Statsguru: From disruption to saturation, where is telecom sector headed?

In 2016, Reliance Jio entered the market and disrupted the telecom sector. While users like us got cheap data and higher speeds, competition ensured that telcos went through a tough time managing their financial health. 

A look at a broader time frame shows that mobile users were growing healthily till 2017, with the exception of 2013. But growth has fallen in recent years, with mobile users reducing in absolute number for the first time in six years (Chart 1). The share of rural mobile users also seems to have saturated. India now has 1,161 million mobile users, and 44 per cent of them are rural. 

Urban tele-density — active SIM cards in cities per 100 people according to Census — had always been more than 100, because of rural-to-urban migration. Tele-density in villages reduced for the first time in many years to 57 as of March 2019 (Chart 2), showing that further seepage into villages needs a stronger push. 

Experts say that the high indebtedness of the sector is putting brakes on installing new telecom infrastructure in poor access areas. Though average revenue per user (ARPU) plummeted to half in three years, the March data signals that it might grow gradually (Chart 3). Though the cost of data has halved in two years, usage has grown eight-fold, providing a silver lining for telcos (Chart 4). The data now accounts for more than half of revenue to telcos (Chart 5). But good days for telecom are not in sight yet. Revenues are dropping quarter on quarter, with no growth visible (Chart 6).