Jio vs Airtel vs Vodafone Idea - Subscriber Numbers upto July'19

Every month we have been reading reports of Reliance Jio adding a few million subscribers and Airtel + Vodafone Idea losing a few million of theirs. July'19 is no different. Reliance Jio maintained it's subscribers momentum with addition of another 8.5 million subscribers in July'19, taking it's total to almost 340 million. Vodafone Idea lost a smaller number of users compared to the previous 2 months. It's total subscriber base now stands at 380 million, down by 3.4 million. Airtel has now included Tata Tele's subscribers in it's count. Tata Tele had about 11.5 million subscribers in June'19. But Airtel+Tata Tele's subscriber count has jumped from 320.3 million in June'19 to 328.5 million in July'19. That means Airtel also lost nearly 3.2 million subscribers during July'19.

All the three operators have seen their VLR % erode during July'19. Starting with Airtel, it's own VLR % at the end of June'19 was 98.5%, which dropped to 94.95% in July'19. This is mainly due to addition of Tata Tele's subscribers in it's total count. Most of these Tata Tele's subscribers were already using Airtel's network on Roaming. Hence this had helped boost Airtel's VLR % for the previous few months, as can be seen from the table alongside. Airtel's VLR base has dropped from 315.5 million to 311.9 million, i.e. a drop of 3.6 million active users. The same at the end of January'19 was 331.2 million. That means Airtel has lost close to 16 million active users during these 6 months.

Looking at Vodafone Idea, it is already tainted to be the worst performing Telecom operator in terms of subscriber & revenue growth in the recent months. The effects of large-scale Network Integration activity across several circles has had a severe impact on Vodafone Idea's active subscribers count post March'19. At the end of March'19, Vodafone Idea's Total subscribers were 395 million, which is now down to 380 million, i.e. a loss of just 15 million users in 4 months time. Nothing alarming. But during the same period, it's VLR % has dropped from 93.3% to 81.9%, in a staggered manner. This means it's active subscriber count has dropped from 368 million to 311 million over those 4 months, i.e. a loss of 57 million, which is large figure. An average of over 14 million a month!! This is substantially more than what Jio is adding every month.

Over the last month or so, we have seen several announcements from Vodafone Idea about launch of TurboNet 4G services in more & more cities across the country. TurboNet 4G is the brand they have adopted for announcing the launch of Integrated network for Vodafone & Idea combined. TurboNet 4G also represents the launch of a network which is expected to offer wider coverage & much larger capacity than before, with the help of the largest spectrum pool amongst all operators in India. This should help improve adoption of 4G services amongst Vodafone & Idea users and also attract users from rival networks. We may not see much of it's effect in August numbers, but I am sure we will start seeing a boost in numbers for Vodafone Idea from September'19 onwards. Apart from launch of TurboNet 4G, Vodafone Idea has also introduced lower denomination recharge options for users to remain active on the network.

Coming to Reliance Jio, it's monthly subscriber addition numbers have been very consistent. It seems as if the company is despatching only a limited number of simcards / Jio Phones every month. For the 6 months between January to July'19, Jio's Total subscriber base went up from 289 million to 340 million, i.e. 51 million new additions translating into 8.5 million every month. That is precisely the number they are adding every month. Even their VLR % is steady around the 83-84% mark. Looks like everything is working in a very measured fashion. Sometimes even raises a doubt in my mind whether these are genuine numbers or manufactured ones.

Airtel & Vodafone Idea are now neck-to-neck in terms of active subscribers. It will be an interesting race from September'19 onwards. Airtel might inch ahead in August as Vodafone Idea's TurboNet 4G marketing started only in the latter half of August. In about 4 to 5 months time, Jio will close the gap between it's Active base numbers and the other two, which currently stands at about 29 million. And most probably Jio will just zoom past both of them. Both Airtel & Vodafone Idea are unlikely to offer something like the Jio Phone, which is what is pulling major numbers for Reliance Jio since the last couple of years. Both Airtel & Vodafone Idea will prefer to expand their 4G network coverage to get closer to that offered by Jio currently and target the Smartphone users to upgrade to 4G or pull a few dis-satisfied users from Jio or BSNL.

That brings us to the comparison of Wireless Broadband numbers of the 3 operators. Jio's entire subscriber base is counted as Broadband user base as it's 4G-only network. In case of both Airtel & Vodafone Idea, it comprises of 4G and 3G subscribers. The 3G subscriber base for both operators is rapidly falling. Both have less than 25 million 3G users on their Networks as of July'19. By the end of this year, both operators are expected to shut down 3G networks as the same spectrum can be used to add to their 4G capacity. So all these 40 to 50 million 3G users will be forced to upgrade their handsets and start availing 4G services over the next 3 to 6 months.

Airtel's Wireless Broadband user base has been steadily increasing over the last 6 months. It went from 110 million in January'19 to over 121 million in July'19, i.e. at a pace of almost 2 million a month. On the other hand, Vodafone Idea had a tough time trying to maintain it's wireless broadband user numbers between February'19 to May'19, when it lost about 1.25 million users. It has seen some increase for the last 2 months of June & July'19. I am pretty sure that this will pick up pace from September'19 onwards & we could see Vodafone Idea adding 2 million+ Wireless Broadband users every month. This race between Airtel and Vodafone Idea will get very interesting by the end of 2019. I am excited to see which one of the two proves to be a bigger challenger to Jio in the year 2020. So far we all know that Airtel has performed better than Vodafone Idea. But there are reasons for the same. As Vodafone Idea starts pushing it's upgraded network services through formal advertisement channels, we should see the company numbers start improving.

Q1FY20 Telecom AGR update: BSNL is on a surprise comeback

TRAI announced the Q1FY20 Financial Numbers for all Telecom operators a couple of days back. I have considered the Adjusted Gross Revenue (AGR) numbers for the Top-4 Telecom operators in my analysis. For Q3FY19, Vodafone Idea was No.1 (31.4% Market-share), Bharti Airtel was No.2 (30.7%), Reliance Jio was No.3 (29.2%) and BSNL+MTNL was No.4 (8.7%). Things have changed substantially over the last 2 quarters.

Vodafone Idea was expected to lose some market share as it is undertaking a massive Network Integration exercise since November'2018. This has resulted in Vodafone Idea slipping to No.3 position with 27.2% market share in Q1FY20. Bharti Airtel had lost it's No.2 position during Q4FY19 due to some one-off adjustments. It has now regained the No.2 position with a market share of 29.6%. Reliance Jio has jumped to No.1 position in Q1FY20 with a market share of 30.2%. But all these developments were more or less expected. What is surprising is the fact that BSNL seems to be on a strong comeback. BSNL+MTNL combine had reported an AGR of just Rs.2864 crores in Q3FY19, which jumped to Rs.3546 crores in Q4FY19, which was a Q-o-Q jump of about 24%. BSNL+MTNL combine has managed to post an even stronger Q-o-Q growth in Q1FY20 to improve it's AGR to Rs.4703 crores, which is a jump of almost 33%. This strong growth has resulted in BSNL+MTNL combine's market share improving substantially to 13% in Q1FY20.

If we compare the Q1FY20 numbers with Q3FY19 numbers, Bharti Airtel has managed to increase it's AGR by 5.5%, but lost market share by 1.1%. Vodafone Idea has seen it's AGR dip by 5.5%, resulting in it's market share dropping by 4.2%. Reliance Jio has reported an AGR increase of 13% and a market share increase of 1%. On the other hand, BSNL+MTNL combine has managed to increase it's AGR by 64%, resulting in it's market share increasing by 4.3%. BSNL has managed to post such strong growth entirely on it's own since MTNL's performance continues to be disappointing. It will be interesting to see if BSNL manages to continue to post healthy positive growth in the coming quarters. Over the last few months we have been reading many reports of BSNL delaying salary payments to it's staff due to paucity of funds. Government of India is seriously considering some major boost to BSNL, including handing over of MTNL's operations to BSNL. If this happens soon, BSNL will be able to improve it's services & presence in the 2 important Metro circles of Delhi & Mumbai. This should help to further improve BSNL's quarterly numbers. Let's wait & watch how things pan out in the coming quarters for BSNL.

Coming to Vodafone Idea, the company is expected to improve it's performance from Q2FY20 onwards. It's Network Integration work has progressed well over the previous 2 quarters and the company continues to rapidly Integrate the networks in more & more towers in various circles. Very soon we will see the company increasing it's marketing efforts to spread the word of it's Stronger & Larger Network in several cities across the country. Initially this marketing effort will be more localised, limited to only those cities where the Network Integration work is over and the capacity has been increased. As the company gets closer to achieving the Network Integration work in over 80-85% of it's towers across the country, then we will see Vodafone Idea pushing for large scale advertisements across various mediums. I am expecting this to start before the end of December'2019.

Bharti Airtel & Reliance Jio continue to aggressively market their services across the country & also continue to incrementally increase their coverage & capacity. While Bharti Airtel has started switching off it's 3G network from some locations and utilise that spectrum for 4G service, Reliance Jio is simultaneously working on rolling out it's wireline services on a commercial basis next month. This might reduce some of it's aggression on the wireless front and we could see some slow down in subscriber addition on Reliance Jio's Wireless network in the coming months.

The next data point awaited is the Subscribers data for the month of July'19, which should be released in the 3rd week of next month.

Do Share your thoughts on this report or Views on the points discussed. Awaiting your Comments.

Telecom Status Report: VLR numbers at the end of May'19

TRAI's report on Subscriber numbers at the end of May'19 is out. The numbers for Top-3 players, which together account for about 90% of the market-share, have progressed on expected lines. Reliance Jio continued to lead the charge with addition of 8.1 million subscribers in May'19. Bharti Airtel lost 1.5 million, while Vodafone Idea lost 5.7 million subscribers during the month.

The bigger news that grabbed the headlines was that Reliance Jio has now overtaken Bharti Airtel to become the No.2 player in the Wireless telecom industry, in terms of Total Subscribers. Reliance Jio's Total Subscriber count has reached 323 million, compared to Bharti Airtel's 320 million at the end of May'19. This is something that was expected to happen sooner or later. Reliance Jio is expected to topple the current No.1, Vodafone Idea, sometime before the end of end of this year.

But if we look at the Active Subscriber base count, i.e. the VLR base of each of these three operators, Bharti Airtel is still very comfortably placed in the No.2 spot, with 320 million active subscribers. It lost 4 million Active subscribers during the month. On the other hand, Vodafone Idea continued to lose Active Subscribers at a faster pace. After the big slump of 26 million in April'19, Vodafone Idea saw it's Active users base drop by another 8 million during May'19. It's lead over Bharti Airtel is now just 14 million.

At the same time, Reliance Jio's Active users base increased by a mere 3 million, compared to the 8 million of Gross additions it did. It still trails the Top-2 by a good margin, with an Active subscribers base of 268 million. If the current trend continues for a few more months, Bharti Airtel will become the No.1 player toppling Vodafone Idea, maybe in another 2 or 3 months, well before Reliance Jio catches up with these 2 and overtake them.

Vodafone Idea seriously needs to ramp up it's Integrated network rollout to more circles and simultaneously start with wider marketing campaign. Since it is currently focusing on the Network rollout part, it has stopped Advertising it's brand & services on a large scale. This is clearly hurting the operator's numbers month after month. The operator is said to have completed the Integrated network rollout, which is expected to have much larger Capacity & Speed, in about 10 circles. Vodafone Idea is expected to complete the rollout across the country by the end of this year.

Bharti Airtel has been Advertising it's brand & services very aggressively, which is helping it gain 4G subscribers month after month, though at a pace slower than Reliance Jio. Industry reports suggest that a major portion of Reliance Jio's subscriber additions are happening for the Jio Phone subscribers, which are actually low-revenue subscribers.

We will get more details on each operator's performance in their Quarterly Results presentations this month.

Who is winning the Revenue Race: Airtel or Vodafone-Idea or Jio?

The TRAI's Revenue figures for March'2019 Quarter are now out. And it's throwing some interesting information.

For the Quarter ending December 2018, Vodafone-Idea was the No.1 operator with an Adjusted Gross Revenue (AGR, including NLD, ILD and ISP numbers) figure of Rs.10,377 crores. It was closely followed by Airtel at No.2 with an AGR of Rs.10,146 crores, just about 2.3% shy of the leader. Then came Jio at No.3 with an AGR of Rs.9,644 crores, just about 5% shy of the No.2 player. That means the gap between No.1 and No.3 was just about 7%!! BSNL/MTNL is a distant No.4 with an AGR of Rs.2864 crores.

With competition so tight, coupled with the fact that Reliance Jio continues to add millions of new 4G customers every month, it's Monthly addition figure of 4G customers is larger than the Quarterly addition figures of 4G customers for both Vodafone-Idea and Bharti Airtel, things were set to change in the Revenue Rankings sooner or later.

The Big News this quarter is that Reliance Jio has already overtaken Bharti Airtel to become No.2 in the Revenue Rankings, even though it posted just 4% growth in it's AGR figure Q-o-Q to reach Rs.10,032 crores. The bigger reason being a near 11.5% drop in AGR for Bharti Airtel to reach Rs.8,986 crores. The reasons for such a sharp drop in AGR for India's former No.1 operator is not exactly known. It could be due to some one-time adjustments as well and the AGR figure might bounce back in the next quarter. That we will have to wait & see. Currently we will focus on the numbers that we have.

Vodafone-Idea has managed to hold it's fort with a nominal 0.3% drop in AGR and is now at Rs.10,348 crores. But it is very likely that Vodafone-Idea will lose it's No.1 position to Reliance Jio in the June'19 quarter, unless it manages to ring in some growth for itself. BSNL/MTNL posted a strong 24% Q-o-Q growth in it's AGR figure and it now stands at Rs.3,546 crores.

Bharti Airtel: It managed to report a growth in it's AGR for 10 out of the 22 circles. The circles where it managed to post double digit % growth are: Bihar, Gujarat, North East and West Bengal. Even Orissa and Rajasthan posted healthy growth for Airtel. But at the same time Airtel saw massive drops in AGR figures for important circles like Delhi, Mumbai, Karnataka and Tamil Nadu. Even Airtel's NLD AGR has seen a drop of 18% Q-o-Q. Karnataka alone contributed 8.5% of Airtel's Total AGR in December'18. And it reported a drop of 15% in AGR for it's biggest contributing circle. Airtel is rapidly expanding it's 4G coverage and re-farming it's 2G & 3G spectrum for use with 4G in many circles to expand capacities. Hopefully this should help bring back some growth in AGR in the coming quarters. Bharti Airtel will also receive a small boost in AGR when Tata Tele's mobile business finally merges with it. That process is in the final stages.

Vodafone-Idea: AGR figures for almost all circles were pretty stable Q-o-Q in case of Vodafone Idea, with only 1 or 2% variations in most cases. Only Bihar circle saw an erosion of nearly 19%. Gujarat, Haryana, Maharashtra and Punjab reported some amount of noticeable growth, but nothing significant. Vodafone-Idea too continues to improve the capacity & reach of it's 4G network, primarily by combining the frequencies of both previous entities. It has the advantage of having the largest pool of 4G-capable spectrum on a combined basis now, after merger. This should translate into capacity advantage sooner or later and then we could see Vodafone-Idea reporting healthy growth in customers as well as revenues.

Reliance Jio: Riding on a strong growth in customer additions across the country, Reliance Jio managed to post a growth of between 2% and 7% for most of the 21 out of the 22 circles, where it reported an increase. It was only the circle of Mumbai where it reported a decline of 1.5% in AGR. With a huge number of Jio Phone as well as Smart Phone users on it's network across all parts of the country, Reliance Jio is certainly experiencing capacity constraints in several regions. I for one am not happy with my experience of Jio service over the last few months. Jio has deployed it's best network only in Urban areas or in areas of high population density and paying capacity. While it has deployed secondary network in rural areas, more focused on catering to Jio Phone users. Jio has the momentum in it's favour currently. But as and when a higher proportion of it's customers start experiencing poor service, it could very well see a slowdown in growth momentum.

Telecom: Q4-FY'17 Analysis: BSNL is the surprise Winner.

It was widely expected that Q4-FY'17 will produce the worst Revenue numbers for all telecom operators as Reliance Jio had extended it's Freebie offer till 31st March'17. Reliance Jio started adding subscribers on it's 4G-LTE networks in a big way from latter half of Q2-FY'17. Hence Q1-FY'17 numbers will become the benchmark for pre-Jio era. The Top-8 operators (Airtel, Vodafone, Idea, BSNL/MTNL, Tata Tele, Aircel, RCom & Telenor) together generated Adjusted Gross Revenues (AGR) of Rs.40,089 crores in Q1-FY'17. From that point onwards, the Industry AGR numbers have been on a downward trend in each of the next 3 Quarters so far, reaching a number of Rs. 33,149 crores in Q4-FY'17. That means Reliance Jio has managed to pull down the Industry's Quarterly AGR by nearly Rs.7,000 crores or about 17.5%, over the last 3 Quarters.

How did Reliance Jio manage to make such a large impact even when it's Active Subscriber Base market share reached just about 8% by the end of March'17? That is because of 2 reasons: Firstly, these 8% subscribers shifted almost their entire Mobile (Voice as well as Data) usage to Reliance Jio from their Primary operator; Secondly, in an attempt to hold on to their precious customer base, the existing operators had to make big changes to their tariff plans and introduce many new offers to attract attention of existing as well as new subscribers. In fact many of the attractive offers from the Top-3 players (Airtel, Vodafone & Idea) were given only to new subscribers, which led to millions of existing mobile users buying new sim cards just to avail these special one-time offers. This boosted the subscriber numbers of these operators at a time when Reliance Jio was aggressively eating into their usage market share. Ofcourse most of these recently activated sim cards, purchased only to avail the special one-time offers, will soon be thrown away once the validity period of the offers expire.

Between Q1 and Q4-FY'17, all telecom operators (barring 2) have seen substantial double-digit percentage drops in their AGR numbers. The Top-3 percentage losers are: Aircel (31.5%), Tata Tele (28.4%) and Telenor (24.3%). Each of India's Top-2 telecom operators, Airtel & Vodafone, have seen their AGR shrink by 19.4% between Q1 and Q4 of FY'17. Idea Cellular too lost 17.9% of it's AGR, more than the Industry shrinkage of 17.5%. Surprisingly, two operators managed to buck the AGR shrinking trend: RCom and BSNL, but their stories are different. RCom's Q1-FY'17 AGR number of Rs.1274 crores was already lower by 33% compared to it's year ago number of Rs.1864 crores. It dropped another 25% to report a number of just Rs.968 crores in Q3-FY'17. But the company has managed to pull it back smartly to Rs.1270 crores in Q4-FY'17. Could this pull back be a result of it's association with Reliance Jio for 4G-LTE services? This will only be confirmed if RCom manages to maintain this number or improve further in Q1-FY'18. Coming to BSNL/MTNL, the PSU combine has managed to post a 7.6% increase in it's AGR numbers between Q1 and Q4 of FY'17, which is really a surprising performance. Even it's Q2 and Q3 numbers were quite stable and Q4 number has been an improvement on both. The charts above clearly show how Public Sector combine of BSNL/MTNL managed to maintain it's Quarterly AGR numbers throughout the 3 Quarters of Reliance Jio onslaught, even when none of the Private Sector players could not save themselves from 17% to 31% erosion in AGR numbers over the 3 quarters.

BSNL/MTNL have managed this strong performance even without 4G-LTE service offering. It just did the basics right. Firstly, the operator worked on improving it's 3G networks at various important urban locations. Secondly, it worked on reducing the monthly Wireline surrenders and managed to report an increase in Wireline customer base in March'17. If this trend continues, it will give further push/stability to BSNL/MTNL's AGR numbers in coming quarters. Thirdly, BSNL/MTNL surprisingly made some very swift moves to introduce new Data Plans for both 3G as well as Wireline Broadband services and marketed the same over various mediums, both at local level as well as National level. This seems to be working for the company. If BSNL continues to strengthen it's 3G network in semi-urban and rural areas as well, then it could certainly prove to be a strong challenger to Reliance Jio and the Trio of Airtel-Vodafone-Idea. With Reliance Jio finally making it's service chargeable during the current quarter of Q1-FY'18, it will be very interesting to see how the numbers pan out for different operators over the next few quarters.

Telecom: Dec'16 Quarter AGR numbers - Who lost how much??

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.

Reliance Jio's Happy New Year Offer - Bad news for everyone!!

Reliance Industries' Chairman made another 'Big' announcement yesterday about Reliance Jio. And it turned out to be just another new offer 'Happy New Year Offer', where Jio customers will get access to Free services till 31st March'2017. The main reason for extending Free services for another 3 months was said to be that the company was not very happy with the Quality of Service some of it's customers were getting,

primarily due to 2 factors: 1) The Voice Calling experience still wasn't as smooth as expected due to lack of cooperation from incumbent operators; 2) The Data speeds for some customers was below acceptable levels as nearly 20% of the subscribers were exploiting the existing FUP limits to the maximum.

To counter these, on one hand Reliance Jio will continue to work with regulator & other operators to enhance the Interconnect Capacities to bring down Call Failure rate to under 0.5% level; and on the other hand Reliance Jio is lowering the FUP limit to 1 GB per day under the new Happy New Year Offer. This offer opens for new enrollments from 4th of December'16 as TRAI had asked the company to end it's Welcome Offer after 90 days of introduction, i.e. on 3rd December'16. Subscribers of Welcome Offer will continue to enjoy benefits of the same till 31st December'16 and then will be migrated to Happy New Year Offer on 1st January'17. Hence from 1st January'17, every subscriber on the Jio network will have a FUP limit of 1 GB per day, which is expected to improve the quality of Data service for most users.

Why am I disappointed? : As a user of Jio's service, I am happy to be able to enjoy the Free service for 3 more months and in turn save couple of thousands more. But I was actually eagerly looking forward to the day when Jio's Free service ends and how it performs once people are supposed to start recharging/paying to continue using Jio's Data & Voice service. In the current situation where over 50 million subscribers continue to use/abuse Jio's Free service, it is quite an unfair comparison between experience of Jio's network with that of others'. Average Daily Data usage of a Jio user is well above 500 MB, whereas the average Monthly Data usage of a 3G/4G user of other operators is about 1 GB. Jio's user base has already crossed the 3G/4G user base of Airtel, making Jio the top Wireless Broadband service provider. That means the Data Volume on Jio's network will be in the range of about 20 to 30 times the Volume on networks of the other incumbent operators. In such circumstance, the Quality of Data service is bound to drop especially in high density regions.

The other reason for feeling bad is that this extension of Free Service period will mean even more pain in an already troubled Telecom sector. Only the Top-3 operators (Airtel, Vodafone & Idea) were making some kind of decent Cash Profit before the Jio Tsunami hit the sector about 3 or 4 months ago. All the other smaller operators were already struggling to cover their Operating Costs with their Revenues, with that situation expected to worsen much much more during the 6 months period from October'16 to March'17. In fact we could see a couple of operators to just Shut shop (either partially or fully) due to Liquidity issues as Banks will also be reluctant to fund them more, without the promoters willing to infuse more money in the business. All these existing operators (including PSUs BSNL & MTNL) are struggling to retain a substantial portion of their customer usage, especially the ones with a 4G smartphones. With over 50 million users already having shifted their Data as well as Voice usage (either partially or fully) to Jio, all the existing operators are bound to feel substantial pain in revenue momentum. In my earlier posts, I had mentioned that I am expecting the Top-3 operators to post a drop of about 10-15% in their Revenues in December'16 quarter compared to June'16 quarter numbers. Now the March'17 quarter could prove to be even more painful with the drop extending to about 15 to 20% of Revenues quite easily. Such large drops in Revenues at a time when these operators are investing in CAPEX for expanding 3G/4G capacities could mean that even these Top-3 operators could post Cash Losses or very negligible Cash Profits in either December'16 or March'17 quarter. This is also not good news for shareholders of Reliance Industries as the company will need to Capitalise another quarter's Operating Costs for Jio, which could be around $ 1 Billion, leading to higher Interest burden and Depreciation Costs once Jio's revenues & costs start being consolidated with Reliance Industries' Quarterly numbers. Ofcourse this additional $ 1 Billion is quite small to the size of the total CAPEX undertaken by the company for Jio in total. But even shareholders of Reliance Industries must be very eager to see how Jio's financial performance progresses, and this extension will mean a further delay for the same.

I am expecting all these existing operators to approach TRAI / DoT to appeal that Reliance Jio cannot be allowed to offer Free Service for another 3 months. Even I am not sure if Reliance Jio's new offer will get permission from the regulator or not. We should know about it in the next couple of weeks for sure. Let's wait & watch.

Telecom AGR Analysis - Q2-FY'17 numbers are the start of a new story.

The Q2 of FY'17, i.e. the period July to September'2016, will be the start of a new Telecom story. And all of us know why, isn't it? Yes. It is the start of Reliance Jio becoming available to a much wider population from sometime around the end of August'16, when Jio Preview Offer was opened to a huge list of 4G smartphones. Soon after that, on 5th September, Jio was made open to the public with it's Welcome Offer, which offered everything from Data, Voice calls, SMS & access to Jio Apps, FREE till 31st December'16. This lead to a mad rush to acquire a Jio Sim by millions of 4G Smartphone users. This migration of usage (atleast temporarily) from one of the existing operators to Jio by a few million users, starting from the month of September, was definitely going to affect the Revenues of all existing operators. Ofcourse, the impact was expected to be small in Q2 as Jio started activating Sim cards at a rapid pace only in the last month of the quarter. In one of my previous posts I had mentioned that I was expecting a 3 to 5% erosion of Industry's Gross Revenues in Q2 and a bigger hit of 10 to 15% in Q3. Now that we have Adjusted Gross Revenue (AGR) numbers for Q2-FY'17, let's see how the industry has fared.

For my analysis, I have been keeping a track of AGR numbers for all 22 circles of 9 Telecom operators: Airtel, Vodafone, Idea, Tata, Aircel, BSNL/MTNL, RCom, Telenor & Jio. As of now Jio's numbers are close to Zero (insignificant). The other 8 operators comprise of nearly 98% of the Industry's Total Revenues. The Total AGR for these 9 operators across all 22 circles was Rs.40,097 crores in Q1-FY'17, which has dropped by 3.3% to Rs.38,764 crores in Q2-FY'17. This was very much on expected lines. It is interesting to see how the different operators and circles

have performed Q-o-Q. After collating all the numbers, I was slightly surprised to note that impact of Jio's Welcome Offer is the least in the Metro Circles and the maximum in the C-Category Circles.[The AGR number for Metro Circles in March'16 quarter looks unusually taller mainly because of abnormal numbers from MTNL during that quarter.] On a Q-o-Q comparison, AGR for Metro Circles is down by just 1.1%, for A-Category Circles it is down by 2.3%, for B-Category Circles it is down by 3.9% and for C-Category Circles it is down by a whopping 8.2%. What does this indicate? Does this mean that Jio did not attract a decent subscriber base in Metro & A-Category Circles? I certainly don't think that is the case. The thing is that Metro & A-Category circles were expected to be the early adopters of 4G service. Hence the incumbent operators were more focused on protecting their Revenues & Customer base in these circles from migrating to Jio. Hence the Top-3 operators, i.e. Airtel, Vodafone & Idea, invested substantial Capital to aggressively expand their 4G/3G coverage in these circles and also in Urban areas of B & C-Category Circles. All the existing operators also made rapid changes to their 3G/4G Data packs and also came out with more & more attractive Special Offers for their Data consumers, in an attempt to keep a user tied to their network. And the incumbent operators certainly seem to have done an excellent job.

The other factor that might have helped here is the higher proportion of postpaid user base in Metro & A-Category circles. Most of the Postpaid users did not migrate to Jio during this Welcome Offer period as they wanted to check Jio's quality of service before jumping ship. At the same time the incumbent operators offered these postpaid users more & more Voice minutes or Data Limits within their existing plans, making it more attractive to remain with a proven operator. In case of Pre-paid users, there is no monthly commitment and hence they can easily alter their Recharge/STV choices & frequencies depending on requirement/offers. Another point being availability of Jio's 4G network across 18,000 cities & towns and over 2 lakh villages, spread across all 22 circles. On the other hand, only Airtel, Vodafone & Idea had their 4G networks operational, that too in select cities & towns, possibly more focused on areas where they knew there is a higher proportion of 4G Smartphone presence. The period between September'16 to June'17 could see the maximum pace of rollout of 4G sites by the Top-3 operators. They will also rapidly deploy the recently acquired 4G-capable spectrum in several new circles in the coming months, in an attempt to try & bridge the huge gap between Jio's 4G coverage and that of their own.

Operatorwise Categorywise Performance: It is even more interesting to see how different operators have fared in different categories. In

the Metro Category, Airtel surprisingly managed to post a 1.2% growth in AGR. Metro is one of the only 2 Category of Circles where Airtel does not hold the No.1 Rank, but it has now significantly closed the gap to Vodafone. Airtel could possibly wrest the No.1 Rank here in Q3-FY'17. MTNL is the only other operator to report Q-o-Q growth, but it's quarterly numbers recently have been quite volatile. All other operators have reported a Q-o-Q drop with RCom being the worst with 9% erosion in AGR. In Category-A Circles, BSNL was the only one to report growth with 1.7% Q-o-Q increase in AGR, but here again it can be dismissed to quarterly volatility. Amongst the other operators, the best performer surprisingly was Tata Tele with just 0.2% drop. It's 3G operations in most of the Category-A circles seems to have managed to keep it's customers tied to it's network. Idea was a big loser from the Top-3 with nearly 5% erosion in AGR. The worst performers were Telenor & RCom with 21% and 14% Q-o-Q drops in AGR.

Category-B & C Circles are where each of the Top-3 operators too have taken a considerable hit. BSNL is again the best performer in both these Categories, with 10.2% Growth in Category-B and a small drop of 2.2% in Category-C Circles. Category-B is the other segment where Airtel was trailing someone in AGR market share. With the No.1 player Idea reporting a bigger drop in AGR this quarter, Airtel is now almost on-par with it. The worst performers in Category-B Circles were again Telenor & RCom with 13% & 10% drops respectively. The same in Category-C Circles were RCom, Telenor & Idea with 32%, 16% & 14% drops respectively. Airtel which is the dominant player in the Category-C Circles with nearly 48% market share, also experienced a substantial 8.8% drop in AGR during Q2-FY'17. This is also the only Category where Airtel has reported a small drop in AGR market share by 30 bps. In all the other 3 categories, Airtel has either increased it's market share or managed to increase it with a clear outperformance.

On an overall basis, Telenor has taken the biggest percentage hit with near 17% Q-o-Q drop in AGR, followed by RCom with near 13% drop. Aircel's numbers are not exactly comparable here as I had to make some adjustments to reported numbers as it included the revenues from Spectrum trading in 7 circles. Even though BSNL/MTNL combine reported a 4.9% Q-o-Q increase in AGR, the Total AGR for the company was lower than each of the 5 quarters prior to Q1-FY'17. Hence we need to take BSNL/MTNL's Q2 numbers with a pinch of salt. Tata Tele was the surprise package here as it has managed to face the Jio storm pretty well in Q2-FY'17 with a small 3.4% Q-o-Q drop in AGR. This is despite the fact that Tata Tele has Zero 4G presence and 3G operations in only 8 circles. The credit for the good performance clearly goes to Tata Tele's operations in Category-B circles, which contributes nearly 48% to the company's Total AGR, where it reported a negligible 0.2% drop. Amongst the Top-3 operators, Idea Cellular is the one to take a significant hit with it's AGR dropping by nearly 6.2% Q-o-Q. The 2 most important circles for Idea Cellular were Rest of Maharashtra and Madhya Pradesh, which together contribute around 28% of the company's Total AGR. Idea Cellular's AGR in these 2 crucial circles reported a Q-o-Q drop of 8.5% during Q2-FY'17. The No.1 & No.2 operators, Airtel & Vodafone, proved to be the most resilient to Jio's onslaught in Q2-FY'17 with a small 2.8% Q-o-Q drop in AGR.

Now all eyes will be on 3 things: 1) How does Jio's QoS (Quality of Service) progress during the Welcome Offer Period. 2) Whether Jio announces new tariff plans or Offers in December. 3) How well do Airtel, Vodafone & Idea make use of their existing or recently acquired spectrum resources in the coming 6 months in trying to combat Jio as well as each other. Jio was facing substantial Call-connectivity issues with other operators throughout September & October. But over the recent couple of weeks, the issues seem to have been considerably resolved as most users are reporting Call-connectivity within just 1 attempt. Now Jio needs to focus on improving the experience with Data service, which had taken a beating due to the huge traffic being generated from the millions of customers it added during the last 2-odd months. Some reports suggest that Jio is rolling out LTE-Advanced (Carrier Aggregation) technology on a PAN-India basis, which should help the operator in better utilising it's Spectrum resources and improve the overall Data through-puts for most users. Let's wait & watch on how successful the operator is in completing this task well before the Welcome Offer period ends. Reliance Jio can expect to see a major portion of it's Welcome Offer user base to upgrade to being Paid-users only if the operator is able to offer decent QoS both on Voice Calls as well as Data service atleast for the last 2 weeks of the Welcome Offer period.

All-Out War for Wireless Data traffic now begins!!

As per Quarterly Reports presented by Bharti Airtel & Idea Cellular post June'16 Result announcements, the No. 1 & No. 3 operator were carrying approximately 60 million GBs and 35 million GBs respectively on a monthly basis. At an average realisation rate of about Rs.220 per GB, it translated into a monthly revenue of about Rs.1300-1350 crores for Bharti Airtel and about Rs.750-800 crores for Idea Cellular.

Reliance Jio entered the scene in the second half of the June quarter, when it started issuing a Jio Sim with 90-days Preview Offer alongwith all LYF handsets. By June-end, Jio had activated an additional about 1 million Sim cards under this offer, taking it's active user base to 1.5 million. The average usage of these 1.5 million users was said to be about 1 GB per day!! That means Reliance Jio's network must have carried approximately 35 to 45 million GBs of Data during the month of June'16, making it the 2nd largest Wireless Data carrier in India at that point of time. And this was just the start. Reliance Jio is expected to have added another 1 million users in the month of July'16 under the LYF-bundled Preview Offer. It's Data traffic must have been in the region of 70 to 80 million GBs for July'16, making it the No. 1 Wireless Data operator in India in terms of Traffic alone. Theoretically, Jio wasn't making any money from this traffic as it was all Free for the buyers of LYF handsets. In the 2nd fortnight of August'16, Reliance Jio opened the floodgates by allowing other 4G handset owners to also receive a Jio Sim with the 90-days Preview Offer.

By the end of August'16, the active user base on Jio's network is expected to have touched close to 5 million with a monthly Data Traffic in excess of 150 million GBs, more than double that of Airtel's expected Data traffic number for the month. It is highly unlikely that existing operators like Bharti Airtel & Idea Cellular or anyone else, must have seen any significant growth in monthly Data Volumes during the current quarter, i.e. Sept'16 quarter. A small portion of the heavy Data users had already bought the LYF handset and were enjoying the Unlimited Data benefits on Jio network. The massive rush for Jio Sims, which started in the last week of August, has continued in September after the Chairman of RIL announced full scale launch from 5th September with Welcome Offer where all users will be eligible to get 4GB per day of 4G Data & Unlimited Voice Calls & SMS till 31st December'16. Reliance Jio's user base is expected to touch around 15 million by the end of Sept'16 with a monthly Data Volume of around 250 million GBs

How is the Competition reacting to Reliance Jio's aggressive Usage growth?

With Reliance Jio zooming past all the existing operators in terms of Network Traffic numbers, it was just obvious that all the existing operators will feel varying degrees of pain. At least 10 to 20% of Traffic on Jio's network must have directly come from competitors' traffic numbers (remaining 80-90% volume was either Splurge usage or replacing Broadband/Cablenet traffic, as everything was Free on Jio's network). Before Jio came in, monthly Wireless Data volume on 2G/3G/4G networks must have been in the region of 150 million GBs and it was growing at a pace of 3 to 5% M-o-M. That means incremental growth in Volume of about 5 to 10 million GBs. That means Jio must have gulped down not just the incremental Volume, but a small portion of existing volume number too, by now. The existing operators must have detected exhaustion of growth in Data volumes in July itself. Hence their first step towards protecting volumes came around end of July in terms of increasing Data limits on packs of denomination higher than Rs.300 or 350. Where they were earlier offering 2 GB Data limit, it was revised to 3 GB and in the regular 3 GB Data pack, the limit was raised to 5 GB, and then 10 GB 3G/4G Data pack was now priced just under Rs.1000/-, which was earlier costing anywhere between Rs.1300 to 1800. 

This step might have helped retain Data volumes for some time. But after Jio unleashed the Sim card eligibility to almost all 4G handset owners in the last week of August, leading players like Bharti Airtel & Idea Cellular, who both had reasonably large 4G network in place, had to take the second step. Both of them announced something like the Mega Saver Pack costing around Rs.1498/- by the end of August, which came with upfront 1 GB Data limit & gave the subscriber the eligibility to get 1 GB/ 2 GB/ 5 GB recharges at highly discounted rates of about Rs.51/ 101 / 251, any number of times over a 12 months period. Seems like this Mega Saver pack wasn't helping these operators in arresting fall in Data Volumes much, as people across all major cities & towns continued thronging Reliance Digital stores to grab a Jio Sim at the earliest. Both Airtel & Idea further sweetened the Mega Saver pack by hiking the upfront Data limit to 6 GB, just 2 weeks after announcing the packs around August-end. Seems like this too wasn't helping the operators much as today Bharti Airtel is said to have announced another pack priced at Rs.1495, which will give the customer 30 GB of 4G Data with 90 days validity, bringing the effective Data rate to just Rs.50 per GB. This pack is said to be available in Delhi from today & will be rolled out to other circles over the next few days. I won't be surprised if Idea & Vodafone too follow Airtel in announcing a similar pack in the coming few days.

My View: 

Reliance Jio's offer includes both Free Data & Free Calling and SMS till the end of this year. This is kind of a double-whammy for all existing operators as a major usage shift of existing mobile users to Jio's network will start pulling down the former's revenues. Hence the Top-3 operators have undertaken a 2-pronged strategy to counter this: 1st is to try & spoil Reliance Jio's name as much as possible as far as Voice calling is concerned. Reliance Jio has been crying foul since even before it's commercial launch that Airtel, Vodafone & Idea have been deliberately not giving enough Points of Interconnect to enable smooth transfer of Calls from Jio to their networks & vice-versa. This might have been one reason why Jio was forced to announce Commercial operations from 5th September, coupled with Welcome Offer of Free usage to it's subscribers till year end. After announcement of Commercial operations, Jio must have signed requisite Interconnect agreements with each operator & started paying IUC @ 14 paise per min for each outgoing call to other operator. At the same time, the other operators will have to provide enough Points of Interconnect in line with increase in Call traffic between them. It's been close to 3-weeks since Jio's commercial operations have started, but the Voice calling to other operators, especially the Top-3 ones, is still not anywhere near smooth. 

Reliance Jio has been desperately pushing each of the other operators for enabling more PoIs at the earliest. But the more they delay it, the more damage will be inflicted on Jio's brand image and better their chances of retaining their customers. But this can't go on for long & very soon we will see a substantial improvement in Voice Calling from Jio numbers to those of other operators. Jio will try to streamline all their Voice Calling operations well before the Welcome Offer period ends. If Jio's active customers do get a good Voice Calling experience for atleast the last 3 to 4 weeks during this Free period, then there is a higher probability of these customers getting converted into Paying customers from 1st January'17. And once the word spreads that Voice Calling is also now normal from Jio network, many people will start thinking of porting their primary mobile numbers too.

The 2nd part of the strategy adopted by existing operators is to try & offer higher Data limits for higher denomination packs. By doing this they are trying to maintain some minimum level of Average Monthly Revenues, even though the Data Volume might get a big boost. Look at the Mega Saver pack for example. If a customer does recharge with Rs.1498, he gets 6 GB 3G/4G Data upfront with 12 months validity. This ensures an ARPU of about Rs.125/month to the operator. Suppose this customer needs atleast 5 GB of Data per month, that means he will be consuming about 60 GB in a year. That means he will need to do a recharge of Rs.251 or 252 every month from the 2nd month onwards. That means the operator will receive a total revenue of about Rs.4200 to 4300 (1498 + 2770 approx.) from this customer over the year, translating into a monthly ARPU of around Rs.350/-, which is a decent number. The other pack that Bharti Airtel announced today, which offers 30 GB of 4G Data for 90 days at Rs.1495, is again aimed to ensure around Rs.500 per month in ARPU for the operator. This pack will most probably be a limited period offer as it is an attempt to retain High Usage customers from shifting their usage to Jio. 

But the big question is: How successful will all these moves be to ensure minimum loss of revenues for all these operators for Sept & Dec quarters? 

I think all these existing operators who have millions & millions of subscribers on their 2G/3G/4G networks, will not lose much of their Voice revenues, atleast during the Sept quarter, because of 2 reasons: 1) Jio is expected to enroll just about 15 million users by Sept-end, which is just about 1.5% of the total active subscriber base; 2) Voice Calling experience on Jio is still not smooth, though it is expected to improve in the next few weeks. The existing operators will certainly lose some portion of their Voice Revenues during December quarter as Jio's user base is expected to expand from 15 million to well over 50 million over the 3-months period. And the Voice Calling experience should be much better during most part of the December quarter. I am estimating a drop in Voice Revenues to the tune of 3 to 8% across all existing operators. The drop in Outgoing Calls volume could be larger than drop in Revenues, but all these operators are expected to be Net-receivers of IUC from Reliance Jio as Calls from Jio to their networks are expected to remain 5 to 10 times higher than calls in the reverse direction, atleast in the initial few quarters. Gradually this multiple could come down to about 2-3 times over the next 1 or 2 years.

Coming to Data Revenues, this is where the impact will be much bigger on all existing operators. As of June'16-end nearly 70% of the Total Wireless Data traffic & 95% of the incremental traffic was from 3G/4G customers. Bharti Airtel had about 36 million & Idea Cellular had about 27 million 3G/4G Data customers at the end of June quarter. That means the Total 3G/4G Data customers in India should be around 100 to 110 million by the end of June'16. Out of this number, nearly half of them are expected to have a 4G handset, making them a potential customer for Reliance Jio. Apart from that, nearly 8 to 10 million new Smartphones are sold in India every month and most of them now are expected to be 4G compatible phones. That means Reliance Jio's potential customers are growing in numbers at a rapid pace. By the end of December'16, the number of 4G handsets in India could be crossing the 100 million mark and there could potentially be a Reliance Jio Sim card in half of those. Since Reliance Jio is offering all it's services Free of charge till December-end, almost all the 4G handset owners would like to try their services. So it's a matter of how many enrollments Reliance Jio is able to handle over these 3 to 4 months. I am estimating that Reliance Jio could be able to activate anywhere between 10 to 15 million Sim cards every month, which should translate into a User base of between 50 to 60 million by end of December'16. Even if this turns out to be true, then Reliance Jio could possibly become the largest Wireless Broadband player in India (in terms of Subscribers too) even before the end of this year. This will certainly have a serious impact on the Data Volumes of all existing 3G/4G operators in the country.

The existing operators are already seeing a substantial portion of their 3G/4G customers shifting their usage to Reliance Jio and hence are being forced to offer increased Data limits to their customers in order to try & retain as many Data Consuming users as possible. This action will help them in somehow maintaining the overall Data volumes on their networks, but it will certainly pull down the Net realised rate per GB of Data. I am expecting the June-quarter average rate of about Rs.220 per GB to fall to around Rs.180-190 per GB for September-quarter and to a level of below Rs.150 per GB for December-quarter. That means the Average rate per GB is expected to fall by about 30-35% over these 2 quarters. Hence in order to maintain Data revenues at same level as June-quarter, these operators will need to ensure a Data volume growth of around 30-35% over these 2 quarters, which I think will be very difficult to manage on the face of Free Usage offer from Reliance Jio during this period under consideration.

But things could be a bit different from January onwards. The Top-3 operators, who are continuously expanding their 4G network coverage currently, could recover a part of the Data Traffic market share lost during the Sept & December quarters, as Reliance Jio users will also need to pay to use their services. I have already shared my opinion on the Tariff Plans announced by Reliance Jio earlier this month. Click here for that post. Those tariff plans are more suited only to certain categories of users, like the ones who talk a lot and those who live in urban areas & have regular access to Jionet WiFi services. Those plans are clearly not suited to those who were looking for pure 4G Data packs. Unless Reliance Jio tweaks those tariff plans or introduces new pure 4G-Data packs, it is bound to lose a substantial chunk of it's user base post 1st January'17. Reliance Jio will certainly consider the traffic flow on it's networks for a couple of weeks post 1st January'17 and can then easily introduce new Data packs to bring back the users who had stopped using their services due to lack of suitability.

All in all......this massive competition amongst the incumbents & Reliance Jio for increasing Wireless Data traffic is currently benefiting the Data customers tremendously. India's Wireless Data volumes could be hitting a record high during the Oct to Dec'16 quarter, which might remain a record even for another year or more. This is Bonanza period for Customers, but equally a painful period for Shareholders of all these Telecom companies. 'Survival of the Fittest' will be tested in this sector over the next few quarters.