Reliance Jio effect: Telcos' average revenue per user drops 42%

The telecom operators are facing the heat after Reliance Jio's entry as the competition has increased within a short frame of time. Consumers, however, stand to benefit the most as they are getting the best of telecom services at dirt cheap prices.

By Mudit Kapoor  
Friday, July 6, 2018

Ever since Reliance Jio's launch in September 2016, the telecom industry has been on a roller-coaster ride. Telcos' monthly average revenue per user (ARPU) has declined by a massive 42 per cent even as telecom subscribers in the country have increased 28 per cent. While the profitability of the telecom players has come down due to neck and neck competition, the good thing is that consumers are reaping the benefits from the price war, which began after Jio's entry into the telecom space.

In March 2016 (before Jio), the total telecom subscribers in India were 936 million, which increased by a massive 28 per cent to 1,202.22 million in March 2018 after Jio's launch, according to data derived from the telecom regulatory authority of India (TRAI).  

Teledensity, which represents the number of mobile connections per 100 individuals, has risen sharply by 9.17 per cent from 85.17 in March 2016 to 92.98 in March 2017. In March 2018, the teledensity of India fell by 0.15 per cent to 92.84 per every 100 individuals. A point to note here is that urban teledensity is approximately 3 times higher in India as compared to rural teledensity. Urban teledensity in March 2018 stood at 165.9 connections per 100 individuals. This was due to the increasing popularity of dual SIM phones.

Gross revenue (GR) across the telecom sector has seen a dip of 1.76 per cent in March 2018 as compared to March 2017. The dip was due to the attractive plans offered by telecom operators after Jio's launch to retain their market share. In FY 2018, the first three quarters have shown a consistent decline in the gross revenue of 1.76 per cent, 4.15 per cent and 6.27 per cent, respectively.

Consumers have benefited from reduction in charges as the monthly average revenue per user (ARPU) had declined by a massive 42 per cent since Jio's launch from Rs 131 in Sep 2016 to Rs 76.04 in March 2018 for GSM users.

With the advent of Reliance Jio, the data consumption pattern of consumers has increased sharply. Since Jio's launch, there has been an increase of 924 per cent. At present, 2,447 MB of data per user per month is being consumed as compared to a mere 239 MB in Sep 2016. The per GB charge paid by the consumers have also seen a drop of 91 per cent since Jio's launch. Consumers were paying Rs 184.32 per GB in 2016 as compared to Rs 14.94 in 2018.

The telecom operators are facing the heat after Reliance Jio's entry as the competition has increased within a short frame of time. Consumers, however, stand to benefit the most as they are getting the best of telecom services at dirt cheap prices. This difficult scenario has led to various merger and acquisition within the telecom sector to gain advantages arising from economies of scale.

India's telecommunication industry is the second largest in the world by the number of telephone users (both fixed and mobile phone) with 1,202.22 million subscribers as on March 31, 2018. India has one of the lowest call charges in the world, thanks to telecom operators and the hyper-competition within them.

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