Ind-Ra: A marginal decrease in the overall tele-density in India to 91.56% in September 2017

India Ratings and Research (Ind-Ra) has published the report on India's telecom sector. It highlights the trends in the telecom sector with a focus on subscriber additions, subscriber market share, circle wise additions, broadband subscribers, data usage and pricing.

Key highlights of the report include a marginal decrease in the overall tele-density in India to 91.56% in September 2017 from 93.71% in August 2017 due to a decline in the urban subscriber base. Industry's average revenue per user declined sequentially by 11% q-o-q and 35% y-o-y in September 2017 due to a high competitive intensity. Reliance Jio Infocomm Limited (IND AAA/Stable) gained revenue market share (RMS) of 13.9% in 2QFY18. Top three telcos accounted for 66.6% of RMS - Bharti Airtel Limited with 28.8% of RMS, Vodafone India Limited with 20.5% and Idea Cellular Limited with 17.3% of RMS during the same quarter.

Subscriber growth continued to remain negative in September 2017 for the third consecutive month as per Ind-Ra's expectation. This is reflective of the industry churn, high urban tele-density and reversal of dual SIM-led inflated growth in the past. RJio's SMS (subscriber market share) increased by 10.2% in the 12 months ended September 2017 and stood at 11.7%. Gross industry revenues increased by 6.6% q-o-q to INR468 billion in the quarter ending September 2017. Adjusted gross revenues grew by 8.8% q-o-q to INR307 billion in the quarter ending September 2017.

From large number of operators, the industry structure is being redrawn to oligopolistic as sponsors of smaller, unprofitable telcos exited as they were not being able to sustain losses. Over the last one year, smaller telcos lost 38 million subscribers on an aggregate basis, which has challenged their business continuity. Most of the smaller telcos have sold business at rock-bottom valuations and even need to restructure their debt. Reliance Communications Limited finalises INR390 billion debt resolution plan (to be covered in the next issue).

Hastened consolidation benefited larger telcos as SMS and RMS of fringe telcos has come to larger telcos. Not just that, large telcos have benefited from the acquisition of spectrum and telecom assets at lucrative prices, which has in turn has strengthened their business model. Vodafone India Limited and Idea Cellular Limited merger awaits approvals from the National Company Law Tribunal and Department of Telecommunications.

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