Slide in telecom revenue bottoming out

The relentless month-on-month dip in average revenue per user (ARPU) for GSM telecom operators — because of tariff competition eating into margins — seems to be over.

With telcos raising tariffs, not going for aggressive subscriber expansion (especially low-paying ones), new 3G data revenues kicking in and customers not cutting durations of phone conversations, the focus is now on improving the realisation from each consumer.

Data collated by the Cellular Operators Association of India (COAI) from the top four players, Bharti, Vodafone, Idea and Aircel, show ARPU fell a marginal 0.83 per cent in April-June over January-March. This is in contrast with a sharp fall in ARPU of the same companies by nearly 3.4 per cent in January-March over the previous quarter, October-December, 2010.

The good news is market leader Bharti Airtel saw its ARPU go up after several months, from Rs 140.76 (January-March) to Rs 143.91 (April-June), an increase of 2.2 per cent. In the previous quarter, January-March, Bharti’s ARPU had fallen by a staggering 6.4 per cent compared to October-December, 2010.

The second-largest telecom player, Vodafone, has also seen its ARPU slide arrested. The fall for April-June was only 0.6 per cent over the previous quarter.
 

DECLINE ARPU ARRESTED
	Oct-Dec  2010	Jan-Mar  2011	Apr-June  2011
Bharti	150.37	140.76 (-6.39%)	143.91 (2.24%)
Vodafone	127.71	122.81 (-3.81%)	122.07 (-0.63%)
Idea	126.9	121.49 (-4.26)	121.14 (-0.29%)
Aircel	76.93	72.98 (-5.14%)	71.03 (-2.68%)
Uninor	37.56	39.06 (3.99%)	45.81 (17.28%)
Source: COAI; Figures are in Rs;  Figures in bracket denote growth of ARPU

However, in January-March, its ARPU had dropped 3.8 per cent over the previous quarter.

Among the new players, Uninor has seen a substantial jump in ARPU, up 17.3 per cent to Rs 45.8 in April-June, compared to a growth of 4.0 per cent in the previous quarter.

The ARPU numbers are expected to improve, with key telcos like Bharti and Vodafone-Essar raising tariffs by around 20 per cent in July.

Experts and telcos say tariff corrections undertaken by telcos are working, as these are not leading to a commensurate drop in the minutes of usage. As a result, ARPU is rising. Says a senior executive of Vodafone Essar: “What we are seeing is the tariff increases have stabilised and minutes of usage are not falling. With wireless penetration levels now reaching 71 per cent, further growth is bound to happen slowly.”

He says the entry of 3G, with additional data revenues despite the limited number of subscribers, is pushing up overall ARPUs.

His assessment is supported by the fact that incremental wireless subscriber growth has been coming down month-on-month. For instance, it grew only 1.36 per cent in June this year over the previous month. This is in contrast to a growth of 2.55 per cent in March over the previous month.

Telecom analysts agree the tariff increases have been accepted by consumers. “New players are no longer competing aggressively on price. Incumbents have hiked tariffs and it seems consumers have accepted it; so, the minutes of usage have not gone down. Also, telcos have less incentive to pursue low-paying customers,” says Mahesh Uppal, a Delhi-based telecom analyst.

Another telecom analyst with KPMG, Romal Shetty, says, “The scenario of low ARPUs will significantly change now because of the increase in mobile tariffs and operators’ greater focus on value-added services. Operators are consciously working on ARPUs now. Earlier, the focus was on reducing costs.”