The data revenues for the Indian telcos are likely to grow to Rs 95,500 crore at a Compounded Annual Growth Rate (CAGR) of 21% over the next 5 years, according to ICRA, which also said that data revenues are expected to contribute 34% to the total mobile service revenues from the current levels of around 20%.
“Over the last 5 years, data revenues for the ICRA Sample of telcos traced a strong CAGR of 54% from Rs. 3,200 crore in FY2012 to Rs. 27,450 crore in FY2016. Nevertheless, when compared to international levels, the data revenues as proportion of total mobile service revenues in India are significantly lower, presenting a strong growth driver,” Harsh Jagnani, AVP – Corporate Sector ratings, said.
Over the years, the revenue stream of the telecom companies (telcos) has evolved from being largely driven by voice services to one with a substantial mix of data revenues. High speed data services were started in India post the 2010 auction of data-centric spectrum. With growing data requirement, the data service technology has evolved from 2G to 3G and now to 4G, by way of LTE (Long Term Evolution) technology.
As on December 2015, the broadband subscribers (3G+4G) comprised 46% of the total data subscribers for the ICRA Sample, as against just 8%, as on June 2012. Now with 4G rollout, ICRA expects the proportion of mobile broadband subscribers (3G and 4G) in the total data subscribers to increase further.
In order to assess future growth potential of data revenues in India, ICRA has analysed data revenue trends in other markets. For this, ICRA has analysed 16 telcos covering seven different geographies from both mature as well as emerging markets. The total subscriber base of these telcos stood at 2,179 million as on December 2015, constituting 31% of the total mobile subscribers in the world. Most of these markets have a longer history of mobile data services.
“Data revenues constitute 19% of the total revenues for ICRA Sample of Indian telcos, which is significantly lower than the 40-50% seen for mature international markets and 20-30% seen for emerging markets. India is 3-5 years behind the developed markets in terms of roll out of data services and its penetration to a meaningful extent. A majority of the developed markets witnessed rollout of 3G services during the period 2004-2006. In these markets, 3G services evolved and matured over 7-9 years before the rollout of 4G/LTE services. In China 3G was rolled out in 2009 and within five years, 4G was rolled out. In India, 3G rollout began in 2011 and is still in early stage, while the 4G network rollout has started,” Jagnani elaborated on the differences in data service revenue generation for Indian and international telcos.
Compared to China too, the scale of data services is much smaller in India. In China, the total data subscribers stood at 808.6 million, constituting 62% of the total subscriber base as against 163 million subscribers (27%) for ICRA Sample of Indian companies.
China has also witnessed a significant migration from 3G to 4G in a limited period. Within two years of rollout, the 4G subscriber base stood at 415 million subscribers.
Jagnani highlights the key difference between the two markets, “The data usage per subscriber in China as of December 2015 stood at around 320 MB, while the same was 600 MB for ICRA sample. This difference is primarily on account of the discounted/free MBs offered by Indian telcos to attract usage among the subscribers. However, the data realisation in China is more than three times that of the ICRA Sample of Indian telcos. The comparison of India with other geographies including China points to a robust growth outlook for data services in India, but the path for India will be different. Given the high competitive intensity in India and risks of aggressive pricing, India will see data growth at low realisations.”