There was a time when tariffs determined a mobile firm's subscriber base, profitability and therefore investor interest. Not any more. Though it would take a month for one to know what impact the tariff hike had on the monthly subscriber addition of Airtel, one can hazard a guess that it would hardly be affected by itadding almost the same numbers as it does every month. On the other hand, not only Airtels but the stocks of all the mobile companies soared on Mondaythe first day of trading since the announcement had come on Friday after market hours. What does this show: that the subscribers do not care about tariffs anymore since the charges are anyway quite low and there are as many as 25 schemes which companies offer so a subscriber would not know how the hike impacted him/her. On the contrary a tariff hike today cheers investors because the old linkage between tariff, subscriber and profitability has been broken.
This had to happen because the country has moved to a different trajectory as far as development in mobile telephony is concerned. With more than 70% tele-density and metro centres like Delhi and Mumbai having a tele-density of more than 100%, affordability isn't anymore the criteria determining the penetration of a mobile operator. That's the base which is common to all today. What matters is the revenue-generating customer and the countrys seven major operators today are busy chasing this class of customers rather than the low Arpu-generating subscriber or the one who's only squatting on the network for some free minutes.
The change is best captured in the subscriber addition by the GSM operators in the last two months. Mobile operators using the GSM technologyand majority in India are now on this platformfor the first time since September 2009 added under 10 million (9.5 million) users in May. In June it further slipped to around 8 million. In the prior four months, barring April when the addition was around 11.1 million, the addition had mostly been in the region of 13-15 million. Collectively, adding up land line and CDMA numbers, the country had been seeing a subscriber addition of around 15-20 million every month.
Such a decline in numbers in any other sector would surely worry statisticians tracking macro economy fundamentals. It would be seen as a sign of slowdown. Not so in the telecom sector because here the story is a little different with the industry having moved beyond just adding numbers. In the last one year, almost all the major operators have been on a cleaning exercise, shedding subscribers thriving on free minutes. The focus now is on retaining and focusing on users who are generating revenue. Therefore, the barometer to gauge the industry's robustness has moved beyond subscriber addition to parameters like revenue market share and minutes of usage.
Figures released by the Trai for the fiscal 2010-11 shows that the overall state of the telecom sector continues to be healthy. Operators like Bharti, Reliance Communications and BSNL showed a dip of more that 1% in their revenue market share during the year. On the contrary, operators like Vodafone-Essar, Idea Cellular, Tata Teleservices and a host of new operators showed growth. This was bound to happen. With more and more operators entering the market the bigger incumbents are bound to lose some users in favour of the newer ones. The bottom line is that in fiscal 2011 overall revenues of the sector increased by 12% compared to a 7% increase during the year preceding it.
The other positive feature that the Trai data throws is that the share of active subscribers is rising compared to the inactive ones. Around 70% of the total mobile subscriber base comprises active subscribers. This explains the slowing down of additions during May and June. With operators focusing more on revenue generating customers and the last one year not seeing any tariff wars, the share of inactive subscribers was bound to go down. Such developments act as a deterrent for those subscribers taking fresh add-on connections only for some freebies, thus, artificially swelling up the overall numbers.
The story from hereon for the mobile operators is revenue maximisation rather than simply adding subscribers since from now on a higher number of subscribers is not going to get anyone more spectrum. It would have to be bought from the market so one needs money to pay for it.