It requires no big brainier to tell as mobile data gains scale and penetrates relatively lower-income subscribers, it will start cannibalizing voice revenues. We expect this cannibalization of voice by data to start materializing during FY16. In this backdrop, incumbents need to increase their investments to build quality data-ready networks and launch of Reliance Jio Infocomm may well act as a trigger for that.
Strong Growth of Mobile Data
The strong data consumption growth augurs well for incumbent telecom players, but we think that data is not necessarily completely incremental to voice revenues once it gains scale and penetrates relatively lower income subscribers. A large proportion of wireless subscriber base manages its mobile bill within a pre-determined amount and these subscribers will reduce voice usage if they will spend more on data [Price Sensitive Indian Consumers :-)]. Hence, we believe that as data penetrates in a meaningful way, it will likely impact normal voice revenues.
Voice Growth Tapering
Idea and Airtel reported 19.8% and 11.3% Y/Y growth in wireless revenues, while Vodafone saw 13.2% Y/Y growth. However, wireless revenue growth is primarily driven by data, while voice revenue growth remains muted. Idea and Airtel reported voice revenue growth of 12.7% and 7.6% Y/Y, respectively, the lowest for both in the last six quarters. Also, Airtel and Idea saw MoUs and voice ARPMs moving in opposite direction (Y/Y basis) in each of the last four quarters (with one exception as Idea saw both increasing modestly in Jun-14 quarter).
Airtel Vs Idea Voice Strategies
Airtel seems to be focused on increasing effective pricing, while Idea appears keen to drive volume / minutes growth. Airtel seems committed to raise effective pricing. The company registered Y/Y increase in ARPMs in each of the last six quarter, out of which the company saw MoU decline in four quarters. Idea management suggested that the company registered higher voice minutes growth from ‘new circles’ where Idea is not among top-3 players. The company implies that its voice pricing is competitive/low in these circles, which is driving higher volume growth and market share gains. The overall decline in ARPM and healthy growth in MoUs also indicates that Idea is more focused on driving minutes/volume growth than pricing increase – a strategy which seems to be working as Idea reported a slight increase in voice ARPU.
It will be interesting to witness if data will continue driving increase in blended ARPU, ot it will be incrementally at the cost of voice ARPUs ?