More so since, as Vittals predecessor Sanjay Kapoor puts it, voice will soon be just another app. Translated, voice revenues as a share of mobile revenues will fall to mature market levels of around 50% in a few years, down from 85% today.
The fall could be even faster given the speed at which smart phones are being sold from 7.4% of the market a year ago, they account for 17% today. That, and the entry of Reliance Jio, scheduled later in the year, where the focus will be on data-driven plans, is hastening the pace of change.
Its not as if telecom companies havent seen the writing on the wall, or werent preparing for it. Short message service or SMS has been a lucrative source of revenue actually boosting the bottom line, considering the costs of providing them are negligible, and comprised 12% of profit for Bharti Airtel in 2009-10. In Q3FY14, SMS revenues were down to a mere 6% of top line while data, which made an entry in FY12, comprised 10.3% of Q3FY14 revenues the share was up 60% over FY13.
Which is why, as Idea Cellulars managing director Himanshu Kapania points out, telcos have bid so aggressively in the just-concluded auctions for data spectrum in February. Idea surprised most when it bid R3,705 crore to buy 900 MHz spectrum in Delhi, ideally suited for data services given its excellent in-building penetration. If even a value-player like Idea was prepared to splurge on 900 MHz, it is clear the data play is getting serious.
It wasnt just Idea, companies like Bharti Airtel and Vodafone are also accumulating spectrum ideally suited for data.
At the same auction, Bharti Airtel spent another Rs 18,530 crore to buy 900 MHz and 1800 MHz spectrum even though it already has 5 MHz of 3G spectrum for data. The plan is to move the voice customers on 900 MHz spectrum to 1800 MHz spectrum most phones have the capability of working on both bands, so the shift requires no changes at the customer end so as to free up the costly 900 MHz spectrum for data users.
So when there are enough reasonably priced devices for the 2300MHz spectrum (broadband wireless access, or BWA) in cities like Delhi and Mumbai, Bharti Airtel, for instance, will be able to offer a lot more data services. In these two cities, it will have 5-6 MHz of 900MHz spectrum, 6-7 MHz of 1800MHz spectrum, 5MHz of 2100 MHz spectrum and 20MHz of 2300 MHz spectrum. Bharti owns BWA spectrum in eight circles across the country.
Though it isnt technically correct to divide spectrum into dedicated voice and data streams, Bharti Airtel has 327.8 MHz of data spectrum across the country versus 169.25 MHz of voice spectrum this assumes the 900 MHz, 2100MHz and 2300MHz spectrum bands are all for data and the 1800 MHz band for voice.
This is also why data tariffs have fallen tremendously over the past few quarters. All leading telecom operators including Vodafone, Airtel, Idea and Reliance Communications have slashed data pack rates by 80-90% in the last three quarters. Currently, most players charge between 2 and 10 paise per 10 KB of data downloads.
As for regulatory help, Trai chairman Rahul Khullar has made it clear none will be forthcoming for any practical purposes. Says Khullar, It is the licensor (government) that has to take a call on any regulation. But the architecture is clear, the government will not let these VOIP-based operators enter the market through the licensed route. But as far as voice calls on Skype or Facebook that is, one Facebook/WhatsApp user to another are concerned, they are within the rules. Thats a potential 25 million voice users, and growing, that could possibly start using a lot less voice calls in the near future.