A-Vo-Id operators Subscriber addition continues amidst Jio Launch

Mobile Voice Business IndiaAirtel, Vodafone and Idea Cellular the A-Vo-Id Telecom Lobby in India continued to add subscribers amidst launch of Reliance Jio 4G Network. A-Vo-Id operators are focusing more (for subscriber adds) on rural areas and Jio’s initial focus is likely to be on urban areas where offtake is likely to be through dual SIMs given urban tele density is already >100%. We believe, looking at the incumbents sub data, Jio’s free period offer doesn’t appear to have impacted their net adds.

Reliance Group President has announced that it has crossed the 20 Million subscribers mark in mid October. Its Welcome Offer had commenced on Sep 5. Assuming Jio already had ~4-5m users on its network during its test phase, this equates to ~10-11m subs having been added in Sep. We believe bulk of these users would have come from urban areas where offtake is likely through dual SIMs given tele density is already >100%.

From, Idea’s FY16 Annual Report Analysis – It had highlighted that falling subscriber acquisition cost (SAC) as % of revenue has been one of the key driver for EBITDA margin expansion. However, this has been due to lower gross sub adds (reflected in lower churn) as the per user SAC has seen a sustained increase over the last 5 years. Rising proportion of dual SIMs is likely to lead to higher churn, which would hurt incumbents’ EBITDA margins.

Further, the A-Vo-Id Lobby plans to divide the Indian Telecommunications Market into two large pies – Voice vs Data to milk the last few drops of Voice only business.

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