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After data-led growth amid pandemic, tariff hike, 5G expected in 2021

Accentuated Internet data usage amid the novel coronavirus pandemic turned out to be a silver lining for the financially-stressed telecom sector of India.

Internet of Things

Internet of Things

New Delhi, Dec 24 Accentuated Internet data usage amid the novel coronavirus pandemic turned out to be a silver lining for the financially-stressed telecom sector of India.

Although the industry witnessed sharp erosion in its subscriber base initially during the lockdown, March-April, the work-from-home trend along with webinars and usage of video streaming platforms came as a boon for the sector.

The Director General of the Cellular Operators Association of India (COAI), S.P. Kochhar said that many telecom players have benefitted from a surge in the traffic of data and voice, due to which the telecom sector is performing well compared to other infrastructure sub-sectors.

He said that in the first quarter of this fiscal, customer spending on voice and data services increased 16.6 per cent year-on-year, amounting to Rs 35,642 crore.

As of October, India's wireless subscriber base stood at over 115 crore. Reliance Jio is the largest telco with a subscriber base of over 40.63 crore.

Bharti Airtel's subscriber base was nearly 30.03 crore, while Vodafone Idea has witnessed erosion in its user numbers and as of October-end it stood at over 29.28 crore.

In terms of financial results, growth in data and voice usage supported the revenue growth of the companies.

Jio reported a near three-fold rise in its standalone net profit for the July-September quarter at Rs 2,844 crore. Jio's revenue from operations during the period under review rose 33 per cent to Rs 17,481 crore.

Bharti Airtel narrowed its consolidated net loss for the July-September quarter to Rs 763.2 crore, from Rs 23,044.9 crore reported during the corresponding period a year ago.

The net loss of the company narrowed down significantly due to a 20.7 per cent growth in its total income at Rs 25,933.9 crore.

The financial stressed Vodafone Idea also narrowed its consolidated net loss for the quarter ending September to Rs 7,218.2 crore from a consolidated net loss of Rs 50,921.9 crore during the corresponding period last fiscal.

Going into 2021, the next big thing for the telecom sector, market players say is the fifth generation (5G) connectivity, which has been delayed amid the pandemic.

Kochhar said that 5G launch is expected in the later part of 2021 and the technology is poised to open up a plethora of possibilities in terms of business models, better education, healthcare, smart cities, smart manufacturing, intelligent logistics, and overall, enhanced lifestyles for one and all.

Anku Jain, Managing Director of MediaTek India observed that 2020 has set the stage for 5G to go mainstream.

"2021 will see a bigger trend towards improved remote work capabilities with 5G SoCs taking smartphone and smart device experience to the next level," he said.

He said that the pandemic has acted as a great catalyst expediting digitalization and faster adoption of transformative technologies like Artificial Intelligence, AIoT, Robotics and Cloud Computing among others.

Kochhar said: "With the focus on Atmanirbhar Bharat, revenue from the telecom equipment sector is expected to grow to $26.38 billion by 2020. The number of internet subscribers in the country is expected to double by 2021 to 829 million and overall IP traffic is expected to grow four-fold at a CAGR of 30 per cent by 2021."

The industry, however, rues its financial stressed situation and still awaits support from the government in terms of rationalisation of levies.

The COAI DG, said: "Industry continues to be financially stressed and we seek the support of the government in enabling the industry to truly play its role as an enabler of horizontal growth and a boost to the nation's economy."

He added that some of the top challenges faced by our member TSPs today are those related to liquidity, rationalization of the regulatory levies, AGR issues, spectrum pricing, Right of Way (RoW) rules, and cell tower radiation.

The long-standing demand of the lower spectrum prices has again been reiterated by the industry.

A week back, the Union Cabinet approved the next spectrum auction of a total of 2251.25 MHz, with a total valuation of over Rs 3.92 lakh crore.

In response to the announcement of spectrum auction, the COAI DG had said that while the government has addressed the requirement for more spectrum, lower reserve prices would have provided additional resources for network expansion to the Telcos.

"High reserve prices in past auctions have resulted in large amounts of spectrum remaining unsold. We hope the Govt. will take additional measures to boost the financial health of the industry, which is the backbone of a digitally connected India," he said.

The upcoming year is also likely to bring about rise in tariffs according to market analysts.

Although, tariffs have somewhat increased this year and the rise in data usage has also led to the rise in the Average Revenue Per User (ARPU) of all the telcos, for the industry to be sustainable further hike in tariffs is expected in the near future.

Kochhar was of the view that the recent growth in ARPU is not adequate and it needs to grow much more with a higher growth rate for the telecom operators to break even and support the financially stressed telecom sector.

According to ICRA, telecom service providers are expected to bring about the next round of tariff hikes over the next one or two quarters which is likely to drive revenue growth in the next financial year.

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