Airtel, Idea revenue get boost from data services

Mobile phone companies' strategy of focusing on data as their next major growth opportunity is beginning to yield results as incumbents such as Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications have all witnessed a steady increase in the number of subscribers using data on their mobile phones. However, this may not essentially translate into direct revenues as data tariffs are becoming more affordable.

Bharti Airtel, the largest telco in India by subscribers and revenues has seen a 26% jump in data traffic on its networks in the first two quarters this year. That is, from April to September 2012, the total data traffic has gone up by over 60%, Akhil Gupta, joint managing director for Bharti Enterprises said.

Over one-fifth of its total customer base of 185 million uses internet on mobile phones and the amount of data used by each of these customers has risen to 133 MB (megabytes) in September from 112 MB in April, and by 24% from 107 MB in January-March.

"To our mind there is no doubt that with the operators having invested more than thousands of crores in spectrum, they have no choice but to spread data services in the country and the traction on part of the customers for data services is huge," Gupta said.

Idea Cellular that gave the details of the data traffic for the first time in the second quarter, reported a 20% increase over the first quarter. While about 19 million customers of the total 115 million use regular data ( 2G) and high-speed data ( 3G) services, the average daily mobile data volume rose 20% to 9.6 terabytes per day in the second quarter against 7.52 terabytes per day in the first quarter.

"We are observing a surge of mobile data volume growth. During the last one year the mobile data has been growing for Idea on a cumulative quarterly growth rate of nearly 30% per quarter," Idea Cellular's managing director Himanshu Kapania had said earlier.

However, the data average revenue per user or Apru, a key gauge for profitability, is nearly flat for Bharti Airtel. It has come back to the same level as the last quarter of the previous fiscal. That is, to Rs 43 in Q2 FY 13 from Rs 40 in Q1 FY 13 and from Rs 44 in Q4 FY12.

This indicates that even though data usage in increasing, the realization per megabyte of data used is going down because data tariffs continue to be on the lower side, benefitting only customers. In Airtel's case, the data realization per MB has fallen to 32.4 paise in September from 35.3 paise in April and from 40.9 paise in the Jan-March quarter.

Incumbent telcos have seen a steady increase in the number of subscribers using data on their cell phones and in the quantum of data traffic.

Idea Cellular is in a better position as its data Arpu for the 18.9 million data users is Rs 50 a month for the three months ended September against the previous quarter data Arpu of Rs 47.

"The rate of fall of blended 2G and 3G data average realized rate on MB has slowed down. This quarter data average realization per MB was 31.7 paisa against a sequential last quarter of 32.8 paisa per MB, a decline of 3.4%," Kapania told analysts at an earnings call over a month ago.

Data browsing revenue for Vodafone has risen by 50% in the first six months this year to Rs 876 crore compared to Rs 584.2 crore in the same period last year. Data revenue as percentage of service revenue was 5.7% for Q2 FY 13, higher than 5.1% in the first quarter. Except this, other trends are in line with the industry.

For instance, its realization per MB has come down to 41 paise in the second quarter ended September compared to 59 paise at the end of the fourth quarter last fiscal even as data usage per subscriber has risen to 117 MB from 77 MB in the same time.

"In the past six months pricing has been aggressive and we've seen a drop in prices across the industry. Since this has happened, we've seen a strong uptake, with more subscribers and higher usage per subscriber," said Vodafone India's chief finance officer Colman Deegan a fortnight ago while talking about the company's results.

Bharti Airtel, Idea Cellular, Vodafone and Reliance Communications slashed 3G tariffs by about 70% in May this year, about 18 months after they launched 3G services which were not witnessing rapid adoption. Telcos had paid more than 67,710 crore for buying 3G airwaves from the government in 2010.

Reliance Communications' chief executive officer Gurdeep Singh told ET a couple of weeks ago that its 3G user base grew by 20% in the second quarter over the first and that the average data usage per subscriber was the highest in the industry at 232 MB.

Bharti Airtel's 3G customer base swelled by about 50% to over 4 million from 2.7 million after the price correction. Idea Cellular's active 3G customer base also grew by 600,000 to 3.7 million in the quarter of July to September 2012.

The data Arpu of pure 3G customers is higher than that of blended mobile data users and now stands at Rs 87, almost similar to last quarter of Rs 88, Kapania added.

Kapania and Vodafone's Deegan agree that the overall ecosystem was improving as 3G networks were expanding faster with higher speeds, available to consumers at near-2G tariffs on more affordable smartphones. These factors will ready the country for wireless data explosion in the next 18 to 24 months.