Telecom Operators Eye Internet Data for Big Bucks

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Telecom Operators Eye Internet Data for Big Bucks

As it inches closer to the 100-crore subscriber base milestone, telecom industry identified mobile Internet data as the next big thing for revenue generation even as consumers were burdened with up to 100 percent rise in charges for such services in 2014.

From a subscriber base of nearly 91.5 crores at the end of last year, the industry was hoping to reach the 100-crores mark by the end of 2014, while various players were seen devising new ways to expand their revenue base and caught on to the growing interest among consumers for mobile Internet as a big opportunity.

Towards the end of the year, Airtel announced plans to charge extra for Internet calls through VOIP applications like Skype and Viber, but had to abandon the idea after a public outrage.

As more telecom players firm up plans for charging on such services, the sectoral regulator Trai, which has power to control tariffs, may soon come out with regulations for messaging and calling applications.

During 2014, telecom operators gained heavily from rise in mobile Internet usage which was driven by applications like WhatsApp, Facebook, Skype and consumer adopted them as these applications reduced their phone bill.

"In year 2014, operators saw a healthy increase in subscriber revenue on back of nearly 100 percent growth in data revenues and very favourable take-up of OTT (over-the-top) applications like WhatsApp, Facebook etc," PwC Leader Telecom Arpita P Agarwal said.

Airtel in July-September 2014 period reported 94.6 percent increase in mobile data traffic over previous year accounting for 11.1 percent of its total revenue. Idea Cellular reported over 125 percent jump in mobile data in same period.

Vodafone reported data revenue of Rs. 2,552.5 crores in the first half of 2014-15 and it now contributes 13.5 percent to the company's service revenue.

"Data will continue to drive growth in revenue and we expect to stay focused on our data penetration. As and when the market matures, we will make necessary investments to stay relevant to mass market customer's needs," Uninor CEO Vivek Sood said.

Uninor's 20 percent customers have subscribed to its mobile Internet services.

GlobalWebIndex (GWI), in survey of the Asia Pacific region including India, found that 45 percent users of such applications use them because messaging is free on them.

Top mobile messaging apps in India include WhatsApp, WeChat and Facebook Messenger, GWI survey said.

(Also See: Committed to Improve Tele-Density, Voice, Broadband Penetration: Prasad)

"In 2014, we saw an increase in adoption of rich media based services amongst our subscriber base, which is also a strong indicator of evolution of data users. As we step into the new year, we believe that video consumption on mobile will get even more popular amongst the youth," Aircel Chief Marketing Officer Anupam Vasudev said.

Experts feel that launch of new 4G network specially Reliance Jio Infocomm and new entrants may bring some respite to consumers.

July 2015 is the deadline for 4G spectrum holder companies to provide 90 percent coverage in metro area, if they have spectrum there, and 50 percent of rural area within five years. If a company fails to meet roll-out conditions, spectrum will be taken back.

Industry body Cellular Operators Association of India has sought extension of this deadline indicating that companies are not ready with 4G network to start service.

For seeking extension COAI has cited delay in development of technologies for it and public interference in installing mobile towers due to apprehension of health hazard from radiation emitted from it.

Latest data from Telecom Regulatory Authority of India shows that the telecom subscriber base in the country increased by 6.4 percent to 96.26 crores in October, from about 91.5 crores at the end of 2013.

As per industry estimates, the total subscriber base was earlier expected to grow to 100 crores by end of 2014.

Wireless connections dominated market which grew by about 7 percent to 93.53 crores in October 2014.

(Also See: DoT Seeks Defence, Finance Ministries' Views on Spectrum Auction)

As per Trai data, there were about 26 crores Internet users in the country till June which included over 24 crores consumers using Internet over their mobile or through dongles.

Internet penetration in the country increased by about 30 percent, courtesy smartphone and dongles.

The incumbent telecom operator Airtel, Vodafone, Idea Cellular continue to dominate market in terms of both market share and revenues. The companies are now posting increase in profits as the competition has reduced in most of the service areas where they operate.

Even as the profitability of telecom operators is improving, COAI is of the view that it is still below the level witnessed 3-5 years ago.

"While the profitability of the industry is improving, it is much below the level that the sector was witnessing 3-5 years ago. The revenue growth has reduced to 8.5 percent during 2013 from 15.4 percent in 2011," COAI Director General Rajan S Mathews said.

Sistema Shyam Teleservices (SSTL), which offers services under MTS brand name, said the though sector in India continues to be under huge debt, the revenues for the sector have started to improve.

"However, the health of the telecom sector can improve a lot faster if regulatory policies which ensure a level playing field," MTS India Head of Strategy Ranjan Banerjee said.

The total revenue of industry or gross revenue of telecom service providers increased by about 10 percent to Rs. 62,919.19 crores in quarter ended June 2014, from Rs. 57,260.98 crores a year ago.

The adjusted gross revenue, which operators count as revenue earned from selling telecom services, grew even at higher rate of 13.49 percent in April-June 2014 quarter to Rs. 43,851.85 crores from Rs. 38,640.3 crores registered in same quarter a year ago.

New players Videocon Telecom, Uninor, SSTL have seen growth but are yet to achieve dominating position in the market as they operate only in select service area.

Uninor posted highest revenue growth among all other telecom units of its Norway based parent firm Telenor in quarter ended September.

(Also See: Sharad Raises Concern Over Software Allowing Illegal Calls)

Videocon, which operates in four service areas, shared that its revenue jumped by 160 percent to Rs. 182 crores in the second quarter ended September 2015 with Strong growth in data revenue.

COAI said that in the last 2-3 years, the industry has been under huge financial stress due to high regulatory costs such as one-time license fee, spectrum usage charges and higher capex requirement resulting from spectrum auctions.

Telecom operators have attributed rising rates of services to inflation, building of new infrastructure to add more capacity specially through spectrum purchase as reason for rise in mobile Internet rates.

This year the industry also jointly made bids of about Rs. 62,162 crores for buying spectrum - which act like pipe for sending data on mobile.

The industry is gearing for another auction for three sets of spectrum- 800MHz (CDMA), 900MHz and 1800MHz (currently used for GSM services). Auction of these airwaves is planned for February 2015 from which government expects to collect minimum of Rs. 9,533 crores in current fiscal.

Most of the spectrum proposed to be auctioned are currently held by leading operators namely Airtel, Vodafone, Idea Cellular and Reliance Communications through their licence expiring in 2015-16.

Non-availability of additional spectrum will make auction tough for these incumbents.

The other issue before dominating telecom operators is presence of 11 telecom operators which makes it a competitive and good for consumers. However, the sector players have demanding government to frame rules that could help sector to consolidate. Many players in the sector are bleeding and only less than half of them are posting profits.

Government framed mergers and acquisition rules in February but it did not help industry players in making any move. Guidelines like spectrum sharing and trading which would have supplemented it are yet to be announced.

Airtel attempted to buy business of Loop Mobile but failed to crystallise it in the absence of permission from the DoT.

In 2015, new players that hold broadband wireless access spectrum, mainly Reliance Jio Infocomm, are expected to make entry and make market more competitive.

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Further reading: Airtel, COAI, DoT, GSM, Idea, India, Internet, Mobile, Telecom, Trai, Vodafone
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