Telecom tariffs are going down and people are directly linking it to the future of ARPU. The ARPU (Average Revenue Per User) is falling every quarter and people are expecting it to fall further. The general theory prevailing is that as a result the revenues of the telecom operators will fall.
Although the first point is valid that the ARPU will fall but not the revenue.
Lets take a look at, What is ARPU? How is it calculated?
ARPU is calculated on total number of active SIMs and not on total number of active users. The total number of active SIMs will never fall as prepaid users opt for lifetime validity plans which do not expire( though, some operators suspend the SIMs after 6 months of non-usage). These are a value for money plan for prepaid customers as they would never need to pay for validity. Also the telecom operators are pushing life time validity SIMs as they would be able to show lager user base to attract more users and investors as well. Even when the user has shifted to a new location his previous numbers(SIMs) are still accounted as an active user. Even if you have broken and thrown your old SIMs they still continue to be in the records.
Mobiles in India are the Unique Identifiers
College students and low income users for whom a permanent number does not make much of a difference are in continuous search of value deals and end up taking attractive entry level plans hence adding to the cumulative userbase. The user does not spend more but owns more numbers hence adding to the denominator for ARPU calculation but not in numerator. This point is mainly related to misunderstanding of stats or using the wrong stats as a benchmark. The current ARPU is actually Average Revenue Per SIM.
The second point is mostly associated with the bottom of the pyramid theory. The falling tariffs will only push usage further. The rural India and urban poor does have an active SIM card but that is mostly to receive calls from their employers or just to send a missed call. When the tariff lowers further, for which there is still scope, these people will spend more as they would get bigger bang for their buck. Overall the total MoU(Minutes of Use) will rise.
The telecom revolution that we saw in 2003 after free incoming was introduced was for us, the middle income urban crowd. We had a mobile phone but we used it very cautiously, for incoming and outgoing, until then. This time it will be for a larger audience who form majority of the population of India. They have a mobile phone but use it cautiously, for outgoing, until now!
The Indian telecom growth potential is far from over.
What’s your opinion? Do you agree/disagree with the logic?
[Naman is a startup enthusiast and has worked with couple of Indian startups as Product Manager. He writes at The Inspire Blog]
with declining tariff MOU will raise, but will the MOUs raise enough to make up for the loss is one theory that needs to be proved. Just curious to see this case .
One of the strongest driving factors for holding onto subscribers (quite literally) by telcos is their quest to grab more bandwidth. India distributes bandwidth on basis of subscribers, but the telcos share revenue with government based on overall numbers. So whether ARPU goes up or down, its the subscriber numbers that get the bandwidth – which is the scarcest commodity in business today.
I think the Indian Mobile market is too hyped . All the new operators who are trying to launch in hopes of some revenues would be surely in for a disappointment .Indian govt is also acting like an idiot in allowing so many operators/circle . What is the fun ? Better to have 2 -3 players at the most & let them give good network quality . Owing to complete lack of policy Indian Mobile market is reduced to a FMCG like industry .
We at mobikwik have an interesting vision on how the Indian mobile market is going to evolve. Read more at http://mobikwik.wordpress.com. Curiously enough, Rajesh Jain talks about something similar, the emergence of a neutral “digital services operator” in his blog and the Nasscom product conclave happening now.
ARPU is correctly mentioned as Average Revenue Per SIM. 95% or more of this comes from voice. In no time we will see an increase in ARPU since customers will start using their SIMS for convenience services such as m-commerce, P2P money transfer, & NFC based payments! VAS services based on interactive gaming, infotainment and segmented contented will increase dependence on the SIM more as a utility than an optional luxury!
It is clear that there will two measures ARPS (Average Revenue Per SIM)and Revenue per user will include average revenue from multiple SIMS used by the same user. MNO s will focus on pushing more SIMS per user ( SIM in mobile, SIM in car, SIM on other smart gadgets such as watches, SIM in devices for telemetry and monitoring) .
The future of GSM mobility is bright and the explosion in SIMS in INDIA is only the beginning . The best of telecom is yet to come !
I found the thread of questions and their answers very aptly provided.. Thanks for the information.
A question from my side…
For a sole proprietary firm, if the proprieter is deceased, can Income Tax file cases, or freeze accounts? if so who should be responding to the IT cases?
the problem with the deal aggregators is clutter. There are just too many deals on a page for a day. Can’t read all of them or don’t want to read them all.
My loyalty would stick to a curated deal aggregator which shows me deals which I might like.
This can be automated by user behavior (tho difficult )
or it could be manual by person with similar tastes.
thoughts?
this comment reached the wrong post. admin can remove it