Telecom companies have been reporting impressive growth in subscribers in recent months, but this has meant little since revenues have been practically flat for the industry for the past few quarters.
Between December 2008 and September 2009, the wireless subscriber base has grown at a quarterly average rate of about 11%. But wireless revenues have been flat at about Rs26,400 crore since the December quarter, according to Telecom Regulatory Authority of India (Trai) data collated by HSBC Research.
The September quarter was no different. While the wireless subscriber base grew by 10.4%, revenues were flat. The telecom industry, as is widely documented, has been hit by the double whammy of an increasing proportion of low-usage rural customers and the phenomenon of a single customer having multiple phone connections.
With many customers now being split between various operators, per-customer usage has dropped sharply. Of course, the fall in revenue per customer has been accentuated by sharp price cuts by telecom companies and the introduction of per-second billing plans also leads to a drop in revenue.
In such an environment, it would make more sense to look at the revenue market share of telecom companies rather than their share based on subscriber numbers.
Tata Teleservices Ltd, for instance, has made huge strides in market share measured by subscriber numbers in the past quarter. This was thanks to the success of its per-second billing strategy for its services under the Tata Docomo brand that uses the GSM or global system for mobile communications technology platform. In June, Tata Teleservices had an 8.7% share of the wireless subscriber base, but this jumped to 9.9% at the end of September, thanks to a 26% jump in subscribers.
In revenue, however, its share has risen marginally from about 7.1% in the June quarter to 7.4% in the September quarter, a recent HSBC report notes.
Similarly, Aircel Ltd, which has expanded its services to new areas aggressively this year, reported an 18% increase in its subscriber base last quarter, but a lower 6.5% increase in revenues. Its revenue market share has risen by about 20 basis points to 3.6%. One basis point is one-hundredth of a percentage point.
Graphics: Sandeep Bhatnagar / Mint
New operators have been gaining revenue market share at the expense of incumbents, even if at a low rate. Bharti Airtel Ltd and VodafoneEssar Ltd, for instance, lost 50 and 30 basis points, respectively, in revenue market share last quarter. This explains why these companies have eventually chosen to mimic the aggressive pricing strategies initiated by new firms such as Tata Docomo.
While this may arrest the decline in revenue market share in future quarters, it is sure to result in a rapid shrinking of the overall pie. As HSBC’s analysts say, “We remain cautious on the Indian telecom sector, since the move by the entire sector to adopt the per-second billing format will be revenue-destructive.”
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