Though Reliance’s Jio began commercial operations only in the last month of the September quarter, the impact of the big discounting they began can already be seen in the profits of incumbent telcos. Unlike Idea whose profits plunged, market-leader Bharti Airtel managed to turn in a marginally higher profit despite a drop in revenues only because of a tight control on expenses. More worrying, while voice revenues continue to fall—ARPUs fell from R140 in September 2015 to Rs132 in September 2016—data ARPUs that were once growing rapidly, continue to stagnate. They jumped from Rs 150 in September 2014 to R193 in September 2015, rose to R200 in December and have remained at that level since—the picture is worse for Idea. What is heartening for Bharti Airtel, though, is that while the number of broadband subscribers is growing at a steady base, the per subscriber usage has finally touched 1GB a month—that is a healthy 30% increase over the previous year when average usage was 765MB; it was 563MB in September 2014.
While there is little doubt that the continued slashing in data prices will lower realisations quite dramatically, a lot depends on how fast incumbent telcos are able to move towards the Jio model of bundling free voice minutes along with data—that is, a move towards just protecting ARPU while making the most of the carriage capacity on their networks. Some of that has already begun to happen with both Airtel and Vodafone offering 4G data at R25 per GB for customers who purchase a new 4G phone—this is cheaper than Jio and to avail its services, customers have to buy new 4G phones anyway. Though Jio’s bundled offers are cheaper, Vodafone has already begun to offer 1,000 minutes of ‘free’ voice with 4GB of data and 500 SMSs for just R699. Telcos are also working on bettering their entertainment offerings since, even though Jio’s free service makes a huge difference, customers cannot be using 1GB of data per day if the entertainment content was not attractive. With most incumbent telcos using the last auction to augment capacity and plug gaps in their networks, they are in a position to unleash a lot of capacity. While the Jio network will get better once it gets less clogged—that will happen once it starts charging—the fact that incumbents like Airtel, Vodafone and Idea are faster in some circles makes it clear Jio will really have to fight to take away their customers. All of this, of course, is value destructive—that explains why the incumbent leaders have also shored up their finances over the past few months.