Though India is adding the highest number of mobile subscribers each month at 10-11 million, the worrying trend is that Indians seem to be talking less. The second quarter result of the country?s largest telecom operator, Bharti Airtel, showed fall in minutes of usage for the second consecutive quarter. Now this is a worrying factor because though we may add huge subscribers each month, the revenue realisation from each user has been falling for some time. Operators like Bharti or Reliance Communications make profit because of the growing volume of customers. Thus, rise in minutes of usage compensated for the low realisation per user.
Therefore, any trend which goes in the direction of reduction of minutes of usage would ring alarm bells for any company or sector analyst. The obvious question is: Is the telecom growth story over?
The obvious answer is no. However, what is likely to happen is that as mobile operators fan into the rural areas and category C circles, which are smaller cities, minutes of usage would decline, leading to slower revenue growth. For companies like Bharti Airtel, this may not be of immediate worry because the company has huge economies of scale and has very low debt. However, for smaller players, the ones who are in an expansion mode, spreading from operations in a few circles to a pan-India level, it?s the beginning of worrying times.
Let?s look at the facts. For a company like Bharti, 57% of its total customers come from the rural areas and 65% of its new sites are coming up in rural areas. It?s clear that with saturation coming in cities, mobile players are fanning in rural areas where phone connections are selling but people are talking less. The major factor contributing to this is schemes like lifetime validity, which, by paying a small amount, ensures that one can receive calls for a number of years. For bigger operators like Bharti, there?s a huge cushion, but for a smaller operator, or a new one, there are infrastructure investments. Further, competition from the incumbents is increasing with offers of lower and lower tariffs. The most recent example is of Rcomm, which has forayed into GSM services and is offering SIM cards for Rs 25.
rishi.raj@expressindia.com