April, May data show sharp decline in India’s wireless telecom growth

After entering a hyper growth face, India’s telecom market seems to be finally cooling off, with subscriber addition numbers showing a sudden drop off in April and May.

The net wireless addition for the month of May, the latest for which data is available, was just 13.5 million, down from 15.34 million in the previous month. Compare this to the 2009 monthly average addition of around 19 million subscribers.

In fact, the May figure is the lowest monthly addition in India’s telecom history since June 2009, a period of two years. It may very well go down as the end of the high-growth era begun in early 2009 when the first of the ‘new operators’ entered the market.

2009 and 2010 saw the Indian telecom market catch fire — ignited by the entry of virile, hungry-for-growth new GSM operators in each license area.

Reliance, Tata, Uninor and Aircel, along with CDMA competitor MTS, began to stretch the limits of how low tariffs and schemes would go in what was already known as the cheapest telecom market in the World.

As a result, what used to the industry total for a month, 2 to 3 million subscribers, suddenly became the tally of a single player. Reliance Communications, which launched its GSM in early 2009, was grossing 5 million subscribers a month in early 2009. It failed to keep up the momentum as the biggest reason for its spurt — free talk time — wound down after the first three months.

The phenomenon was repeated in the second half of 2009, when Tata launched its GSM service, the Tata DoCoMo. Towards the end of 2009, the operator was adding almost, though not quite, 4 million subscribers a month, despite being present only in around half of the markets.

Like Reliance, a large part of the attraction of Tata DoCoMo too was dirt cheap call rates. The operator set off the ‘pay per second’ revolution, offering to charge just one paise per second (coming to around 54 paise per minute on average) in a market where the prevailing rates were Rs 1 to 1.5 per minute.

This was matched by Reliance which, at one time, replaced all its plans with a single one — all calls at 50 paise per minute — leading to a stock market sell-off of telecom stocks. It then went further and introduced a one paisa per second scheme and a Rs 1 per three minute scheme.

It was then the turn of Uninor, which launched in late 2009, offering 1 paisa per second and assured discounts of 10-50% on top. Interestingly, the ‘discounts’ were not a marketing gimmick, but something that subscribers actually got.

The final episode of tariff war, as of now, was written just a month ago.

Russian operator MTS, eager for some action, announced it was converting its base call rate to 30 paise per minute. After paying 20 paise per minute to the operator on which the called subscriber was present, that left MTS with just 10 paise for every minute one of its subscribers talked — a record yet to be broken or even matched in India’s famed telecom wars.

Not surprisingly, subscriber addition numbers went through the roof, as consumers — who once considered themselves loyal to existing brands like Airtel and Vodafone, could no longer ignore the lure of the cut-throat rates.

Many started buying new connections from the new operators as and when they launched, ending up with four or five SIM cards. Unfortunately for many, they soon realized that the cheap rates came at a price — of ubiquitous, failsafe network coverage.

As new operators tried to cover more and more area under their signal, many of the subscribers started dropping off. Operators too started writing off many of their subscribers after TRAI demanded to know how many of them were actually active, late last year.

The latest subscriber numbers are perhaps a reflection of the trend. Even as the total addition came down to the lowest level in two years — 13.5 million — additions by the traditional players like Bharti, Vodafone and to some extent, Idea, have remained stable.

As a result, unlike late 2009 and early 2010, when it was the new operators that dominated the charts, the May chart shows the come-back of the big three, along with Reliance.

Bharti and Vodafone, which accounted for 12% and 10% of the total subscriber additions during September of last year, accounted for nearly 37% in May this year. Tata, which used to account for 23% of the total additions in October 2009, its heyday, has fallen back to just 2.9% in the latest tally, for May.

The only exception, perhaps, is Reliance, which has maintained a consistent share of between 14%-17% throughout. Uninor too has maintained a healthy share of around 6-10% over the last one year or so.

Meanwhile, India’s total additions rose consistently from June 2009 to March 2011, undergoing a period of stability at around 18 million subscribers per month for around six months, before beginning its rise again.

The peak was hit in November last year, with close to 23 million additions. It has been consistently downhill from there, hitting 15.3 million in April and now, 13. 4 million in May. Some analysts see it as the end of India’s hyper growth phase in telecom, while a fewer others see it as a temporary blip.

With 15 connnections for every 10 adults in the country, perhaps India is indeed moving to a different phase of growth.


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