Increasing internet penetration to boost revenue from data services for telcos

Key highlights

• Currently voice calls dominate Indian telecom industry revenues at ~70%. 
• Data services contribute merely 20% of telco's revenues.
• Increasing internet penetration especially in rural areas to boost revenue earned from data services.

Telecom operators will now turn to data services to fatten profit margins as increase in use of internet bodes well with mobile subscribers.

In a webinar on emerging trends in the telecom sector on Friday, sector analyst Bhagyashree Bhati of Care Ratings said data services was the ‘next major source of revenue’ for telcos on the back of higher internet usage.

“Data usage is the next major source of revenue earner for telecom companies after voice call services. The use of data services is on a rise,” Bhati said.

Voice calls still formed majority part of telcos revenue up to 70% until the December 2016 quarter.

Airtel’s voice calls formed 71% of its revenue and Idea’s voice calls was 72.8% of total revenue in that quarter (Q3FY17), the analyst said.

“As per the March 2017 quarterly results of Bharti Airtel, data services accounted for 21.5% of mobile India revenues and data services for  Idea Cellular accounted for 18.3% of the overall service revenue,” the report by Care Ratings said.

Mobile data consumption is expected to witness a four-fold jump in the next five years, a report by ratings agency CRISIL said on July 25.

“Mobile data consumption in India has grown 24 times in the past 5 fiscals. CRISIL Research expects that number to multiply four-fold in the next five years through fiscal 2022, given low penetration and an expected doubling of data subscribers to more than 900 million (90 crore),” the report read.

After the launch of Reliance Jio digital services in September last year, the industry has faced headwinds that lead to mounting losses.

Zeebiz had earlier reported how Jio’s launch accelerated bundled data matrices.

“Jio’s entry is a major reason for telecoms’ shift in the pricing paradigm’s focus to data instead of voice; however this can also be attributed to increase in penetration of 3G and 4G services,” Gaurav Dixit, Care Ratings’ telecom analyst told Zeebiz in a report dated March 23.

Following Jio’s example of doling out unlimited voice calls for free, Airtel, Idea and Vodafone have also started bundling free voice calls with data packs.

Care Ratings research showed that industry average revenue per user (ARPU) fell drastically quarter on quarter post Jio’s launch in September.

Industry ARPUs began to decline from June when it was at a high of Rs 126 to Rs 121 in September and Rs 82.7 in March. These estimates were taken with

How Reliance Jio bundled the telecom sector into 'one plan'