The recent news about the move to acquire wireless infrastructure assets of Anil Ambani’s Reliance Communications by Reliance Jio Infocomm continues to pave the way for consolidation in the Telecom sector in India. Consolidation in the industry has forced smaller players such as Telenor, Sistema, Tata Teleservices, Videocon to exit the market. Read our article on Tata Teleservices Succumbs to the Pressure for Survival in the Telecom Industry – How Many More to Go? The number of companies in the telecom space have now reduced and currently Bharti Airtel, Vodafone-Idea and Reliance Jio continue to battle it out for garnering higher and higher market share.
The number of telephone subscribers in India slightly declined from 1,206.71 million at the end of Sep-17 to 1,201.72 million at the end of Oct-17, thereby showing a monthly growth rate of -0.41%. The urban subscription declined from 704.89 million at the end of Sep-17 to 697.54 million at the end of Oct-17, however, the rural subscription increased from 501.82 million to 504.19 million during the same period. The monthly growth rates of urban and rural subscription were-1.04% and 0.47% respectively during the month of Oct-17.
The case for growth in internet data was strong as the number of broadband users stood at 340.26 million at the end of October 31, 2017, against 218.42 million at the end of October 31, 2016.
Bharti Airtel continues to lead the market with a 29.80% market share, taking total subscriber base to 282.04 million. India’s total mobile subscribers base as on September 2017 was 946.66 million. Airtel was followed by Vodafone India having 207.44 million subscribers and Idea Cellular having 190.15 million subscribers at the end of September. Reliance Jio’s market share stood at 13.58% with 128.58 million subscribers and MTNL’s stood at 0.38% with over 3.6 million subscribers as of August 2017.
The battle to garner market share for telecom companies reflected in their poor performance on the profitability front. Bharti Airtel’s net profit for the July-September quarter fell sharply by 77 percent from a year earlier. The net profit for the second quarter was whittled down to a mere Rs.3.43 billion from a robust Rs.14.61 billion in the July- September quarter of 2016-17. Airtel’s second quarter net profit is its smallest in 19 quarters and its sixth consecutive drop in quarterly profit.
Idea Cellular reported a consolidated net loss of Rs.11.06 billion for the quarter ended September 30, 2017. The company said the seasonally weak quarter was marked by high competition, regulatory changes and consolidation in the industry. Idea Cellular had reported a loss of Rs.8.14 billion in June quarter and a profit of Rs.915 million in the corresponding quarter a year ago.
Indian telecom operators have been hit by the entry of Reliance Jio which has been offering free voice calls and data at dirt-cheap prices. The sector faces further price pressure after Telecom Regulatory Authority of India (TRAI) recently cut the fee operators pay each other for calls made from one network to another.
The telecom regulator has sought views on the new telecom policy being formulated by the government to attract $100 billion worth of investments in a sector that’s going through consolidation amid intense competition. As part of the consultations for the National Telecom Policy-2018, the Telecom Regulatory Authority of India has set objectives including leapfrogging into the top-50 nations in terms of network readiness, communication systems and services, which will align with the government’s agenda of rising up the ranks in ease of doing business in the telecom sector.
Bharti Airtel stock has risen by 66% in the year 2017 while Idea Cellular rose by 39% in the same time period. The rise in stock prices of telecom companies is indicative of the consolidation in the sector as opposed to the conventional rise in revenues and profitability that drives stock prices higher. Survival of the fittest seems to be a long term scenario for the Telecom sector in India.