BackTelecom: slowing data growth a worry for industry
Growth in data revenue fell to 35% and 27%, respectively, for Bharti and Idea, from as high as 70-80% just a year ago
Premium
The telecom industry continued to report average growth rates in the June quarter.
Voice revenues grew 3.8% and 4.6% year-on-year, respectively, for Bharti Airtel Ltd and Idea Cellular Ltd, and declined by 0.9% for Vodafone India Ltd.
But worse still, growth in data revenue decelerated further. As the chart alongside shows, growth in data revenue fell to 35% and 27%, respectively, for Bharti and Idea, from as high as 70-80% just a year ago.
In fact, in the June quarter, Idea and Vodafone slowed investments on their networks considerably, which is perhaps an indication that the data opportunity is not as big as was earlier thought.
“Idea added close to 6,500 3G + 4G sites (in Q1), compared with 17,000 in the previous quarter. Vodafone’s site additions also slowed to 6,000 3G + 4G sites as compared with 15,000 in Q4. Idea’s and Vodafone’s lower rollout numbers are largely a reflection of the relatively limited spectrum portfolio, especially in 4G. However, it might also be an indication of their view on the market, where both companies have been relatively conservative, compared with Bharti," analysts at Kotak Institutional Equities wrote in a note to clients.
Idea’s voice volumes and revenue grew at a sedate pace as the company attempted to curb promotions. Since the move has backfired, it can be expected to be flexible with pricing to drive growth from Q2 onwards.
In any case, industry dynamics have changed considerably since Reliance Jio Infocomm Ltd launched operations in September. While data tariffs were anyway expected to be under pressure, Jio has also targeted the voice segment by offering unlimited voice calls at fairly low tariffs.
The full impact of the Jio launch on average realizations and the growth metrics of incumbents will be visible only next year; but, it’s likely that some impact of additional promotions may be visible this year itself, especially in the December quarter.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
