Jio Launch – Mobile Data ARPU Decline Inevitable, Subs / Volume Growth Tepid

Mobile Data ARPU Delcine IndiaThe 800 pound gorilla, Reliance Jio Infocomm’s entry will shake the Mobile Broadband Data Market in India at a much faster pace than it had in the past when Challengers [Aircel, DoCoMo, Uninor, etc] entered the Voice market in India and expect it to repeat but at much faster pace in the Mobile Data War.

Airtel’s data ARPU is Rs 200 and Idea’s data ARPU is Rs 150 – today, 20-25% overall subscribers of these companies are data subs. If data upgrades takes place to touch 500 to 600 Mn of the subscriber base by 2020 as telcos steadfastly aver, we should model in a reasonable incremental data ARPU decline (at least 30-40% lower) from current levels.

Airtel’s voice ARPU, when voice penetration for Airtel had achieved the same level of penetration as data for Airtel today, was Rs 325+ during FY 2008 (with MOUs at ~500 minutes and ARPM of 65 paise) – contrast the voice ARPU/MOU/ARPM then with today (2016) – current voice ARPU at ~Rs 140 with MOU of ~400 minutes and ARPM of ~35 paise. In other words, it may be useful to see how voice metrics have moved from the time Airtel’s subscriber base stood at ~60-80 million, equivalent to Bharti Airtel’s 3G / 4G data sub population today as this could give us some approximate indication of how data metrics might move with sub penetration.

It bears mention that the top 10-15% sub-base in India has disproportionately high economics relative to the average subscriber – the subscriber economics in India fall rather sharply as we reach out to lower layers of consumer subs.

Reliance Jio (RJio) will play the same role in accelerating data price decline, much like the other smaller voice-centric players have done to voice pricing (over FY09-14). Data is more elastic than voice and that a decline in data pricing will bring out more corresponding volume increase offsets.

Cracks Begin to Appear in A-Vo-Id Operators Lobby
Idea’s 3G data ARPU is declining to reflect this trade-off down to Rs174 in June-16 from Rs209 five quarters back in Mar-15 as 3G data subs exploded significantly to 25.2 million subs during this period (70%+ jump from 14.5 million 3G data subs in Mar-15). Idea was vulnerable of declining data ARPU than Airtel given its subscriber profile. It is a matter of time before Airtel follows Idea’s declining ARPU trend trend as well.

Telecom Operators woes will not stop here as the CAPEX cycle will begin to accommodate increased demand thus always putting a strain on cash flow. This is the Economics of Telecom Business and even Bankrupt Companies in India wanted to enter the sector during the Corrupt regime of Congress Government which engineered the Largest Spectrum Scam.

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