Unlike in other markets in the APAC region, voice continues to dominate mobile sector revenue in India. Based on our estimates, voice contributed c82% of mobile revenues in FY15. With increasing numbers of OTT apps such as Skype, Viber, Whatsapp, Google Talk, Hike and Line offering Voice over Internet (VoIP) services in India, there is some concern that voice revenues, which are the bread and butter of Indian operators currently, may come under pressure.
As the Indian mobile market is still under-penetrated in rural areas (c.47% rural penetration), minutes on the network will continue to grow, in our view. We believe that rural penetration has the potential to reach 75%, and the vast majority of rural consumers are likely to use voice as their primary communication tool.
VoIP has had limited success globally, even in developed markets. In markets with good data networks such as Singapore and HK, the key has been getting the tariff structure right. The tariff plans have evolved to be data-centric, with voice and SMS virtually free. We believe that in India as well, especially in urban centres, such tariff plans will be prevalent once the data market matures.
