As India’s telecom industry develops, the metro category circles have remained the prime focus of service providers. This has not changed even though the market in these cities has attained maturity and no significant subscriber additions have taken place in the past few years. Several factors have contributed to their continued relevance, including demographics, consumption patterns and subscriber portfolios. These characteristics have affected operator strategies in the launch of next-generation technologies and efforts to improve service quality.
tele.net takes stock of the various trends and developments across the metro circles of Delhi, Mumbai and Kolkata and the various operator strategies for tapping their revenue potential…
Subscriber portfolio
As metro circles encompass smaller geographical areas, they account for the smallest wireless subscriber base in the country, following the Category A, B and C circles. As of November 2015, metro circles had a total wireless subscriber base of 102.5 million users. Meanwhile, Kolkata, Delhi and Mumbai together had the second largest wireline subscriber base of 7.13 million users after the Category A circle. This could be on account of the early penetration of wireline and the heavy usage of wireline broadband. In fact, even in terms of the decline in the wireline subscriber base across all categories, the metro circles noted a year-on-year decrease of only 0.83 per cent in November 2015 as compared to 9.09 per cent in Category B and 4.66 per cent in Category A. This slow decline is due to their heavy emphasis on broadband, with a larger share of enterprise customers requiring such infrastructure to support operations.
Consumption patterns
Unique consumption patterns make metro circles the prime focus of incumbent operators. For instance, these cities account for a higher share of post-paid customers in comparison with other category circles. According to the latest Performance Indicator Report published by the Telecom Regulatory Authority of India (TRAI), under CDMA services, the Mumbai and Delhi circles held 87 per cent and 74 per cent as their respective shares of prepaid consumers, with the remaining being held by post-paid consumers. Meanwhile, for GSM services, Delhi held an 85.7 per cent share in prepaid while Mumbai held 82.39 per cent as of September 2015. This goes to show that the premium consumers are largely located in the metro circles, which are not as price-sensitive as compared to other circles, but demand a higher quality of services.
Another important feature of this category is the high average revenue per user (ARPU), which is comparatively greater than in circles of other categories. For instance, the average ARPU per circle for GSM services in the metro circles was Rs 169 per month as of September 2015, much higher than the average ARPU of Rs 133 per month for Category A, Rs 115 per month for Category B and Rs 117 per month for Category C. A similar trend was observed with CDMA services as of September 2015. Apart from this, subscribers in the metro circles also have a lower consumption of voice and SMS services in comparison with subscribers in other circles. Thus, it can be inferred that users in metros rely more on interaction via data services, because of which their ARPUs are higher despite the lower consumption in voice and SMS.
4G takes centre stage
Due to these characteristics, the metro circles have taken centre stage in terms of 4G launches. Bharti Airtel had ventured into 4G by launching it in the Kolkata circle way back in 2012. Over the years, it has established its 4G services in the city, offering heavy competition to other operators. As a result, pan-Indian 4G spectrum holder Reliance Jio Infocomm Limited (RJIL) ventured into Kolkata by offering free-public Wi-Fi to facilitate its uptake. Meanwhile, Vodafone sped up its 4G service provision and conducted several trials before finally launching it in the 1800 MHz band in January 2016.
For the Delhi circle, Airtel remained the frontrunner, launching 4G in the city in June 2015. Vodafone began 4G trials in the region at the same time and launched these services in December 2015. Meanwhile, Idea Cellular is focusing on its 3G services in Delhi, having launched them on its own network in December 2015. The operator was earlier offering 3G in the region through intra-circle roaming agreements. RJIL is lagging behind other operators, with its 4G services being planned for a March 2016 launch. It is likely to face difficulties in attaining a market share in this circle due to its late launch as its user base is likely to opt for established operators and services that deliver good quality high-speed data.
Mumbai has been the prime circle for Vodafone India, with the operator launching 4G services in the region in January 2016. Meanwhile, RJIL had conducted a limited 4G launch in December 2015 for its Mumbai-based employees. Airtel was the first operator to launch 4G in the city in mid-2015, but it has been facing stiff competition from other operators on account of the region’s large enterprise consumer base.
The metro circles continue to be watched by the industry on account of their high revenue potential and as likely launch pads for future telecom technologies.
Call quality issues
Needless to say, even though there have been rising instances of call drops and deteriorating voice quality in the metro circles, they have also witnessed some level of improvement in comparison with other cities. This has occurred on two accounts: a stricter mandate from the centre and the strategic importance of these circles for operator revenues. Poor service quality causes churn in the subscriber base, which has a greater impact when the user base comprises premium consumers. As a consequence, operator efforts in restoring network quality is greater in these circles compared to others.
This is also evident in the results of TRAI’s recent drive tests. In the Delhi circle, nearly all operators reported reductions in dropped call rates in the January 2016 drive test compared to the July 2015 drive test. However, this has not been replicated in the Kolkata and Mumbai circles, where almost all operators reported a worsening of the call drop situation. One aspect that must be noted is that the dropped call rates of the metro circles, while not meeting the benchmark of 2 per cent, are much lower than the highest dropped call rates reported in Bhubaneswar (9.75 per cent), Surat (10.94 per cent) and Pune (42.93 per cent), according to the drive tests. This implies that operator emphasis remains on the metro circles despite their heavy investments in 4G.
Growth drivers
The relevance of the metro circles for telecom operators is not likely to deteriorate in coming years. The three cities demographically comprise consumers with a higher level of education and a greater proportion in the organised work force. They are the early adopters of any technological update on account of their readiness and unperturbed demand. For instance, mobile payments and mobile commerce activity have taken off in these cities, offering opportunities to over-the-top and value added service providers and fuelling data demand in the region. The launch of 4G handsets across various price ranges has been received with greater popularity in metro cities, which complements the launch of 4G by various operators. Facilities like public Wi-Fi are also readily adopted in these cities, which is why operators like RJIL and Bharat Sanchar Nigam Limited are entering the 4G segment through this route.
The large enterprise base of the metro circles continues to command greater attention from operators as they look to drive revenues from these consumers. Hence, the national strategies of a number of operators accord greater importance to these regions.
Having said that, operators also face a lot of issues in the metro circles, which often lead to a rise in investments that are not sufficiently banked. For instance, right-of-way issues lead to cost escalations, while the small geographical areas limit the scope of expansion. This could cause operators to shift their focus to Category A and B circles after a few years to derive profits. While this remains a future possibility, the metro circles continue being watched by the industry on account of their revenue potential and as likely launch pads for future technologies.
Shambhavi Sharan
