Telcos ARPUs Drop Due to Lack of IUC Despite Strong Quarter

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Earlier this year, the interconnect usage charge or IUC was withdrawn, which also resulted in dragging down the average revenue per user or ARPU of major telecom companies. This comes as a bit of surprise since most of them had reported major user additions during the January-March quarter, as per India Ratings and Research.

As per the data released by TRAI or the Telecom Regulatory Authority of India, the country's subscriber base for wireless networking grew by approximately 8.3 million to reach a  total of 1,168 million users for the month of February, which, incidentally is the highest addition to have taken place during the last year and a half as per the rating firm in a note.

Specifics revealed that Vi or Vodafone Idea, a telco that has been consistently losing its subscribers was able to report a growth in subscribers for the first time in the month of February, with the last instance of such a growth having occurred way back in the month of October in 2019, almost 2 years ago.

What Else Does The Data Reveal

According to the data, Reliance Jio Infocomm Ltd added a net amount of 4.3 million subscribers, closely followed by Bharti Airtel’s 3.7 million with a major gap to Vi, at  0.70 million.

A statement from the rating firm states that the sliding voice tariffs, growing data tariffs and increasing data usage per subscriber, as well as the increasing data subscribers when it comes to the overall subscriber base coupled with reducing tariff differentials amongst the telcos over the span of the last one year, is a sign that indicates that the industry is moving forward, towards a higher average revenue per user (ARPU) regime.

Do note that the ARPU of telcos was reduced in 4QFY21 most primarily due to a reduction in the IUC charges to Rs 0 per minute with effect from January, down from Rs 0.06.

Airtel’s ARPU saw a dip from Rs 166 in the previous quarter to Rs 145 in Q4 with Jio reporting a drop from Rs 151 to Rs 138. The agency states that the movement in ARPU needs to be monitored over the span of the next two or three quarters.

In terms of the 5G spectrum auction, it stated that there are still multiple variables and unknowns that need to be addressed in order to ensure the successful implementation of the 5G technology in India, from a reserve price for 5G auctions to incremental users and ARPU and capex that will be incurred by the telcos.

Ind-Ra stated that the Department of Telecom is already considering a cut when it comes to the base price of 5G airwaves and the 700MHz band as well as a lesser upfront payment.

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Shloke is your go-to guy when it comes to consumer tech. Specializing in In-Depth pieces, he's also getting to grips with Telecom. His hobbies consist of Formula One and Gaming.

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