Mobile Data growth has slowed down meaningfully for operators with data ARPU’s flattening out over the past 3 quarters despite the massive rollout of services from operators. While this could have been palatable if the base were high enough, such a slowdown on low data volumes overall is a worrying trend. We believe while realization decline is necessary for increasing usage, education of users and need creation for internet use would be the key to pushing growth of data usage going forward.
Cannibalization of voice revenue by data usage and Data growth itself slowing down with pricing being pushed down to drive usage among what are the low ARPU users now is worrisome for the Indian Telecommunications Industry. Our belief is based on the fact that early adopters of data are the high ARPU users based out of Metros and Circle A locations. These are people with higher disposable incomes of which telephone bills are a small proportion. Adoption of these set of users leads to an incremental revenue from data without sacrificing revenues from voice and hence, an increase of ARPU.
At the next step, incremental revenues from data will come from users who have a fixed monthly budget for their telephone bills. Data revenue from these subscribers will come from a reduction in data pricing (ARMB – Average Revenue per Mega Byte) leading to increase in volume usage as well as cannibalization of voice revenues. The cannibalization of voice revenues will happen through both VoLTE (where Reliance Jio is taking leadership) and VoIP (Skype, Viber, WhatsApp). We believe this will pick up even more once the data networks become more robust and fixed price plans for data become more abundant. Cannibalization of voice revenues and pricing decline in the data segment will only be exacerbated with the entrance of Reliance Jio.