Telcos lose 14 million urban subscribers in FY20; 5 million in March

Nearly five million urban mobile subscribers went off the grid in March this year even as subscriber growth continued in rural areas. Could the massive shock due to a sudden and complete lockdown, consequent loss of incomes and reverse migration to villages be one of the reasons for this significant fall in urban subscriber numbers?

In February too, urban wireless subscribers had decreased but by only about 1.3 million. In the previous month, there had been a growth in both urban and rural wireless subscribers. All in all, the country’s beleaguered telecom operators added a little over nine million total (urban and rural) subscribers in the first two months of the calendar year but lost nearly a third of that or close to three million in March.

Data provided by telecom regulator TRAI shows that between March 2019 to March 2020, the total urban subscriber base shrank by nearly 14 million, with a loss seen in five out of the 12 months. The steepest urban subscriber loss was in November 2019, at nearly 15.6 million and the March number was the second-highest loss in subscribers.

For fiscal 2019-20, the net subscriber loss (urban and rural) was nearly 4.5 million, proving that healthy growth happened in the country’s hinterland.

But coming to the March subscriber churn: One, of course, was the lockdown and consequent loss of incomes, prompting people to forego monthly recharge. Unlike earlier times, now telcos do not allow even incoming calls for free and a mandatory recharge has to be done to keep the SIM card active for just incoming calls.

This could have proved a deterrent for people rendered jobless during the lockdown, especially migrants. In its earnings call with analysts in May, telco Bharti Airtel had said that in the preceding 45-50 days, there had been a “collapse in new device additions and some impact on the low-end subscriber base”.

An industry insider said on Wednesday (July 15) that as and when subscriber numbers for April, May and June were released, the industry expected a further shrinkage in urban pockets due to income squeeze, on account of COVID-19.

Another reason for the March urban shrinkage could be the migration of people from cities to the hinterland due to the lockdown. A telecom expert pointed out that teledensity in urban areas has typically been very high —  referring to the phenomenon of multiple SIM cards being used on one phone — and the general trend has been a dip in urban teledensity gradually while the same metric in rural areas has been increasing.

TRAI data show that the rural teledensity was just 58.54 per cent in March this year, indicating that despite the huge strides wireless telephony has made in India, nearly one in two rural Indians still may not own a phone. So the decline in urban SIMs and the simultaneous increase in rural SIMs may be part of this usual phenomenon of increasing rural teledensity.

All in all, total wireless subscribers decreased from 1,160.59 million at the end of February to 1,157.75 million at the end of March. Wireless subscription in urban areas decreased from 643.24 million to 638.48 million, but in rural areas it increased from 517.34 million to 519.27 million.

A telecom industry veteran pointed out that there was nothing unusual in the urban subscriber churn in March and such a churn was normal for a large telecom market like ours. The only change worth noting was in the market share positions of the dominant players.

As per TRAI, more than six million subscribers deserted Vodafone Idea (VIL) in March while Reliance Jio Infocomm (RJio) gained more than four-and-a-half million. The Indian telecom market is now predominantly a three-legged race, with RJio, VIL and Bharti being prominent telcos.

RJio has been on a subscriber acquisition spree these last few months while the other two large telcos, Bharti Airtel and VIL, have been gradually losing subscribers. The most noticeable churn in subscriber numbers has been seen in VIL, which has otherwise been struggling with payment of past dues to the government and facing frequent news about uncertainty in continuing operations.

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Analysts at Kotak Institutional Equities had listed out several reasons for the subscriber base erosion at VIL and made a comparison of several parameters between Bharti and VIL some weeks back.

Between April-June quarter of 2018-19 (quarter just prior to the merger consummation) and January-March quarter of 2019-20, (a) VIL’s revenues fell from 124 per cent of Bharti’s to 91 per cent, (b) subscriber base shrunk from 126 per cent to 103 per cent (c) ARPU (Average Revenue Per User) fell from 87 per cent to 79 per cent (d) voice traffic decreased from 107 per cent to 75 per cent (e) data traffic fell from 94 per cent to 63 per cent.

Meanwhile, with the tariff increase all telecom companies took late last year, their ARPUs have increased but analysts expected a further doubling of ARPUs by 2023. Their expectation is that RJio, already a leader in subscriber numbers, will corner 45 per cent share of the market by 2022-23, while Bharti may decline marginally to about 30 per cent.

The steepest decline in subscriber market share is expected for VIL, which could go from nearly 28 per cent now to just 20 per cent or just a fifth of the market. This would be a steep fall indeed, considering that VIL was the largest telco by subscribers after the merger of erstwhile Vodafone India and Idea.