Data revenues grow as 3G zooms

A phenomenal 95% growth in number of smartphones increases demand for data

Data usage among subscribers is going up, and that is not just what is cheering telecom operators. A major chunk of growth is coming from the high-end  third-generation (3G) technology. In the first two years after it s launch, subscribers treated 3G as a premium service, just the way operators offered them. In the last few quarters, however, high-speed data browsing has picked up, a year after prices were cut by around 70-80 per cent. Ever since, 3G subscribers have been growing.

This growth has a positive impact on the margins of telecom operators, which have either seen profits go down or remain flat same as call rates remained unchanged. For the first quarter of the current financial year, Idea Cellular, the third-largest telecom operator, showed a 14.8 per cent increase in the average revenue per user (Arpu) for data, year-on-year. Its 3G data revenue growth of 12-13 per cent was one of the reasons that lifted its net profit by 97 per cent. What the company is happy about is that its 3G Arpu at Rs 109 is twice as much as overall data Arpu at Rs 54. The operator says its 3G business is where growth is happening.

“We expect 3G subscribers to double in the next two months,” said Akshay Moondra, chief financial officer, Idea Cellular. It has 5.5 million 3G subscribers and a total of 30.9 million data subscribers.

Though the number of 3G subcribers are lower at 3.7 million for Vodafone India, 3G has contributed 47 per cent of the growth in data browsing revenue, over the last one year. “While 3G is growing across circles, the fastest growing circles are Mumbai, Delhi and Gujarat,” said Vivek Mathur, chief commercial officer, Vodafone India. Over a quarter of the growth in revenues of Vodafone in the first quarter also came from data browsing, 2G and 3G combined.

The country’s largest player, Bharti Airtel saw a 117 per cent increase on an annual basis in data consumed on its networks. Reliance Communications said its data traffic grew 14 per cent on a quarterly basis, as it announced a plan dropping its 3G rates below 2G rates recently.

“Revenues from 3G business have started to show in the top line. But volumes need to grow further if we have to see a sizeable increase. It might happen in the next one or two years,” said Mritunjay Kapur, country manager of Protiviti Consulting.

  The trigger for data uptake is the phenomenal 95 per cent growth in the numbers of smartphones to 13.9 million. Most smartphones sold are in the price range of Rs 4,000-7,000. This is also expected to increase. “Smartphones sales will grow due to data uptake and data usage will grow as more people shift from feature phones to smartphones. We will both grow together,” said Shashin Devsare, executive director, Karbonn Mobiles. As the smartphone ecosystem evolves, Kapur expects the top 20-30 per cent of total subscribers to start using data, on both 2G and 3G networks.

“Network records show that subscribers have been consuming high speed data for video streaming. Consumers are latching on to 3G data as it is reached levels of affordability,” said Kamlesh Bhatia, research director, Gartner. The improvement in the number of local applications and localised content also added increased demand from data subcribers. Slowly and steadily, coverage across towns has also increased, widening the base of 3G users. The operators will also have to keep investing in 3G coverage to sustain and increase demand. “If 3G networks get loaded, the quality of browsing will come down. Superior levels of browsing will be an incentive for subscribers to stay connected through 3G,” said Bhatia.