Price war worries have recently depressed telecom shares and everyone is watching the Average Revenue Per User or ARPU like a haw
What is it?
What is it?
The business for telecom carriers depends on two main factors. One is the number of subscribers. The more they are able to add, the higher is the expected revenue. In India, 14.63 million subscribers were added in the September 2016 quarter, show Telecom Regulatory Authority of India (TRAI) data.
Two, revenue also depends on the income that the operator is able to generate by offering different services. ARPU or average revenue per user, is the average billing per customer earned by the telecom company every month.
Why is it important?
The telecom business is capital-guzzling. So, carriers who invest a lot in building their infrastructure need healthy utilisation on their networks to report a profit. So they try to woo more subscribers even if it means lower tariffs.
When mobile penetration in India was low, there was heady growth in ARPU numbers. That’s not the case anymore — there are already 105 crore subscribers and wireless tele-density is already above 87 per cent. Carriers are vying for limited number of new users, triggering price wars.
To add to the woes, ARPUs of Indian players have always been anaemic by global standards. The industry ARPU was ₹131 per month in September 2016, as per the latest data from TRAI. The number has barely crept up from ₹125 levels a year ago
What is it?
The business for telecom carriers depends on two main factors. One is the number of subscribers. The more they are able to add, the higher is the expected revenue. In India, 14.63 million subscribers were added in the September 2016 quarter, show Telecom Regulatory Authority of India (TRAI) data.
Two, revenue also depends on the income that the operator is able to generate by offering different services. ARPU or average revenue per user, is the average billing per customer earned by the telecom company every month.
Why is it important?
The telecom business is capital-guzzling. So, carriers who invest a lot in building their infrastructure need healthy utilisation on their networks to report a profit. So they try to woo more subscribers even if it means lower tariffs.
When mobile penetration in India was low, there was heady growth in ARPU numbers. That’s not the case anymore — there are already 105 crore subscribers and wireless tele-density is already above 87 per cent. Carriers are vying for limited number of new users, triggering price wars.
To add to the woes, ARPUs of Indian players have always been anaemic by global standards. The industry ARPU was ₹131 per month in September 2016, as per the latest data from TRAI. The number has barely crept up from ₹125 levels a year ago.
India has one of the lowest data tariffs in the world; $3.5 per 1 GB of data, compared with $15 in China and $10 in the US. Voice revenues accounted for two-third of total revenue for carriers in 2015-16. But with increasing smartphone penetration and data consumption, data — which is cannibalizing on profitable voice calls. The new player — Reliance Jio — has shaken up the market with its free voice call offer, leading to the worry if this source of high APRU will soon disappear!
The Government has been demanding a bigger pound of flesh for allotting spectrum — the raw material that all telcos need. As a result, telec
Why should I care?
A falling APRU certainly rings in good times for you, as you can get to enjoy voice and data at cheaper rates. But the problem is that too precipitous a fall in ARPUs can trigger a situation where players merge with each other to create new telco giants. If that happens, competition will wane and the newly created Goliaths may go back to raising their tariffs.
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