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The telecom pecking order

Oct 12, 2010

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.

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