Statsguru: The telecom sector's data war

Last week, the UK-based Vodafone Group announced the infusion of Rs 47,700 crore of fresh equity into its Indian arm. The move comes at a time when the telecom industry is gearing up for the biggest spectrum auction in the history of the sector in India. As Chart 1 shows, seven operators have submitted the earnest money, with Reliance Jio (RJio) leading the pack, followed by Vodafone and Idea.

By offering free voice services, RJio has upended the market. Currently, users on an average consume about 400 minutes of talktime a month which, at an average realisation of 35-40 paise per minute, translates into revenues of around Rs 140-160 per month. Existing operators hope that the decline in voice revenues will be offset by the rise in data revenues as both data subscribers and data usage by customers increase.

As Chart 2 shows, data usage per customer has increased sharply over the past two years. But this rise has been accompanied by falling incremental revenues, with realisations per MB falling, as seen in Chart 3. As a consequence, growth in data revenues for major telecom operators has slowed over the past few years, as shown in Chart 4. Analysts are sceptical whether the decline in voice revenues can be offset in the near term by a rise in data revenues.

Chart 5 compares the data offerings of RJio and Bharti's earlier plans. At the lower end, RJio's Rs 149 plan offers 300 MB of data and free voice. Add to that a top-up of Rs 151 and for Rs 300 it offers 1.3 GB of data and free voice. By comparison, Bharti offers 1 GB of data for Rs 253, but add the cost of voice calls, which is roughly Rs 140-160, and it works out to be more expensive. In the middle range, both companies offer 10 GB of data for roughly the same cost, though at higher data levels, RJio fares better. In reaction to RJio's offering, Bharti on Friday announced the launch of a special 4G prepaid data pack that offers free data for 90 days.