the bigger consolidation move is that of Vodafone India with Idea Cellular, which could potentially create India's largest Telecom player, atleast for the time being. Even though the operators will continue to face pressure on Topline, this consolidation will help them rationalise their network resources and save atleast 20 to 30% of their operating costs. The combined entity will also be able to offer wider & stronger 3G/4G coverage across the country to combat competition from Reliance Jio as well as Bharti Airtel.
March'17 quarter is going to be even more painful for all telecom operators, thanks to the continued Free Services of Reliance Jio till 31st March'17. The real competition will start from April'17 onwards when Reliance Jio will finally start charging it's customers for availing it's services. But the new 4G-only operator is expected to remain extremely aggressive with it's pricing in it's effort to pile up large number of paying subscribers in the coming months. The AGR numbers reported by all existing telecom operators in June'16 will continue to remain the peak values for most of them for atleast another 4 to 6 quarters, if not more. I am expecting Reliance Jio to start with a AGR market share of nearly 15% in it's very first Revenue-Reporting quarter of April-June'17. And it will continue to build on it from there with an aim to be the No.1 player in another 3 to 4 years time.
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