Analysts worry over Airtel's data growth

Customer base up a mere 1.2% to 58.9 mn in June quarter; Airtel says price of devices hinders deeper data penetration

With the launch of fourth-generation services by Reliance Jio Infocomm imminent, analysts have expressed concern over the slowdown in data growth by the country’s top mobile operator, Bharti Airtel.

The data customer base of Airtel increased by a marginal 1.2 per cent to 58.9 million in the June quarter, from 58.2 mn in the preceding quarter.

Gopal Vittal, managing director and chief executive officer, India and South Asia, acknowledged the development during an investor call on Thursday.

“We have been noticing a slowdown in net additions in the last few months. There are some barriers like the price of devices,” he said.

Vittal said the company was making efforts to get more customers to use data and they needed to be educated on using the internet.

He added the company had launched sachet packs with prices as low as Rs 5 to bring in more data customers.

Not only subscriber addition; Airtel also witnessed slower growth in data revenue and volume.

Kotak Institutional Equities said Bharti Airtel’s data volume grew 7.7 per cent, quarter on quarter, and 55 per cent, year on year, to 158 billion MB, while revenue grew five per cent, quarter on quarter, and 35 per cent, year on year, to Rs 3,530 crore.

“This was the slowest growth in data revenue and volume in the past few years. Data realisation dipped 2.5 per cent, quarter on quarter, and 13 per cent, year on year, to 22.3 paise/min,” Kotak said.

The company’s data customer base has stagnated at 23 per cent of the overall user base, while broadband users make up 16 per cent.

“Bharti added only 1.1 mn 3G/4G customers in the quarter, a cause for concern. We will look for more colour around slowing data uptake,” Goldman Sachs said.

Morgan Stanley said domestic wireless data volume slowed to 7.7 per cent, quarter on quarter, adding 11 billion MB in the quarter. Realisation was softer and average revenue per MB declined 3 per cent, resulting in data revenue growth of 4.5 per cent, quarter on quarter, the slowest rate so far.

“Data is the future growth driver and hence our biggest concern. Reliance Jio’s entry will likely increase competitive intensity, voice tariff hikes could be tough, and average revenue per MB could fall further. Incumbents face the risk of data cannibalising voice as well as margin pressure with rising competitive intensity,” Morgan Stanley added.

Citi, however, said data growth was likely to pick up in the second quarter of 2016-17.

“Usage growth, while decelerating, remains healthy. Data as percentage of revenue went up to 23.7 per cent. Usage growth should accelerate in the July-September helped by an increase in data allowance, though there will be a sharper decline in realisation,” Citi said.