Indian telecom industry seems all set to dial into a new life. After growing at a breakneck pace, riding on voice services, the world?s second-largest wireless market is now plugging into data services.
The reasons are not hard to find. Despite the hyper growth, average revenue per user (APRU) per month for the Indian telecom operators is declining. Data services are seen as a tool to reduce the base of ARPU fall. According to industry veterans, the future of mobile telephony lies in data services. On an annual basis, where the telecom industry ARPU has been declining at a rate of 10-15%, value-added services (VAS) and data contribution to the revenue has increased and contributes about 8-11% of an operator?s revenues.
?A long economic recovery places pressures on mobile operators to compete on price, particularly with undifferentiated voice services. Mobile data services allow operators to counter that pressure,? says Dan Shey, practice director, ABI Research. For Bharti Airtel, which has recently crossed the 100-million subscriber mark, the ARPUs have declined from Rs 324 in third quarter of the financial year 2008-09 to Rs 305 in the fourth quarter of the same financial year.
The story with Reliance Communication (RComm) and Idea Cellular is not different. RComm and Idea Cellular ARPUs have also plummeted to Rs 224 and Rs 260 in Q4 FY2008-09 from Rs 251 and Rs 260 in Q3 FY2008-09. Plummeting ARPU trend is the result of operators launching their services in the semi-urban and rural areas where the cost of subscriber acquisition is high.
Wireless players in the GSM space claim to offer data services via GPRS mode but the speeds are well below the criteria. As per Trai regulations, service providers need to offer access speeds higher than 256 kbps.
Telecom companies like Tata Teleservices and Reliance Communication are leveraging on the enhanced data carrying capacity of their respective EVDO networks. They have introduced wireless data cards or dongles to facilitate wireless data services, whereas Aircel has introduced pocket Internet cards to cater the wireless Internet demand of the subscribers. Also an operator like MTNL, which is yet to commercially launch 3G services in the Mumbai, is betting high on the wireless data cards. Currently, due to relevance of data services in urban areas, data service is not much penetrated. Also, data in the form of quality VAS comprises 20% of VAS, which is almost 3% of an operator?s revenue. To significantly impact an operator?s revenue and to stabilise the falling ARPUs, data services have to contribute almost 40-50% of VAS.
Revenues from data services will significantly contribute to the overall growth of mobile services in India, with a CAGR of 16.8% from 2009 to 2013, says Gartner. Data services comprises of two services, one of them is giving Internet connectivity and enabling subscribers to access and download data on Internet. This can be either in the form of Internet on mobile or through wireless data cards or dongles. Operators also tend to push data services in the form of quality VAS.
Growth will be triggered by increased adoption of VAS and data, which are relevant to both rural and urban markets. Voice usage will increase steadily, but data usage will grow more strongly with the increased consumption of value-added services. ?Voice services will continue to contribute largely to the operator?s revenue. However, with the increased growth in data services, the percentage of revenue coming from voice will reduce from 89% in 2008 to 86% in 2013,? said Madhusudan Gupta, senior research analyst, Gartner. Also, the prepaid segment, which accounted for more than 93% of all mobile connections in 2008 and is expected to grow to more than 96% of the connection base by 2013, is set to adopt data services faster than the post-paid segment.
Whereas in the developed countries the data services are observed to be growing at 20-25%, India has seen it growing at a rate of 8-10%. With 3G auctions likely to follow in the coming months, operators are eyeing the data services regime as the margins are higher. ?It is expected that 3G would fuel the data services growth in India but that would be again an urban-centric service. Also, for data services to support falling ARPUs would take a longer time span of more than five years,? said Harit Shah, analyst, Angel Broking.
With 3G, India would experience increased uptake of the non-voice data services. Operators would experiment on the 3G-based services ranging from utilities to entertainment, which are tailor-made so as to suit the subscriber needs. Mobile operators need to stress the utility of mobile services and pursue appropriate services personalisation initiatives that allow customers to buy and use services in ways that best suit their needs. Within the next three to five years, VAS and data is expected to contribute to 15% of an operator?s revenues.
Most of the telecom operators derive a large portion of their data revenues from content downloads (music, games, ringtones etc). Business customers should also be a target for data segment services. But the charges remain a major constrain, which at the moment are quite high, thereby limiting the demand for these services.
?nikita.upadhyay@expressindia.com
