Author(s): Raghu Gopal
India has become the world's second-largest wireless telecom market with about 730 million unique subscribers and 1.1 billion connections at the end of the second quarter of 2018. The number of Internet users rose 50 percent during the past five years.
There's no doubt these are impressive numbers, but growth isn't always everything it's cracked up to be. During the past two years, the Indian telecom sector has been grappling with falling revenue, an unfortunate trend caused mainly by the market entry of Reliance Jio with its extremely low-priced wireless services.
Data released by the Telecom Regulatory Authority of India shows the wireless industry is now shrinking. The number of total wireless connections at the end of June 2018 dropped to 1.14 billion from 1.18 billion for the same period in 2017. Although this isn't a big fall, any decline in a market accustomed to runaway growth hurts. Operators and handset makers may have to get used to a flat market given that user penetration has grown so fast, so quickly. In urban areas, for example, telecom density has reached close to 90 percent, suggesting that the industry's subscriber growth boom is sputtering.
Reliance Jio can be blamed — or credited — for the ongoing change of fortunes. Smaller operators such as Aircel and Reliance Communications have had to exit the market while others have been forced into being acquired or merge. For instance, Airtel bought Tata Teleservices, Telenor was acquired by Bharti Airtel, and Vodafone's Indian arm merged with Idea Celular.
Reliance Jio's free voice calls and cheap data deals were matched by rivals and these widespread low-cost service plans have changed customer behaviour in India. A growing proportion of consumers no longer feel the need to hold multiple SIM cards to lower their spending.
It's interesting to note that although the overall number of wireless connections in India is falling, wireless Internet subscribers have jumped from 409 million in the first quarter of 2018 to nearly 491 million as at July 2018. The government expects the rise in mobile phone penetration and the fall in data costs will lead to the number of Internet users doubling over the next five years.
Unlike the telephone density in Indian urban markets, telecom penetration in the country's rural markets is only at about 60 percent, but the emergence of an affluent middle class is triggering demand for the mobile and Internet segments.
With monthly data usage per smartphone expected to shoot up significantly in the coming years, operators are increasingly focusing on content. In the second quarter of 2018, Reliance Jio reported almost 10GB of average data usage per user per month. For Airtel, this figure is 7GB, and the company is now looking to boost its content portfolio through tie-ups with video platforms Netflix, Amazon Prime and ZEE5. Jio, on the other hand, is exploring the option of producing content in-house.
With the number of mobile users stagnating, operators are increasingly seeking to convince owners of feature phones to switch to smartphones and become data customers. Subscriber numbers are becoming a less adequate metric to judge growth, so operators will need to focus on increasing average revenue per user through stronger data usage rather than by flooding the market with SIM cards. Quarter after quarter, Indian operators have been losing money, fighting each other to accumulate more customers. It's refreshing to see them now refocusing their efforts on quality rather than quantity.