The year 2016 ushered in challenging yet exciting times for telecom operators with sector dynamics changing and the competitive landscape heating up. Many operators reworked their strategies and chalked out new business plans to expand their reach.
Data emerged as the key business driver as operators focused on monetising their service offerings while growing their 3G and 4G presence across the country. Bharti Airtel rolled out 4G services in 21 out of 22 circles while Vodafone India made its 4G services available in select cities across 17 circles. Idea Cellular expanded its services to 11 circles and plans to cover nine more by March 2017. Smaller operators such as Telenor India and Aircel also made their presence felt in the 4G space by rolling out services in limited circles of operation.
Competition in the data space took on a new meaning as Reliance Jio Infocomm Limited (RJIL) made a high-profile entry with “free” welcome offerings, stunning the incumbents and nearly paralysing smaller operators. A price war ensued with deleterious effects on operator earnings and profitability. The quarter ended September 2016 was disappointing for the industry with realisations, particularly in the data segment, taking a stiff hit.
In terms of market share, Bharti Airtel held on to the top spot despite the increased competition and accounted for 24.32 per cent of the wireless market as of October 2016. It was followed by Vodafone with 18.72 per cent share and Idea Cellular with 17.17 per cent share. Bharat Sanchar Nigam Limited (BSNL) emerged as the fourth largest wireless operator with a market share of 8.8 per cent, ahead of Aircel with 8.3 per cent share and Reliance Communications (RCOM) with 7.99 per cent share. Meanwhile, consolidation activity gathered momentum. Operators turned to spectrum trading, mergers and acquisitions for reasons ranging from surviving competition to strengthening their spectrum holding and restoring their financial health. While Airtel acquired Videocon’s and Aircel’s spectrum, the much talked-about three-way merger between RCOM, Aircel and Sistema Shyam TeleServices Limited (SSTL) remains work in progress.
RCOM, in particular, had much to cheer about as its concerted efforts to reduce its debt bore fruit. Its merger deal with Aircel and a deal with Brookfield Infrastructure for tower sale may finally put an end to the operator’s financial woes. For bleeding operator BSNL too, 2016 proved to be a good year with its finances and operational performance improving. Mahanagar Telephone Nigam Limited (MTNL), however, continued to be in the red.
There were some disappointments and challenges too. Operators continued to be at loggerheads with the regulator on issues ranging from call drops and quality of service to net neutrality and interconnection. The October 2016 spectrum auction turned out to be a damp squib, with high reserve prices playing the spoiler, particularly for airwaves in the coveted 700 MHz band.
Going forward, 2017 promises to be even more exciting and action packed for operators. With data becoming the new voice, they will have to innovate on their offerings and strategies as tried-and-tested success recipes will no longer work. To this end, Airtel and Vodafone have already launched unlimited voice calling services while Idea plans to do so soon. Meanwhile, it will be interesting to see how RJIL retains its growing customer base once its free service offer ends. The industry may also witness further consolidation. Currently, Airtel is reported to be in talks with Telenor for acquiring its Indian operations to strengthen its 4G spectrum holdings.
tele.net takes a look at the performance of telecom operators in 2016 and the key initiatives taken by them during the year…
Bharti Airtel
The year 2016 was a busy one for Bharti Airtel. While it maintained its top position in the country’s wireless pecking order, it had to deploy several strategies for delivering a sound operational and financial performance. It focused on strengthening its spectrum holding to have a better play in the 4G space. It acquired 173.8 MHz of spectrum worth Rs 142.44 billion during the auctions held in October 2016. This includes 43.8 MHz of paired spectrum in the 1800 MHz and 2100 MHz bands, and 130 MHz of unpaired spectrum in the 2300 MHz band. Further, in March 2016, Airtel acquired 2×5 MHz of Videocon Telecom’s spectrum in the 1800 MHz band in six circles for Rs 44.28 billion. Later, Airtel acquired Aircel’s 4G spectrum in eight telecom circles. It now has 4G and 3G spectrum in all circles, giving it a key edge in the market. It has already launched 4G services in 21 of the 22 circles in the country and has about 5 million 4G consumers on its network. Further, to gain consumer confidence and spread more awareness, Airtel started a unique initiative called “Open Network” in 2016, which enabled subscribers to point out gaps in the operator’s network. Consequently, it upgraded over 9,000 network sites across the country and optimised another 30,000 after receiving feedback from its subscribers.
As part of its initiatives to offer a better consumer experience, Airtel also launched the V-Fiber service that is aimed at offering data speeds of up to 100 Mbps over its existing broadband infrastructure for delivering superfast broadband to digital homes. The service has so far been launched in Bengaluru, Hyderabad, Indore, Chennai, Mumbai, Ahmedabad, Bhopal and Delhi-NCR.
The operator went live with its payments bank, with a pilot start in Rajasthan in November 2016. As part of the launch, over 10,000 Airtel retail outlets across the state will function as banking points and offer convenient banking services to customers. The operator is offering an interest rate of 7.25 per cent per annum on savings account deposits in its payments bank. Airtel is expected to extend the pilot launch to Karnataka, Telangana and Andhra Pradesh before the full-scale pan-Indian service launch. Airtel has also been taking steps to downsize its Africa operations. During the past year, Airtel has divested 922 telecom towers in the Democratic Republic of Congo (DRC) and 588 telecom towers in Niger to Helios Towers Africa. Meanwhile, the transaction for the sale of Airtel’s operations in Sierra Leone to Orange received full regulatory approval and was closed in July 2016.
Financially, the operator’s profitability was impacted by an increase in spectrum-related costs as well as the entry of RJIL. For the quarter ended December 2016, Airtel reported a decline of around 54 per cent year on year in its consolidated net profits for its India operations. The operator’s net profit fell from Rs 11.08 billion during the quarter ended December 2015 to Rs 5.04 billion in the corresponding quarter in 2016. Its ARPU decreased by 10.4 per cent from Rs 192 to Rs 172 during the same period. While its voice ARPU declined from Rs 137 to Rs 123, the data ARPU decreased from Rs 200 to Rs 175. The voice ARPU could decline further as the operator has launched unlimited voice calling services for its subscribers to counter the threat from the new operator.
Going forward, 2017 is also likely to be a busy year for the operator. It is reportedly in talks with Norway-based Telenor for buying its India business for $350 million. Airtel is likely to take over half of Telenor India’s liabilities, while the latter is expected to bear the remaining half. Although this move will significantly add to Airtel’s debt, the operator will be able to further fortify its 4G spectrum holding if the deal goes through.
Vodafone India
The past year was notable for Vodafone India. The operator’s subscriber base crossed the 200 million mark, the expansion of 4G services took centre stage and the company received a significant equity infusion of Rs 477 billion from its UK-based parent.
This is the country’s largest-ever foreign direct investment in rupee terms, which has helped Vodafone bid aggressively during the spectrum auction held in October 2016. The operator acquired spectrum in the 1800 MHz, 2100 MHz and 2500 MHz bands across all its key telecom circles for a 20-year period at a total cost of Rs 202.8 billion.
The roll-out of 4G services emerged as the key focus area, with the operator expanding its 4G reach across the country. So far, Vodafone India’s 4G services have been launched in select towns and cities across the Kerala, Karnataka, Kolkata, Delhi-NCR, Mumbai, Haryana, Uttar Pradesh (East), Gujarat, West Bengal, Rajasthan, Assam, Northeast, Odisha, Maharashtra and Tamil Nadu circles. The operator also has plans to launch voice over long term evolution (VoLTE) and has signed a contract with Nokia to use the vendor’s IP multimedia system technology to support it in the launch of these services.
Operationally, Vodafone India continued with its strategies of targeting high-value customers, offering a strong enterprise portfolio, and innovating on branding and marketing. The operator launched several data and voice-based plans including unlimited calling packs, double data plans and youth-centric schemes such as the “Vodafone U” plan. These have helped increase the data ARPU for customers using more than 1 MB of data from Rs 158 during the quarter ended September 2015 to Rs 164 during the corresponding quarter in 2016. Also, the operator’s data business contributed about 20 per cent to its overall revenues during the quarter ended September 2016.
Meanwhile, Vodafone India has partnered with the governments of Goa and Telangana, among other states. Under the contract with the Goa government, worth Rs 10 million, the operator will provide SIM cards with 100 minutes of free local voice calling and 3 GB of 3G data at a 2 Mbps speed to youth in the state. In Telangana, Vodafone Business Services, the enterprise arm of Vodafone, has partnered with T-Hub, the government’s startup development initiative, to engage with start-ups across the country and initiate national-level programmes. Vodafone will also provide customised solutions in the cloud and internet of things (IoT) segments to enable these start-ups to launch their operations and scale up their businesses.
Further, in a key move, Vodafone India signed an agreement to buy YOU Broadband for around Rs 4 billion. As a result, Vodafone will acquire YOU Broadband’s over 3,000 km of optic fibre and 6,000 km of last-mile fibre-to-the-home network across 12 cities. The acquisition of fibre in Mumbai, which is a key data market for Vodafone, will help the operator in addressing connectivity issues and providing seamless delivery of services. It is also expected to increase Vodafone’s competitiveness in high-data-consuming cities. The transaction is now awaiting approval of the Foreign Investment Promotion Board.
Going forward, the expansion of 4G services will remain central to the operator’s growth strategy. It has recently announced plans to launch 4G services in Goa, Punjab and Uttar Pradesh (West) to reach around 2,400 towns across 17 circles by March 2017. It is also planning to invest Rs 60 billion in Maharashtra for capacity augmentation and undertaking new business initiatives. The proceeds of the investment would be used by the operator to upgrade its technology centre in Pune and increase its capacity to develop products in both engineering and information technology segments for Vodafone companies across the globe.
In addition, Vodafone India has plans to launch its payments bank in the country by March 2017. It has recently launched the M-Pesa pay application to facilitate cashless transactions between customers and merchants.
Idea Cellular
Like its peers, Idea Cellular too chalked out fresh strategies to keep pace with the industry’s changing competitive landscape and evolving business dynamics. Data emerged as a key focus area, driving growth for the company. The operator launched 4G services in December 2015 to capitalise on the opportunities emerging in this segment and spent the better part of 2016 in expanding its services across the country. As of end-September 2016, Idea had 3.07 million 4G customers, recording a 70 per cent quarter-on-quarter growth. Its overall data subscriber base stood at 30.7 million.
In a bid to enhance its 4G play, Idea bought 349.2 MHz of spectrum for Rs 127.98 billion in the auction held in October 2016. This spectrum portfolio will allow the company to roll out networks that can carry about twenty times the current data traffic. Idea has so far deployed 4G services in 11 circles and plans to extend these to nine new service areas by March 2017, using the newly acquired spectrum. The focus is on expanding coverage rather than building capacity. By end-March 2017, Idea’s 4G footprint will cover the key 20 circles that contribute 94 per cent of the company’s revenue and 90 per cent of the industry’s revenue.
The company is also betting big on digital content to strengthen its 4G portfolio. It is all set to launch Idea-branded game services, movies and music services in the coming months. It is also looking to introduce live TV, digital magazines and newspapers, and video and audio chat apps in 2017-18. Idea’s model for digital services includes building its own apps or partnering with technology platforms while sourcing content directly from or in partnership with labels and aggregators. In January 2016, Idea partnered with ErosNow, the digital over-the-top (OTT) distribution service of Eros International, to offer access to movies and videos – the highest consumed data service for telecom operators. In addition, there are plans to leverage voice over long term evolution VoLTE to take on VoIP and OTT players.
The operator has also resorted to tariff revisions and introduced lucrative offers to sustain competition in the 4G space, particularly from RJIL. It has slashed its existing tariffs by almost half to drive data usage on its networks and launched innovative voice packs that enable prepaid Idea users to make unlimited calls across the country.
In addition to the competitive pressure from RJIL, Idea faces a strong challenge from the RCOM-SSTL-Aircel merger. Being viewed as the largest consolidation deal in the industry, the merger will create a strong operator, with the second largest spectrum holding amongst all operators.
Idea has also worked on improving its service quality, an area that has been in the spotlight with the Telecom Regulatory Authority of India (TRAI) coming down strongly on the incumbents given the growing incidence of call drops. During 2016, Idea plugged several black spots in its networks to ensure seamless delivery of services, such that TRAI’s chairman, R.S. Sharma, reportedly stated that Idea’s call failure rate had come down to zero.
To reaffirm its position in the market this year and enjoy continued user loyalty, Idea will have to revisit its strategies. A focus on data services will be central to its strategy going forward. It has already revised its capex guidance for 2016-17 by Rs 10 billion to gear up to counter competition. Idea will now have to work on establishing a significant 4G base in the country. While Bharti Airtel and Vodafone India have continued to make extensive 4G roll-outs in the past months, Idea’s progress in this area has been modest. Moreover, it was a late entrant into the mobile money space and thus would have to leverage this opportunity in a big way.
RCOM
Owing to the growing competition in the telecom industry, RCOM has been witnessing a decline in its wireless subscriber base. This, coupled with a mounting pile of debt, is taking a toll on the operator’s finances. The company’s net profit witnessed an 80 per cent year-on-year decline, from Rs 1.95 billion during the quarter ended September 2015 to Rs 0.39 billion during the corresponding quarter in 2016.
As a result, most of 2016 was spent in devising strategies to improve its financial health, many of which are at various stages of implementation. After having announced a merger with SSTL in 2015, RCOM signed a definitive agreement with Aircel in mid-September 2016 to merge its wireless operations with the latter’s wireless business. As a part of the deal, RCOM and Maxis Communications Berhad, the Malaysia-based parent company of Aircel, will create a separate entity for managing their wireless operations. This merger was termed as the biggest consolidation ever in the Indian telecom industry. Each company will hold a 50 per cent stake in the merged entity, with equal representation on the board of directors. The combined entity is expected to have a customer base of 180 million and a revenue market share of 6 per cent. Also, the merged company will have the second largest spectrum holding, aggregating 448 MHz across the 850 MHz, 900 MHz, 1800 MHz and 2100 MHz bands.
Further, RCOM signed a non-binding term sheet agreement with Canada-based Brookfield Infrastructure Group to sell 51 per cent stake in its tower business while retaining the remaining 49 per cent stake. As per the agreement, RCOM will receive an upfront cash payment of Rs 110 billion. Following the closure of the deal, RCOM’s 44,000 towers will be transferred from Reliance Infratel Limited to a separate special purpose vehicle owned by Brookfield. However, RCOM will continue to be an anchor tenant for these tower assets under a long-term master service agreement.
In 2016, RCOM also completed the execution of its spectrum sharing arrangements with RJIL in the 850 MHz band for offering 4G services. Operationally, the spectrum arrangements between the two operators will result in network synergies, optimal spectrum utilisation, and enhanced network capacity and capex efficiencies. Financially, RCOM will achieve considerable savings in operating costs and future investments in networks, which may strengthen the operator’s bottom line and generate positive cash flows.
Besides, RCOM has been actively ex-panding its product portfolio for its enterprise, wireless and wireline customers. The operator recently launched Reliance Spottr, a location-based service that allows customers to track up to five RCOM mobile numbers anywhere in the country after obtaining consent from them. It also launched the Reliance Games Arcade, a collection of more than 300 premium games that can be downloaded at an affordable subscription fee. Recently, the operator launched a 4G VoLTE-enabled fixed wireless phone, which has an inbuilt SIM slot that can connect up to eight Wi-Fi-enabled devices and offers fast 4G speeds.
Going forward, RCOM plans to raise about $500 million through an offshore bond sale as it wants to invest in improving its offerings in an increasingly competitive telecom market. The company is also looking at monetising its non-core assets to bring down its net debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) ratio from 4.64 to 3 in the future. To this end, it plans to hive off its direct-to-home (DTH) business, monetise its real estate assets and sell a stake in its subsidiary, Reliance Globalcom.
BSNL
BSNL continued to make efforts to improve its operational efficiency and drive financial growth. Expansion plans were drawn up to strengthen the company’s mobile network, several attractive initiatives were launched to revive its fading wireline business, and new and innovative data-oriented offers were introduced to bring more customers on board. Data has emerged as a key building block of the operator’s new growth strategy. It may help catapult the company back into the competition with private players. Although it missed the voice bus, the operator is sure about making a mark in the data space. It has already launched a series of data plans at compelling price points to retain its existing customers and acquire new ones. Its scheme offering unlimited 3G access at Rs 1,099 per month has been successful in building the demand for mobile data. As a result, data usage on BSNL’s network has grown fourfold, from around 80 TB in 2012 to about 353 TB as of October 2016.
Since it has limited 4G spectrum holdings, BSNL has turned to Wi-Fi in a big way as an alternative to provide highspeed services to its customers. The company currently has around 2,700 hotspots across the country and plans to take this number to 40,000 by March 2018. It is exploring both capex and opex models for Wi-Fi deployment. BSNL, along with MTNL, has also signed a deal with the tourism ministry to equip 100 tourist destinations with high speed Wi-Fi by creating public Wi-Fi hotspots. In November 2016, the operator partnered with the Diu and Daman government to provide free Wi-Fi facility in the region.
Meanwhile, after resisting the idea of opening up its infrastructure for sharing, BSNL finally took some concrete steps towards forming partnerships with private operators to monetise its underutilised spectrum assets. In September 2016, the operator signed 2G roaming agreements with RJIL and Vodafone India, in order to help private operators plug connectivity gaps on their networks. BSNL has also signed a spectrum sharing deal with a private operator in the Gujarat circle, which is expected to bring in revenues of Rs 15 billion over a period of five years. Further, the company has floated an expression of interest for the launch of 4G services in the 2500 MHz band through a revenu sharing model. In fact, BSNL is targeting an annual revenue of Rs 20 billion through spectrum sharing, starting 2017-18.
The operator is also looking to leverage opportunities offered by the digital money space. In September 2016, BSNL partnered with Corporation Bank and Pyro to launch a mobile prepaid wallet, SpeedPay, in Karnataka, Kerala and Tamil Nadu. The wallet enables users to make domestic money transfers, cash deposits and withdrawals through authorised agents, prepaid mobile and DTH recharges, bus tickets purchases, and telephone, credit cards and electricity bill payment facilities. SpeedPay is not limited to BSNL customers, it can be used by any mobile network subscriber. Recently, in December 2016, BSNL partnered with the State Bank of India (SBI) to launch the MobiCash mobile wallet. The wallet works on both feature phones and smartphones, and allows users to deposit cash at BSNL retail outlets.
BSNL had earmarked Rs 40 billion for its internal projects in 2016-17 and another Rs 30 billion for government-funded projects. For internal projects, it invested Rs 15 billion during the first half of 2016-17, and plans to invest the remaining Rs 25 billion by March 2017. The majority of these funds will be dedicated towards expanding the company’s Wi-Fi footprint, enhancing its core network and strengthening its mobile tower portfolio. Over the past two years, BSNL has installed 26,000 base transceiver stations (BTSs) and is planning to add another 20,000 BTSs by the end of 2016-17 at an investment of Rs 20 billion. The installation of new mobile towers in states like Andhra Pradesh, Bihar, Madhya Pradesh, Maharashtra, Odisha, Uttar Pradesh, West Bengal, Chhattisgarh, Jharkhand and Telangana, as well as some left-wing extremism-affected areas is also being planned. In addition, BSNL has recently announced its aim to double its mobile broadband capacity to 600 TB in the southern zone and up to 450 TB in other zones.
Aircel
The year 2016 turned out be to an eventful one for Aircel. It sold 20 MHz of its 4G spectrum in the 2300 MHz band to Bharti Airtel in eight circles for Rs 35 billion. Further, it ended up being a part of the largest ever consolidation in the Indian telecom space when it signed a definitive agreement with RCOM to merge its wireless operations with that of the latter. As per the agreement, RCOM and Maxis Communications Berhad, the Malaysia-based parent company of Aircel, will create a separate entity for managing their wireless operations, and will hold 50 per cent stake each in the merged entity, with equal representation on the board of directors and all committees. Aircel will transfer Rs 140 billion of its debt to the entity.
On the operational front, however, there was little to cheer about. Barring a few circles like the Northeast, Uttar Pradesh (East) and Bihar, the operator’s performance remained sluggish.
Increased competition, a saturating voice market and shrinking margins have resulted in Aircel struggling to keep pace with other operators. The ongoing litigation surrounding the Aircel-Maxis deal and the company’s alleged involvement in the 2G scam have had a serious bearing on its operations, market position, finances and credibility. Nevertheless, the growing appetite of Indians for affordable data services has been a boon for the operator and Aircel has launched several innovative plans at affordable rates to survive the competition in the market. Its “Be Online with Aircel” umbrella initiative, which aims to boost mobile internet penetration, has found many takers. Under this initiative, Aircel offers free basic internet usage and unlimited 3G access for as little as Rs 9 per day. A variety of unlimited voice calling packs for local and STD calls was also launched by the operator in the Uttar Pradesh (East), Delhi and Kolkata circles to counter similar offerings by other operators.
Currently, Aircel is leveraging the opportunities arising from technologies like Wi-Fi. It has a network of over 50,000 Wi-Fi hotspots, helping it ease network congestion as 3G and 4G services have gained traction. The operator is focusing on enterprise customers and the smart homes segment for clocking higher revenues. It also has plans to come up with a portal that will act as a platform for developers to collaborate directly with enterprises and explore business opportunities.
While Aircel has launched commercial 4G services, most of its current licensed circles overlap with those of at least one incumbent, weakening its 4G business case. Thus, in 2017, Aircel will have to design strategies that will not only help it survive the hypercompetition in the Indian market, but also promise growth and opportunities for the operator. Its innovative offerings and aggressive marketing plans are likely to pay dividends in the long run, but the need of the hour is to forge strong business partnerships, like its merger with RCOM, for achieving financial stability and surviving the impending 4G war.
TTSL
The year 2016 was a mixed bag for Tata Teleservices Limited (TTSL). For the most part of the year, the company was entangled in a legal battle with NTT DOCOMO as it failed to sort out its arbitration case with the latter. The company also removed Cyrus Mistry as its director, owing to the tussle between Tata Sons, the parent company of TTSL, and Mistry.
However, it received some respite in October 2016, when it managed to acquire airwaves in the key circles of Delhi and Mumbai in the 1800 MHz band for Rs 45 billion. TTSL also managed to place itself on a stronger financial wicket by scaling down its operations in loss-making circles and undertaking a cost-cutting exercise. Further, it pared its debt through the proceeds received from the completion of the deal between ATC and Viom Networks.
During 2016, TTSL focused on further strengthening its enterprise business segment to drive growth. The segment currently accounts for 30 per cent of the company’s total revenues. Meanwhile, TTSL’s small and medium enterprise (SME) business segment has been growing at 15 per cent per annum for the past three years against the industry rate of around 9 per cent. The enterprise division currently serves around 150,000 enterprises through its IT and connectivity solutions. It offers around 60 IT products to its clients, including marketing solutions like toll-free number services and promotional bulk messaging services to SME customers.
IoT is emerging as a fast growing segment for the company’s enterprise arm. TTSL provides IoT connectivity services through machine-to-machine (M2M) SIM cards for smart metering, and location-based tracking for logistics and security. Besides, the enterprise arm provides a complete suite of IoT solutions comprising devices, applications and connectivity. TTSL received seven to eight times more business in the IoT segment in 2016 as compared to 2015. The company is bullish about the government’s Smart Cities initiative and is working with partners to develop solutions that can be deployed for smart city projects. It is particularly working on developing fleet management solutions for running ambulances, school buses, garbage disposal vehicles and city police vehicles, street light monitoring systems, smart parking systems and metering solutions for utilities.
Another segment in which TTSL has a strong foothold is Wi-Fi hotspots. The company began installing hotspots in mid-2013 and has been instrumental in setting them up at several airports across the country. In January 2016, it launched its highspeed public Wi-Fi service at the Bombay Stock Exchange and is in talks with several state government agencies for implementing Wi-Fi solutions under the Smart Cities Mission. Meanwhile, like other operators, TTSL also expanded its digital payments offerings in 2016. Its money transfer unit, mRUPEE, partnered with Intex mobiles to launch a mobile wallet.
Going forward, it is imperative for TTSL to capitalise on the emerging opportunities in the data segment as well as the enterprise business to achieve a financial turnaround. To this end, the company is planning to commercially launch 4G-backed enterprise services in 2017. The operator has already conducted trials using the 4G services of other operators. It is also expanding its 125,000 km long fibre network by deploying fibre across 2,000 new locations.
In 2017, TTSL should try to resolve the dispute with NTT DOCOMO, which will help restore the confidence of foreign investors in the company. TTSL must also leverage its augmented spectrum holdings to expand its network and compete effectively with its peers.
Telenor India
Despite making significant investments of almost $3 billion in its Indian operations, Norway-based Telenor’s Indian arm is struggling to survive in the Indian telecom market in the face of growing competition and the industry’s ongoing shift towards data. The company’s situation became even worse in 2016, when it decided to write off Rs 18.79 billion as impairment, indicating that some of its investments in India may not see returns. The capital expenditure of the operator declined from NOK 195 million during the quarter ended September 2015 to NOK 186 million during the corresponding quarter in 2016.
The increasing losses and a huge debt burden also compelled the operator to stay away from spectrum auctions conducted in October 2016, despite the urgent need for additional airwaves. According to Telenor, the exorbitant reserve price set by the government was a major dampener.
Operationally, the company’s tried-and-tested “Sabse Sasta” strategy did not help much in 2016. Limited areas of operation and increased competition due to the entry of RJIL with the free voice and data offer were key challenges. Even though Telenor launched several lucrative voice and data plans, these were mostly restricted to voice calling and 2G data. Moreover, the majority of Telenor’s subscribers generate low ARPU, which may not be enough to support its long-term business growth. During the quarter ended September 2016, the operator’s ARPU stood at Rs 92, which is much lower than the ARPUs of Rs 188 and Rs 173 recorded by Bharti Airtel and Idea Cellular respectively.
However, given its strong track record, Telenor will continue to be a formidable regional player in the Indian market. The company is amongst the key players in its telecom circles. Its subscriber base increased by 9 per cent from the quarter ended September 2015 to the corresponding quarter in 2016. The operator also made concerted efforts to launch and strengthen its 4G network across its areas of operations. To this end, it launched 4G services in 27 towns across the six circles in which it operates. Telenor India also started offering narrowband 4G services on a pilot basis in several cities, including Varanasi and Visakhapatnam.
Going forward, Telenor will have to procure 3G/4G spectrum to make a viable business case for its Indian operations, and to cater to the growing appetite of data-based services witnessed in 2016. The year 2017 is going to be critical for Telenor as it decides on its future roadmap in the Indian market.
MTNL
For state-run telecom operator MTNL, the past year did not bring much respite. It continued to face financial losses even as the other state-run operator, BSNL, turned operationally profitable. For the quarter ended September 2016, MTNL reported a stand-alone net loss of Rs 7.68 billion. Its net revenue from operations declined from Rs 7.74 billion during the quarter ended September 2015 to Rs 7.29 billion during the corresponding quarter in 2016. In fact, MTNL’s revenues from both mobile and landline services were lower in the quarter ended September 2016 as compared to the corresponding quarter in 2015. The operator’s dismal performance over the years can be attributed to growing competition, decreasing tariffs, major spectrum-related payouts and high burden of employee remuneration. Further, poorservice quality has resulted in a steep decline in MTNL’s subscriber base. While many industry experts have given up on MTNL, the operator is still hopeful of a turnaround. To this end, it undertook several measures during the past year to bring more customers on board and improve its operational efficiency. In order to revive its wireless segment, it introduced free incoming calls on national roaming and, like BSNL, the company offered free night calling for its landline customers. Under the plan, customers can make unlimited free local calls to any network in Delhi and Mumbai between 10 p.m. and 7 a.m. Moreover, in order to avoid frequent disruption in its landline services, MTNL has started replacing its copper cables with optical fibre. In a bid to increase the uptake of its broadband services, MTNL also upgraded the minimum speed for all its broadband plans to 2 Mbps. Further, the operator collaborated with digital wallet company FreeCharge to provide a swift and secure option for cashless bill payments in Mumbai. It also launched an online testing tool, IPTESTER, for monitoring the status of BTS/Node Bequipment and broadband equipment on a real-time basis. MTNL has been actively exploring new ways to improve its revenues. For instance, it is executing the Rs 2.81 billion Mumbai City Surveillance Project with L&T Infrastructure under which the operator has set up two state-of-the-art Tier III data centres at Worli and Belapur in Mumbai. Unlike private telecom operators that are banking on 4G services to tap the growing data market, MTNL plans to focus on fibre-to-the-home (FTTH) services and upgradation of its existing 3G infrastructure. The company is targeting to connect about 150,000 buildings in Delhi and Mumbai with optic fibre in the next two years. It plans to offer FTTH services in partnership with private firms on a revenue sharing basis. It has also partnered with digital entertainment provider Hungama to offer on-demand entertainment services to its subscribers. Meanwhile, the operator is pursuing a 3G capacity expansion programme, following which the speed on its 3G network is expected to reach 21.1 Mbps from the current 3.6 Mbps. MTNL will add about 2,000 new sites to provide 3G services in both its circles. With these initiatives, MTNL expects to turn profitable in 2017-18. In addition, its proposed partnership with BSNL is likely to bring some respite to the operator. As per the proposal, BSNL will provide equipment for MTNL’s mobile services in the Delhi and Mumbai circles, and act as a managed service provider on a revenue sharing basis. Given that mobile services account for a major portion of MTNL’s losses but only a minor part of its revenue, the move to transfer its wireless operations will help the operator focus more on its wireline segment. However, improvement in service quality and network strengthening will also be crucial.
RJIL
After a long lead time, RJIL finally made its much-awaited entry into the telecom space in September 2016. As
anticipated, the operator came up with aggressively priced data offerings that createda stir in the market. The key highlight of the Reliance Jio launch was, however, the operator’s commitment to offer free voice calls permanently and free national roaming on its network. In addition, RJIL announced that, as part of its inaugural “Welcome” offer, all its services would be available free of cost till December 31, 2016. This caught the public eye and many people sought to avail of the free services during the trial period. The operator reportedly acquired 50 million
subscribers by end-November 2016, adding 600,000 customers every day since its launch, thus becoming the fastest telecom firm to achieve this landmark in the world. Buoyed by the enthusiastic response, the company has extended its free voice and data offer to both its new and existing subscribers till March 31, 2017 as part of its “Happy New Year” plan. It has also rolled out Aadhaar-based registrations that enable instant activation. However, post the launch of Jio, RJIL was involved in several controversies, and acrimonious exchanges with TRAI and other operators. Initially, RJIL complained that it was experiencing as much as 65 per cent failure in calls made from its
network as the incumbent operators were not providing sufficient points of interconnection to complete calls. The incumbents, in turn, complained that their networks were getting blocked as a result of the asymmetric traffic emanating from RJIL’s network. The incumbent operators also termed RJIL’s free voice call offer as predatory, arguing that telecom operators cannot have tariffs below the interconnect user charge. Recently, TRAI also sought an explanation from RJIL as to why the extension of its free voice and data plan till March 31, 2017 should not be seen as a violation of regulations, which requirepromotional offers to be limited to 90 days. Apart from these issues, RJIL faced internal management challenges, with several of its top-level executives resigning from their posts in 2016.
Notwithstanding the hiccups, RJIL has in place elaborate plans for the future as it gears up to consolidate its position in the Indian telecom market. To strengthen its 4G network, it will reportedly install around 45,000 mobile towers within the next six months. RJIL has already installed around 282,000 BTSs, covering around 18,000 cities and 200,000 villages. So far, it has invested Rs 1.6 trillion and plans to invest another Rs 1 trillion over the next four years.
RJIL’s network already offers access to large libraries of video content and multiple TV channels via a bouquet of Jio-specific
apps, including JioTV, JioMusic, Jio- Cinema, JioChat and JioMoney. It plans to soon launch its GigaFiber broadband services, which would reportedly offer 600 GB of data at a speed of 15 Mbps for Rs 500. It is also likely to launch its direct-to-home services with free service subscription for
the first six months. The services would be launched in the form of optical fibre services, offering a speed of up to 1 GB per second. It would also enable customers to access RJIL’s internet offerings.
Further, Jio Payments Bank, a joint venture between Reliance Industries Limited and SBI, has been incorporated. RJIL already operates a prepaid wallet under the Jio Money brand and the payments bank will help it to further tap opportunities in the digital payments space.
