Reliance Jio's freebies cause Airtel, Idea to lose revenue
Freebies gallore, the telecom sector has witnessed depressing Q4 financials. Airtel and Idea’s data revenues plummeted in Q4FY17 as both incumbents also posted depressing revenues in comparison to the same quarters last year. Idea Cellular lost 6.4 million data subscribers while Airtel's mobile data revenue declined 14.6% in Q4.
-- Telcos’ data revenues drop on the back of free services.
-- Idea lost 6.4 million data subscribers in Q4FY17
-- Bharti Airtel’s mobile data revenue declined 14.6%
'Free data' became the most sought after bargaining chip for the telecom companies like Bharti Airtel, Idea Cellular and Vodafine India in an attempt to keep subscribers from porting their way to Reliance Jio.
Reliance Jio, as admitted by telecom companies, has caused damage to the financial results of Bharti Airtel and Idea Cellular in the last two quarters of financial year 2017.
Airtel posted a consolidated net profit of Rs 373 crore in fourth quarter ended March 31, 2017, lower by 71.7% in the corresponding period of the previous year while Idea recorded a net loss of Rs 327.9 crore in three months to March 31 as against Rs 451.9 crore profit in the same period last year.
Both companies posted losses and spared no effort in blaming the new entrant for its downfall.
“The Indian wireless industry witnessed an unprecedented disruption in the second half of financial year 2016-17 (FY17) on account of free voice & mobile data promotions by the new entrant in the sector," Idea Cellular said.
"The October to April 2017 interval can be best described as ‘Period of Telecom Discontinuity,’ permanently changing mobility business parameters,” Idea Cellular said on May 13.
Even telecom major – Airtel’s MD and CEO, Gopal Vittal said, “The sustained predatory pricing by the new operator has led to a decline in revenue growth for the second quarter in a row."
This was a repeat of third quarter result announcements when both companies blamed Reliance Jio’s free services for their poor performance.
In Q3, Idea Cellular posted a net loss of Rs 385.5 crore while Airtel’s net profit declined 55% to Rs 503.7 crore.
“The impact of free extended promotions was even more pronounced on mobile data business,” Idea Cellular said.
The company lost 64 lakh data subscribers in Q3FY17 and overall mobile data customer base receded to 4.22 crore.
Though its per subscriber data usage went up 36.2% to 957 MB as against 703 MB in Q3FY17 Idea said that its data ARPU (Average Revenue Per User) remained flat at Rs 110 as against Rs 111 in Q3FY17.
In an effort to retain its existing mobile subscribers, Idea was forced to reduce on sequential quarterly basis in Q4FY17, its voice rate by 12.5% to 25.9 paisa/min (vs 29.6 paisa in Q3FY17) as also steeply drop its mobile data rate by 27.6% to 11.5 paisa/MB (vs 15.9 paisa in Q3FY17).
The company said that the mobile data volume elasticity was negated by massive mobile data rate drop of 27.6%, though overall mobile data volume grew by 16.7% (vs Q3FY17) to 127 billion MB (2G+3G+4G).
“The Non-Voice Revenue’ (including data) contribution to the ‘overall service revenue’ fell to 24.9% as mobile data revenue contribution declined to 18.3%,” Idea added.
Airtel’s mobile data traffic grew 56.3%, however, the company’s mobile data revenue fell 14.6% to Rs 3,686 crore.
“Mobile Data revenues now contribute to 21.5% of Mobile India revenues vis-à-vis 23.3% in the corresponding quarter last year,” Airtel said.
“Data ARPU decreased by 17.3% to Rs 162 from Rs 196 in the corresponding quarter last year. Data realization per MB for the quarter was at 12.20 paise as compared to 22.87 paise in the corresponding quarter last year,” Airtel said.
Total data ARPU decreased by 4.5% to Rs 185 in FY17 from Rs 194 in the previous year.
The company concentrated on its spectrum bands across the country with the Telenor merger and the Tikona’s 4G business which is still underway.
“Acquisition of Telenor operations and Tikona’s business further strengthens the Pan India spectrum footprint,” Airtel said.
After its merger with Telenor, the company’s total subscriber base increased to 273,648 as against 265,853 in December 2016 and will add 43.4 MHz spectrum in the 1800 MHz band.
“We have added significant data capacities by rolling out +72K incremental Mobile Broadband base stations vs last year,” the company added.
Bharti Airtel and Idea Cellular estimate that the era of freebies is likely to be over for customer acquisition as Reliance Jio has started charging its subscribers.