 "Telecom Trouble: Can data services offset the decline in voice revenues?")
While its competitors may contend that Reliance Jio’s strategy of not charging for voice segment is not innovative, the move could well end up hurting incumbents in the near term. Though data revenue is expected to grow in the coming years, the question is whether the decline in voice revenues can be offset by the rise in income from data.
Voice revenues currently account for roughly 70% of total wireless revenues for the top three telecom operators in the country, down from roughly 80% two years ago. For Bharti, voice revenues grew by a mere 3.8% in the quarter ended June 2016, from a year ago, while for Vodafone and Idea, the comparable figures are -0.9 and 4.6 per cent.
By comparison, revenue from data services has shot up sharply. For the top three telecom operators, data revenues account for 21-24% of total wireless revenues, up from 11-12% two years ago. While more customers are now subscribing to data services, data usage per customer has also risen sharply over this period. For Bharti, data per customer has gone up from 495 MB at the end of the first quarter of 2014 to 904 MB at the end of the first quarter of 2016. For Vodafone, the comparable numbers are 427 MB and 671 MB
But how quickly the decline in voice revenue is offset by people paying more for data services is debatable. Analysts are skeptical and predict RJio’s entry will hurt incumbents. Kotak Institutional Equities has lowered its earnings forecasts for both Bharti and Idea. In the current financial year, it expects EBITDA for Bharti and Idea to fall by 0.3% and 1.4%, respectively. Its forecasts for the next few financial years have been lowered by a much larger magnitude presumably because by then Jio will have gained significant size.
Share of voice revenue for telecom operators has dipped to 70% from over 80% two years ago
But revenue from data services has seen a sharp uptick
While data subscribers have gone up, data usage per customer has also shot up
(Source: Kotak Institutional Equities)
Voice revenues currently account for roughly 70% of total wireless revenues for the top three telecom operators in the country, down from roughly 80% two years ago. For Bharti, voice revenues grew by a mere 3.8% in the quarter ended June 2016, from a year ago, while for Vodafone and Idea, the comparable figures are -0.9 and 4.6 per cent.
By comparison, revenue from data services has shot up sharply. For the top three telecom operators, data revenues account for 21-24% of total wireless revenues, up from 11-12% two years ago. While more customers are now subscribing to data services, data usage per customer has also risen sharply over this period. For Bharti, data per customer has gone up from 495 MB at the end of the first quarter of 2014 to 904 MB at the end of the first quarter of 2016. For Vodafone, the comparable numbers are 427 MB and 671 MB
But how quickly the decline in voice revenue is offset by people paying more for data services is debatable. Analysts are skeptical and predict RJio’s entry will hurt incumbents. Kotak Institutional Equities has lowered its earnings forecasts for both Bharti and Idea. In the current financial year, it expects EBITDA for Bharti and Idea to fall by 0.3% and 1.4%, respectively. Its forecasts for the next few financial years have been lowered by a much larger magnitude presumably because by then Jio will have gained significant size.
Share of voice revenue for telecom operators has dipped to 70% from over 80% two years ago
Voice revenues as a percentage of wireless revenues
| 14-Jun | 14-Sep | 14-Dec | 15-Mar | 15-Jun | 15-Sep | 15-Dec | 16-Mar | 16-Jun | |
| Bharti | 81.8 | 79.8 | 77.4 | 76.3 | 74.7 | 72.6 | 71.1 | 71.1 | 70.9 |
| Vodafone | 82.5 | 80.0 | 79.1 | 79.3 | 76.1 | 74.3 | 73.1 | 73.2 | 72.9 |
| Idea | 82.2 | 78.9 | 76.9 | 75.5 | 73.9 | 72.1 | 71.1 | 71.7 | 71.8 |
But revenue from data services has seen a sharp uptick
Data revenues as a percentage of wireless revenues
| Bharti | 12.4 | 14.5 | 16.2 | 17.7 | 19.2 | 21.5 | 23.1 | 23.3 | 23.7 |
| Vodafone | 12.0 | 14.4 | 15.2 | 16.2 | 18.9 | 20.6 | 21.2 | 21.1 | 22.4 |
| Idea | 11.5 | 14.0 | 15.7 | 16.9 | 17.7 | 19.6 | 20.3 | 20.2 | 21.0 |
While data subscribers have gone up, data usage per customer has also shot up
Usage per customer (MB)
| 14-Jun | 14-Sep | 14-Dec | 15-Mar | 15-Jun | 15-Sep | 15-Dec | 16-Mar | 16-Jun | |
| Bharti | 495 | 563 | 622 | 656 | 706 | 765 | 843 | 859 | 904 |
| Vodafone | 427 | 477 | 512 | 532 | 560 | 618 | 652 | 641 | 671 |
More From This Section
With the entry of R-Jio, incumbents are under pressure
EBITDA margin (%)
| Earlier | Revised | |||||
| 2017E | 2018E | 2019E | 2017E | 2018E | 2019E | |
| Bharti | 36.1 | 36.6 | 39 | 35.8 | 33.7 | 34.6 |
| Idea | 32.6 | 32.6 | 33.1 | 31.2 | 28.2 | 28.7 |
(Source: Kotak Institutional Equities)