The telecom sector has developed some pricing power. In the past six months, most service have raised respective voice and data rates by 20-30 per cent. Most have also seen higher uptake of data services, both in terms of average usage and also in terms of new data subscribers.
Data usage has been driven by greater smartphone penetration, and the popularity of social media utilities and services. India has seen increasing uptake of Facebook and Twitter as well as higher usage of YouTube and other entertainment channels.
In fact, India has the second-largest userbase for Facebook (after the US) and about 80 per cent of India's FB users access it on mobile. Similarly, YouTube is popular, with lots of local content and advertising. Other mobile entertainment services also have strong penetration and so do GPS-based locational services and e-commerce on mobile.
New 4G launches are scheduled for many different cities with service providers displaying some confidence about uptake. Data now generates about 13 per cent of revenue, up from about eight-nine per cent last year.
This is expected to rise in both absolute terms and in terms of revenue-share. Close to two-thirds of India's 220 million Internet users regularly use mobile internet. The internet user base is expected to rise to 380-400 million by 2017 with a majority of subscribers accessing via smartphone.
The sector might also be set for some consolidation with financially weaker service providers pushed out, or taken over. Of course, there are plenty of issues hanging over the industry, including questions about spectrum allocation, intra-circle roaming, defence forces vacating specific bands, litigation among others.
There is a permanent traffic jam on Indian networks because too many operators share too little in the way of spectrum. Fears about health risks from radiation have led to judicial activism restricting the number of mobile towers. So, network quality is poor.
There is also the rural-urban divide in terms of penetration and user-sophistication. Rural teledensity is at 45 per cent while urban density is close to 100 per cent (more than 100 per cent in metros). What is more, rural usage is more voice-oriented and the average revenue per user (Arpu) is much lower on rural networks.
Telecom has already pulled in vast amounts of foreign direct investment (FDI). Given the easing of restrictions on foreign ownership, more FDI is bound to come in. If more spectrum is made available, the quality of service will improve. Spectrum costs are sky-high and massive capex is required to set up networks. Some operating costs have reduced due to lower diesel prices and the sharing of passive infrastructure.
It will not be a picnic for Indian telecom from here on. Competition is stiff. Costs are high. Most operators have a lot of debt on their balance-sheet and they will have to invest more.
While they have been able to raise tariffs, they are also under pressure to reduce roaming charges and there could be more subscriber churn as number portability catches on.
But the worst may be over. Subscriber growth is happening at reasonable pace. Growing data revenues should help boost Arpu. The movement towards smartphones indicates a market, which is finally becoming more sophisticated. The listed telecom majors have all underperformed through the bull run of the past 12 months. They may be worth looking at now, with a long-term perspective.
Data usage has been driven by greater smartphone penetration, and the popularity of social media utilities and services. India has seen increasing uptake of Facebook and Twitter as well as higher usage of YouTube and other entertainment channels.
In fact, India has the second-largest userbase for Facebook (after the US) and about 80 per cent of India's FB users access it on mobile. Similarly, YouTube is popular, with lots of local content and advertising. Other mobile entertainment services also have strong penetration and so do GPS-based locational services and e-commerce on mobile.
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3G uptake has increased as more users got interested in data. A year ago, service providers bemoaned the lack of 3G subscribers. Nowadays, the boot is on the other foot with consumers complaining about poor 3G network coverage. 4G usage is also catching on where it has launched.
New 4G launches are scheduled for many different cities with service providers displaying some confidence about uptake. Data now generates about 13 per cent of revenue, up from about eight-nine per cent last year.
This is expected to rise in both absolute terms and in terms of revenue-share. Close to two-thirds of India's 220 million Internet users regularly use mobile internet. The internet user base is expected to rise to 380-400 million by 2017 with a majority of subscribers accessing via smartphone.
The sector might also be set for some consolidation with financially weaker service providers pushed out, or taken over. Of course, there are plenty of issues hanging over the industry, including questions about spectrum allocation, intra-circle roaming, defence forces vacating specific bands, litigation among others.
There is a permanent traffic jam on Indian networks because too many operators share too little in the way of spectrum. Fears about health risks from radiation have led to judicial activism restricting the number of mobile towers. So, network quality is poor.
There is also the rural-urban divide in terms of penetration and user-sophistication. Rural teledensity is at 45 per cent while urban density is close to 100 per cent (more than 100 per cent in metros). What is more, rural usage is more voice-oriented and the average revenue per user (Arpu) is much lower on rural networks.
Telecom has already pulled in vast amounts of foreign direct investment (FDI). Given the easing of restrictions on foreign ownership, more FDI is bound to come in. If more spectrum is made available, the quality of service will improve. Spectrum costs are sky-high and massive capex is required to set up networks. Some operating costs have reduced due to lower diesel prices and the sharing of passive infrastructure.
It will not be a picnic for Indian telecom from here on. Competition is stiff. Costs are high. Most operators have a lot of debt on their balance-sheet and they will have to invest more.
While they have been able to raise tariffs, they are also under pressure to reduce roaming charges and there could be more subscriber churn as number portability catches on.
But the worst may be over. Subscriber growth is happening at reasonable pace. Growing data revenues should help boost Arpu. The movement towards smartphones indicates a market, which is finally becoming more sophisticated. The listed telecom majors have all underperformed through the bull run of the past 12 months. They may be worth looking at now, with a long-term perspective.