Call it a glass half empty. Cheap data plans may have catalysed India’s mobile Internet story, but more than half of mobile-phone users are still not a part of it. And with tariffs bottoming out, and likely to rise, millions may continue to be Internet-deprived for a while.
True, Jio’s entry in September 2016 has been a watershed, with mobile Internet users more than doubling to around 530 million in the last 30 months (according to TRAI) and average data usage surging 10x to 9 gigabytes (GB) per month. Bharti Airtel subscribers’ average data usage at11GB per month is the highest in the industry currently.
This unprecedented growth was triggered by a crash in data tariffs, from a peak of ₹250 to under ₹15 per GB! Apps, like the Chinese TikTok and local ShareChat, added millions of users in remote areas, thanks to cheap data. But more than half of the 1.16 billion mobile users in India — some 630 million — remain without mobile Internet.
And many of them may not go online in a hurry, with data rates likely to perk up a bit, affordability of devices still being an issue, and vernacular content not ubiquitous.
E-mails sent to Bharti Airtel and Reliance Jio on the possible impact of rising tariffs did not elicit a response.
The brutal tariff war triggered by Reliance Jio (306 million users now) has already led to consolidation in the sector. Operators won’t drop rates further, but they are more likely to weed out low-value subscribers. In fact, in March 2019, Airtel and Vodafone Idea let go of 30 million such users, by dropping plainvanilla plans.
Chris Lane, managing director, Asia-Pacific telecommunications at research firm Bernstein, says, “We don’t expect tariffs to start rising until Jio reaches a market-leading market-share position. Until it reaches a scale position, we doubt it will change strategy. We estimate this will take it at least another year.”
Most market watchers expect that inflection point at 400 million users for Jio. When Jio began services with free calls and cheap packs, it signed up 100 million users in just six months, back in 2016-17.
“For most users, Jio’s mobile phone has become an indispensable part of their life. If prices go up most will pay. A smaller group of users might trade down to lower-use plans,” says Lane.
According to CLSA, a research and analyst firm, the fourth quarter of FY19 was the first time since Reliance Jio’s launch when neither of the incumbents reported a decline in revenue. While Bharti Airtel and Jio reported revenue growth of 4-7% quarteron-quarter, Vodafone Idea’s was flat. CLSA expects that telecom sector recovery is set to continue.
Now, operators, especially Bharti and Vodafone Idea, are looking at improving average revenue per user (ARPU) and average data usage. In the last two quarters of FY19, Vodafone Idea’s ARPU jumped 18% to ₹104 and Airtel saw an increase of 25% to ₹125, while Jio’s ARPU was under pressure at ₹126.
CLSA noted in its telecom outlook in June 2019 that managements remain optimistic on revenue recovery, given the recent partial tariff hikes made by incumbents and upgrades of subscribers from 2G to 4G.
THE BOTTOM LINE
Financially stressed Bharti Airtel and Vodafone Idea are letting go of low-value plans, as they are unable to sustain a dense pan-India 2G network. They want to divert the bulk of their network resources to 4G services to combat Jio.
Ashish Sharma, partner, telecom at consultancy firm PwC India, says, “Jio sets the floor in the market. The number of broadband users may increase to 650 million in two years. But the very poor 150-170 million could take much longer to get online.” For them, data is dear, and so are devices — many of them still use ₹1,000 feature phones and can’t afford to invest even in an entry-level smartphone. The overall telecom revenue is down to ₹1.65 lakh crore (March 2019) compared to ₹1.80 lakh crore when Jio entered in 2016.
Subho Ray, president, Internet and Mobile Association of India (IAMAI), insists low tariffs have helped cover the English-speaking population, and only a bit more.
“Telcos are already scraping the bottom for new users,” he says, despite more than half the mobile users still being offline. “To get the next 200 million users, you need vernacular Internet. Of course, any hike in tariffs will impact user growth,” Ray adds.
The trend, globally and in India, has been that of rising data consumption driven mostly by videos. “We are doubtful this trend will change much. However, as India already has one of the highest data consumption rates, the pace of growth is likely to slow,” added Lane.
Now, if prices go up, “it could impact affordability for many of these users, delaying the time for them to become online users,” Lane says.
On impact of data price rise on internet users, Dinkar Ayilavarapu, Partner, Bain & Company said, “elasticity effects of higher pricing are quite real and it’s quite likely that the usage per sub will fall.” For users, spoilt with unbelievable discounts over the last 30 months, dearer tariffs are around the corner. Most might still be on TikTok, chat, message, shop, or do more, but some will reduce screen time. While for the have-nots, the wait for mobile Internet will become longer.