Data growth moderates for Indian telcos on pricing pressure

Even before a full rollout of the much-awaited 4G data services, telecom players including Bharti Airtel and Idea Cellular have started seeing a slowdown in their existing data growth story.

For the third quarter ended December, the data realization/MB fell 13 per cent to 23.77 paisa for Bharti Airtel and it fell 17 per cent to 22.3 paise for Idea Cellular. These two are the biggest listed telecom players in the Indian market, marked by high competition and low tariffs.

Data revenues grew by 50.6 per cent at Rs 3,184 crore for Bharti Airtel. For Idea Cellular, it grew by 45.72 per cent to Rs 1,806 crore. However, the growth rate in data revenues has slowed down over the last few quarters putting pressure on margins. 

The competition in the industry is expected to increase manifold once Mukesh Ambani’s Reliance Jio enters the market this year with the launch of their 4G services.

The slow growth in data has come at a time when the operators are in the middle of an aggressive expansion plan for 4G services before the rollout of RJio. Besides, the industry is also gearing up for a mega auction to boost up their spectrum portfolio, that is likely to happen in June-July this year. This means operators need to fork out a huge sum of money.

Though margins are low, the data usage on the network is growing significantly. For Bharti Airtel, the data average revenue per user (ARPU) increased 18 per cent to Rs 200. Even the total MBs on the network grew 73 per cent to 133 billion MBs. For Idea Cellular, the data ARPU increased 15 per cent to Rs 145 and the total MBs on the network grew 75.8 per cent to 81 billion MBs.

In an analyst note, Religare said, for Idea, data growth has moderated to 45 per cent YoY (61 per cent YoY in Q2) as pressure on data pricing persisted (with average revenue per MB at -5% QoQ) and elasticity remained disappointing (usage up only 6% QoQ). “Data growth is moderating and data price points need to drop further to drive up adoption,” it said.

Sensing the competition, Idea Cellular also raised its capital expenditure guidance for the current fiscal to Rs 7500 crore, up from Rs 6500 crore announced earlier.

Himanshu Kapania, managing director of Idea said, “There is pressure on voice and data margins because of increased supply from operators who are launching/expanding 3G/4G footprint. The lower realisation from voice due to IUC should not be visible from Q4 onwards. On data front, there is cost of acquisition for new customers, which should improve from current level onwards.

Experts are concerned over the falling realization rates in the data space which will make it difficult for the telcos to maintain good margins and recover their investments made in acquiring the spectrum and setting up infrastructure.