The key aspect of the telecom sector is subscribers. It is the subscriber that earns revenues for the companies in this sector. Therefore, the idea has been to increase subscriber base at all costs. Operators slash rates, offer 'apps' (applications), bundled handsets; anything possible to get subscriber attention.
Therefore, the logical conclusion would be that operators who have higher market share of subscribers would automatically have higher revenue market share as well. Let us analyze the available data to see if this actually the case.
For this study we have used the subscriber data as disclosed by COAI (Cellular Operators Association of India) and AUSPI (Association of Unified Telecom Service Providers of India). For revenues, we have used the circle wise ARPU figures disclosed on a quarterly basis by TRAI (Telecom Regulatory Authority of India).
Subscriber Market Share It is not a mystery that Bharti Airtel , the largest telecom operator in the country, has the largest subscriber base in the country. As on 30th June, 2010, it had a subscriber market share of almost 22%, followed by RCOM (17.6%), Vodafone (17.3%), Tata Tele (11.5%) and Idea Cellular (11%).
Source: COAI, AUSPI As on 30th June, 2010
Revenue Market Share
The picture is slightly different when it comes to the share of revenues earned by the companies. While Bharti remains a leader in this category as well, the seeding order for the others is different from their subscriber shares.
Source: COAI, AUSPI, TRAI As on 30th June, 2010
RCOM loses its second position to Vodafone. In addition, BSNL comes in on the fifth position, while Tata Tele drops down to the sixth position. The main reason behind this is the quantum of discounts offered. It is a known fact that RCOM and Tata Tele (sells under the brand name of Tata Docomo) have been aggressively pricing their services. Tata Tele changed the landscape with their per second billing and RCOM offered free minutes to lure subscribers. While this has helped them to garner a large subscriber base, it has not really translated into higher revenues for the companies.
For companies to perform well over a longer period of time, they cannot concentrate only on the subscribers. They would have to come up with strategies that help them to translate subscriber growth into revenue growth as well. After all there is no point in increasing subscribers if these subscribers don't yield reasonable income for the company. Infact in such cases the interest of the shareholders is compromised for the interest of the subscribers.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407