What does Growth in Mobile Data Mean to Indian Telecom Operators and Customers?

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Telcos around the world are witnessing huge data traffic volumes thanks to smartphone boom and growing adoption of OTT (Over-the-top) services by consumers. However, unfortunately for operators the data revenues are not showing the same growth trend. At the same time to maintain an edge they need to keep upgrading their networks - 2G to 3G to 4G! Commissioning network infrastructure that supports high speed data demands huge capital investments and operational expenditure.

While global mobile data traffic increased 40 times from 2008 to 2013, the revenues associated with it barely tripled (Exhibit 1) - McKinsey, July 201410082014_17:44:34

With McKinsey's observation in mind, we consolidated the numbers for two leading Indian operators Airtel and Vodafone to understand the situation better. Here is what we learnt:

  1. In the case of Airtel while the data usage grew a whopping 367% in a two year period between March 2012 to March 2014, the data ARPU grew by only 79.5%. Prior to March 2012, data usage details were not published by Airtel.
  2. In the case of Vodafone the data usage over the same period grew by 478% and the data revenues grew by 37.5%. Note that in case of Vodafone we used total data revenues as we could not locate data ARPUs.

Here are two interactive charts that show the growth trends of Airtel and Vodafone:



The less growth in revenues is possibly due to the fact that none of the operators anticipated such a huge growth in data. The worrisome trend now is, their cluelessness has lead them to come up with strange demands like charging for OTT services.

There is certainly a better way out if operators understand customers and their demands better.

Customer Perception

McKinsey research suggests that after price, data has become the customer’s most important buying consideration. In fact, if we remove price from the equation, data volume and speed contribute about 40 percent of the remaining weight in a consumer’s purchasing decision. This data preference exists across both developed and emerging markets. It's also stated that consumers place less importance on speed than volume with the volume being five times more important than speed. Next comes the operator's brand which gives a perception of the network quality and effect.

According to a recent Ericsson ConsumerLab Report, Indian mobile users judge the quality of their network based on how often the internet connection drops and how quickly web pages load. Other top perception drivers include time taken to download apps, indoor coverage, and time taken to transfer media, such as videos and pictures via chat apps.


Indian consumers normally are value conscious and this is why operators are competing on pricing. McKinsey suggests that in a mature/commoditized market with similar types of customers, operators need to implement a “market repair” (i.e., raise prices to more accurately reflect data’s value) and/or reinvent the data experience, push new plans that will increase penetration, and increase usage beyond current caps.

McKinsey's multi-country conjoint analysis profiles customers into six different segments as shown below:


Ideal Data Packs

Airtel's KPI (Key Performance Indicators) spreadsheet(s) indicate that average data consumption per consumer comes to less than 500 MB. This is substantiated by McKinsey research which shows that most of the people in all of the countries studied were satisfied with plans that offered no more than 1 GB of data a month. This means Indian operators can aggressively price the data packs offering less than 1 GB data catering to mass market (subject to market repair mentioned above) and start competing in high volume segment.

Other Growth Measures

In addition to profiling the customers and offering reasonable data packs, Indian operators can look at other options like shared data plans suitable for current multi-device homes and provide design your own plan like options (Eg. Airtel MyPack, Vodafone Red) etc.

The Way Forward - Our Take

It is now evident that data is the sole driver for big growth in the telecom industry and no operator can choose to ignore this fact. Apart from few major operators 3G network in India is still patchy. Therefore going forward any operator who plans to grow big needs to ensure that end customer gets superior data experience. As indicated earlier this will necessitate good expenditure and hence cell site upgradations must be done in a phased manner. A good strategy here can be building a database of the top traffic (and hence income) cell sites and upgrade their capacity first. All new networks must be based on the Self-Organized-Networks (SON) concept which can ensure optimum performance during traffic surges or technical glitches. SON also brings down operational costs by reducing human intervention in network design, building and operation.

Good pricing strategy wherein the operators lose less money is of prime importance. Customers just love discounts! E-commerce in India is a standing example of how discounts and promotional offers can win customers and hence contribute to the growth. No bleeding money allowed though - so discounts need to be Smart! This is where surprises are welcome!


  1. Monetizing mobile: Making data pay by David Arcelus, Miguel Fonseca, Joao Leonardo, José Miguel Novo, Pierre Pont. McKinsey & Company, June 2014 - Document available on Registration at McKinsey (subject to approval)
  2. Ericsson ConsumerLab: Network Performance shapes smartphone behavior in India


We thank McKinsey & Company for allowing us to use findings of their research.


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