Ever since Reliance Jio stormed into the telecom arena, a heated battle for supremacy among telecom giants such as Airtel Bharti and Vodafone Idea has been raging in India. With India rapidly becoming the world’s fastest-growing nation in terms of population, mobile users, and internet enthusiasts, these telecom providers are going all out to entice customers with mind-blowing plans. But here’s the plot twist: the cutthroat competition in India’s telecom industry and the stagnation of mobile subscriber growth has taken an unexpected turn, shifting the focus to international roaming services.
Yes, you heard it right! The three major telecom powerhouses are facing a significant hurdle in terms of future growth, primarily due to the stagnation of subscribers. Hence, they are now leaving no stone unturned to transform their high-value prepaid customers into esteemed postpaid customers, all to keep their revenue growth intact.
Before delving deep into this shift, let’s take a closer look at the current state of India’s telecom market and the growth of subscribers over the past six years.
India’s Telecom Subscribers’ Growth Stagnates
India’s telecom market is undeniably massive, driven by its booming population and increasing adoption of mobile phones and internet services. However, the growth of overall telecom subscribers and wireless telecom subscribers, aka mobile phone subscribers, has reached a plateau in recent years. With over 85% of the population already using mobile phones, the potential for further expansion within this segment has become limited.
The Indian telecom industry has hit a roadblock when it comes to subscriber growth, and the numbers speak for themselves. From March 2017 to March 2023, the number of telecom subscribers in India declined a 1.86%, from 1,194.58 million to 1,172.34 million. It is worth noting that a staggering 97% of these subscribers are wireless subscribers.
Similarly, the number of mobile phone subscribers between March 2017 to March 2023 declined a 2.24%, from 1170.18 million to 1,143.93 million. Although there were a few quarters that saw positive growth, the overall growth remained stagnant in the single digits, with no surge exceeding the enticing 5% mark. This was evident as many quarters either recorded no growth or negative growth.
These figures raise questions about the underlying factors causing this stagnation. Is the market reaching saturation? Are intensified competition and changing consumer preferences playing a role?
In light of these statistics, which show the growth of mobile subscribers has almost reached a standstill, the telecom powerhouses have realized that they have hit a roadblock in their quest for more subscribers and revenue. This realization has prompted them to explore alternative strategies. One such strategy involves targeting a specific market segment: postpaid customers who frequently travel internationally.
Postpaid customers are often considered high-value due to their higher usage, longer-term commitments, and potential for additional services such as international roaming or corporate plans. By capturing this segment, telecom providers can tap into a more lucrative customer base to boost their average revenue per user (ARPU) figures.
The numbers from Q4 2022 paint a compelling picture of the industry’s pursuit of higher ARPU. The overall Monthly Average Revenue per User (ARPU) for wireless services increased an impressive 2.79% QoQ and 23.63% YoY, to Rs 141.14.
Zooming in on the prepaid and postpaid battle, we witness a thrilling tug-of-war for dominance in the quest for higher ARPU figures. The prepaid ARPU per month increased a robust 3.6% QoQ and 27.5% YoY, to a dazzling Rs 137.71 in Q4 2022. On the flip side, the postpaid ARPU per month encountered a slight dip of 5.3% QoQ and 13.3% YoY, to Rs 182.30 in the same period.
These statistics further emphasize the telecom providers’ strategic shift towards targeting postpaid customers, particularly those who frequently travel internationally. By doing so, they aim to not only boost their revenue from each postpaid customer but also capture a greater share of the international roaming market. The absence of significant tariff hikes further intensifies the competition, prompting these companies to adopt innovative strategies to attract and retain high-value postpaid customers.
All three telecom providers, Jio, Airtel, and Vodafone Idea, have witnessed significant growth in their Average Revenue per User (ARPU) figures for Q4 2022 (Oct-Dec 2022). Interestingly, Airtel outperformed Jio in terms of average revenue generated per user during this quarter. Jio experienced an impressive 17.5% YoY growth in its ARPU, reaching Rs 178.2. Airtel, on the other hand, reported an 18.4% YoY increase in its ARPU, reaching Rs 193. Vodafone Idea generated an average of Rs 135 from each of its users, witnessing a YoY increase of 17.4% in CY Q4 2022.
However, the quarterly growth rate in Average Revenue Per User (ARPU) has been slowing down for the last few quarters. Since the beginning of Q1 2022, the quarter-over-quarter (QoQ) growth rate has only been declining. Taking a broader view, the trend of the growth rate in ARPU quarter over quarter since Q1 2019 paints a rollercoaster ride.
It indicates that stagnating growth in subscriber count is not the only challenge for all the leading telecom providers in India.
Airtel and Jio Target Vodafone Idea’s Postpaid Customers
To enjoy a larger market share and drive average revenue per user (ARPU) growth, Reliance Jio and Bharti Airtel go head-to-head in their quest to capture the postpaid customer base of Vodafone Idea (Vi). While Vi struggles to safeguard its existing user base due to its financial strain, both Jio and Airtel are strategically positioning themselves to seize a greater portion of the postpaid market.
Despite all the challenges and fierce competition, Vodafone Idea has been enjoying a stronghold in the postpaid segment, boasting a considerable number of postpaid customers. Jio’s postpaid customer base comprises less than 5% of its massive 430 million user base, while Airtel’s postpaid customers make up approximately 6% of its total clientele. Airtel’s commitment to serving this select group is evident, albeit with room for further growth.
In contrast, Vodafone Idea stands tall as a formidable contender in the postpaid arena. Nearly 10% of Vi’s subscriber base of 124.82 million users have chosen to embrace the exclusive perks and privileges of postpaid services.
Besides setting up eyes on Vi’s postpaid customer base, both Airtel and Jio are also pushing their pre-paid customers to post-paid plans that are bundled with many additional benefits.
As international travel gradually resumes after the Covid-19 pandemic, Airtel and Jio are capitalizing on this opportunity to convert their valued prepaid customers into postpaid subscribers. They are accomplishing this by offering attractive and user-friendly international travel packs that provide both competitive pricing and enhanced convenience and flexibility.
Last year in December 2022, Airtel launched ‘Airtel World Pass’, a comprehensive travel pack covering 184 countries. Jio, the undisputed titan, went a step further by offering features like in-flight calling and data packs tailored for globetrotters at just Rs 499, Rs 699 and Rs 999. Jio also offers “International Wi-Fi Calling,” allowing users to stay connected with their loved ones, colleagues, and important contacts in India through Wi-Fi calls from any part of the world. This Facebook-backed telecom giant has been launching some jaw-dropping postpaid plans since 2020, in order to attract high-value customers from its competitors.
“The new international travel packs have helped us attract new postpaid users as well. This customer segment looks for convenience, security and flexibility, which the new international roaming packs provide,” an Airtel spokesperson told ET.
Vodafone Idea Strikes Back
In response to the aggressive strategies of Airtel and Jio, Vodafone Idea unveiled unlimited international roaming packs in 29 countries, encompassing the world’s top travel destinations. Vi’s ‘Truly Unlimited Data and Calls‘ international roaming plans start from just Rs 599 and go up to Rs 4,499.
While pricing alone may not be the sole factor influencing postpaid customers, Airtel and Jio have an opportunity to gain an advantage by focusing on flexibility, convenience, and appealing pricing in international roaming services, potentially enticing customers away from Vi’s postpaid customer base.
In addition to the stagnated growth in telecom subscribers, telecom operators are facing a double whammy of challenges: the sluggish transition from 2G to 4G upgrades and the frustrating delay in 5G monetization. These roadblocks have forced operators to think outside the box and find new ways to boost their ARPU figures. Analysts suggest that by offering value-added services, telecom companies can entice prepaid customers to upgrade to postpaid plans, considering the narrowing gap between prepaid and postpaid pricing.
Unlocking revenue potential
In the fierce battle for postpaid dominance, international roaming services have taken the spotlight. But India’s telecom operators are not stopping there. They are also getting creative with pricing strategies in entry-level packs and tapping into the immense potential of mobile broadband (MBB) usage to drive revenue growth. Upgrading customers to high-speed MBB plans has become a catalyst for boosting ARPU in the short term, especially with the anticipated delay in tariff hikes until mid-2024.
The growth of broadband subscribers in India has been nothing short of remarkable in the last eight years. According to the Telecom Regulatory Authority of India (TRAI), between March 2015 and 2023, the number of broadband subscribers in India surged by a staggering 753.4%, skyrocketing from 99.20 million to 846.57 million. It is worth noting that a majority of these subscribers are accessing broadband services through mobile devices. This exponential increase signifies a positive trend in the adoption of broadband services, as an ever-increasing number of users recognize the transformative power of high-speed connectivity.
While the current focus is on expanding broadband and mobile broadband (MBB) services, JM Financial believes that tariff hikes will be the real game-changer. These tariff hikes will not only contribute to long-term ARPU improvement but also unveil the true potential of 5G monetization. So, buckle up, as the telecom industry gears up for an exhilarating ride of innovation, competition, and growth.
Tariff hikes have the potential to significantly impact the telecom landscape by boosting revenue and profitability for operators. By adjusting pricing plans and introducing higher-value packages, telecom companies can enhance their ARPU figures and drive sustainable growth. This strategic move allows operators to maximize their returns on investments in network infrastructure, technology upgrades, and spectrum acquisition.
In a nutshell
In an era where every customer counts, telecom giants are leaving no stone unturned in their quest for revenue growth. The conversion of prepaid customers to postpaid plans is now at the forefront of their strategies, offering a win-win situation for both telecom operators and customers seeking a more premium and feature-rich mobile experience.
However, it’s also important to understand that prepaid services still play a significant role in the Indian market. Prepaid services cater to a large segment of price-sensitive customers and those who prefer flexibility and control over their usage. Therefore, telecom providers must strike a balance between their prepaid and postpaid offerings to cater to the diverse needs of the Indian consumer base.
But who will eventually emerge victorious in this fierce battle for postpaid dominance? Will it be Reliance Jio, Bharti Airtel, or perhaps a surprise contender? And what other creative tactics will they employ to entice customers and unlock their revenue potential? We need to keep a close eye on the fast-changing telecom landscape in India to get the right answers to these questions.
In the intense battle for postpaid dominance, which company do you believe possesses a competitive advantage over its rivals and is likely to emerge as the victor? We invite you to share your thoughts and opinions in the comment section below!
