Telecom sector's 'renewable shock': ARPUs down by a third, Economic Survey says

Key Highlights

• ARPUs were down 22% since December 2009-June 2016 period.
• Post Jio's launch in September ARPUs were down 32%.
• Jio launch has brought increase in telecom connections.

India’s Economic Survey tabled in parliament on Friday said that the telecom industry has experienced ‘renewables shock,’ due to the new entrant – Reliance Jio.

“The telecommunications sector has experienced its own version of the ‘renewables shock’ in the form of a new entrant that has dramatically reduced prices for, and increased access to, data, thereby benefitting—at least in the short run— consumers,” Ministry of Finance said.

Reliance Jio backed by Reliance Industries Ltd MD, Mukesh Ambani, launched its digital services in September 2016. The company garnered over 10 crore customers on the back of its free service offerings.

“After launching of services by the new entrant in September 2016, the average revenue per user (ARPU) for the industry on aggregate has come down by 22% vis-à-vis the long term (December 2009-June 2016) ARPU, and by about 32% since September 2016,” the report said.

Currently Jio claimed that it has 12.5 crore subscribers.

Due to mounting pressure from Jio, the incumbent telecom operators doled out free services and bundled data plans to fend off the competition.

However due to the excessive discounted offers by operators the government recognised the ‘increase in telecom connections.’

“The performance of India’s Services Sector has been subdued in 2016-17 in line with the global trend. However, some services continue to be key drivers of India’s economic growth. 

There was reasonably good performance in telecom with increase in telecom connections reflecting the Jio effect,” the report added.

As per the data by Telecom Regulatory Authority of India (TRAI) there were 118 crore wireless subscribers in the country as on May 31, 2017.

“The number of telephone subscribers in India increased from 1,198.89 million at the end of Apr-17 to 1,204.98 million at the end of May-17, thereby showing a monthly growth rate of 0.51%,” TRAI said.

Rural tele-density increased to 57.55% in May which was only 50.95% before Jio’s launch at the end of August 2016.

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