TRAI’s (Telecom Regulatory Authority of India) latest telecom subscription report for 31 March 2017 is out, and it falls in line with some of the trends we have been observing for the past few quarters. The Indian telecom industry’s wireless segment has been experiencing accelerated growth for many months now. The launch of Reliance Jio shifted the nation into the 4G era and started a price war among competitors. This, along with the increasing smartphone penetration has triggered a second mobile revolution in India of late.
A closer look at the numbers can provide us with some valuable insights about the current, and future state of the industry.
Wireless Telecom Industry Revitalized By Reliance Jio
Once again, the number of mobile subscriptions in India has registered impressive growth. In Q1 2017, TRAI noted 1170.18 million mobile subscriptions compared to 1127.37 million subscriptions in Q4 2016. 42.81 million new mobile subscribers have added in Q1 2017 alone, at a 3.8% QoQ (Quarter on Quarter) growth rate. While this is quite a bit lower than the 7.8% growth rate in the previous quarter, it is still impressive.
The situation was not quite as desirable just a year ago. In Q1 2016, there was a total of 1033.63 million subscriptions nationwide. This number grew only by a paltry 0.14% in Q2 2016, pointing towards stagnating growth. Q3 2016 was slightly better, registering a modest 1.4% QoQ growth rate to come in at 1049.74 million subscribers in India.
However, the industry was completely turned on its head by the emergence of Reliance Jio. The launch of Reliance Jio in September of 2016 shook up the incumbent service providers to their very core. The ultra-fast 4G speed coupled with the free introductory offers led to people adopting Jio’s network in masses. This is self-evident from the ensuing growth rates. In Q4 2016, the number of wireless subscriptions shot up to 1127.37 million at nearly 7.4% QoQ growth rate!
It is clear that the industry has come a long way in the past year. The total number of subscriptions grew to 1170.18 million at a remarkable 13.2% YoY growth rate.
Reliance Jio Continues to Cannibalise Market Share
While Reliance Jio’s emergence has revitalised the stagnating telecom industry, it also spells trouble for incumbent telecom providers. In Q1 2017, Reliance Jio continued to garner market share at a rapid pace. Reliance Jio’s market share now stands at 9.29%, a significant increase from 6.40% last quarter. Since its launch, Reliance Jio’s market share went from 1.52% in Q3 2016 to 9.39% within the space of few months!
Of course, Reliance Jio’s burgeoning market share has to come at the expense of its rivals. From Q3 2016 to Q4 2016, during Reliance Jio’s initial launch window, the biggest losers were industry leaders Bharti Airtel and Vodafone. Airtel’s market share depreciated by 1.18%, while Vodafone went down by 0.96%. Nevertheless, both managed to retain the 1st and 2nd spot respectively. Another big loser was Tata, who ceded 0.74%. Surprisingly, Idea managed to hold strong against Reliance Jio’s onslaught, and only lost 0.13% market share.
From Q4 2016 to Q1 2017, things settled down a bit. Airtel, Vodafone and Idea only experienced minor losses in market share, nothing as severe as in the previous quarter. Tata, Telenor and Aircel continued their gradual downward spiral.
However, over both quarters, Reliance Jio’s growth continued unabated. Some of the growth is being fueled at the expense of Reliance themselves. Reliance is continually losing market share, from 8.30% in Q3 2016 to 7.68% in Q4 2016 to 7.14% in Q1 2017. This is due to many of Reliance’s existing subscribers migrating to the 4G only Reliance Jio network.
VLR Data Paints An Unflattering Picture For Reliance Jio
For all its growth and expansion over the past few quarters, Reliance Jio continues to suffer in one major aspect. VLR data is a measure of the active wireless subscribers on any given network. This is an important metric, as it gives us an idea about the network’s user retention potential. This is one metric where Reliance Jio has lagged behind rivals, and the gap is only widening.
During its launch window of Q3 2016, Reliance Jio started off strong with a 95.06% active subscriber base. Airtel and Vodafone also had impressive numbers with 96.83% and 94.84% respectively. Idea was the clear leader with 104.26% of active subscribers (this is due to a large number of in roamers on the Idea network). However, things took a turn for the worse in Q4 2016, when Jio’s proportion of active subscribers fell to 79.68%. Meanwhile, Airtel and Vodafone maintained healthy numbers of 97.00% and 94.54%, respectively. Idea remained the clear leader with 100.83% active subscribers. This was during a period of heavy congestion on Jio’s network due to the influx of new users, leading to slower speeds and call drops. This can explain why abandonment levels on Jio’s network were higher.
This trend continued into Q1 2017, and Jio’s proportion of active subscribers fell to 73.38%, while Airtel, Vodafone and Idea’s numbers remained virtually unchanged. This coincided with the Jio’s announcement of the proposed shift to a paid subscription model, which likely caused many users to defect from the network.
While Reliance Jio continues to march forward in terms of market share, its poor VLR percentages indicate that user retention remains an issue. This is a big problem, which is sure to affect their profitability significantly. Now, with the paid subscription model in full effect, Jio may find itself lose even more customers in the upcoming quarter. Interestingly, in contrast, Reliance has reportedly clocked the highest ARPU in the industry. According to a recent study, Reliance Jio ARPU has clocked at $4.7 in March, which is almost 50% higher than its arch rivals.
In the upcoming quarters, it would be interesting to see how the market share of Reliance Jio swells. But the big question would be, can Reliance Jio maintain the current ARPU considering the lowering active subscribers’ percentage?