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Business News/ Industry / Telecom/  Telcos to gain as data usage up after work from home
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Telcos to gain as data usage up after work from home

The shift to remote working has driven up data use even as migration changed the distribution of this traffic
  • There has been an increase of around 12-15% in data traffic during the lockdown, Rajan S. Mathews of COAI said
  • Higher unemployment may negatively impact upgrades to smartphones,” Goldman Sachs said in a 3 June note (Photo: Mint)Premium
    Higher unemployment may negatively impact upgrades to smartphones,” Goldman Sachs said in a 3 June note (Photo: Mint)

    NEW DELHI/MUMBAI : The coronavirus lockdown may prove to be a blessing in disguise for telecom operators as many users have upgraded to more expensive data plans as they work from home (WFH), driving up monthly spending.

    “There has been an increase of around 12-15% in data traffic during the lockdown," said Rajan S. Mathews, director general of Cellular Operators’ Association of India. “This will translate into some overall gains in revenue as well. My own estimate is that Arpu (average revenue per user) for Airtel, Vodafone Idea and Jio may rise by 10-12% in this quarter as smartphone users upgrade their tariff plans."

    The massive shift to remote working has driven up data traffic even as the migration of working population to smaller towns has led to a change in distribution of this traffic.

    All telcos had extended the validity of prepaid plans by over a month till 3 May as users struggled to recharge phones during the lockdown, a move that may somewhat offset the gains. While over 90% of the subscriber base of all three private operators—Bharti Airtel, Vodafone Idea and Reliance Jio Infocomm Ltd—are prepaid subscribers, the majority of them are also on 4G networks, where analysts see an upgrade in plans. Telecom companies have launched “work from home" data plans to tap demand from remote workers.

    The Arpu growth from lockdown will boost the recent upward trend following tariff hikes in December. In the March quarter, Bharti Airtel’s Arpu rose 14% from the preceding three months to 154. That compares with the 1.7% gain at Reliance Jio to 130.6. Telcos were largely expected to report higher Arpus in the fourth quarter of FY20 and the first quarter of the current fiscal as tariff hikes took effect.

    At Bharti Airtel’s investor conference call last month, Gopal Vittal, managing director and chief executive for India and South Asia, said its 4G customer base and postpaid subscriber base were “by and large intact", but there was some impact at the bottom end of the user base.

    “The impact on rural consumers’ income may negatively impact revenue growth for telecom operators’ feature phone base (around 30% of 2019 revenue). Higher unemployment may negatively impact upgrades to smartphones," Goldman Sachs said in a 3 June note.

    Mathews agreed that with feature phone users forming just around 250-300 million of the overall subscriber base of 1 billion, the impact of any loss of revenue from delayed recharges will be offset by upgrades by high-value users.

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    Published: 11 Jun 2020, 12:01 AM IST
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