Fewer new subscribers a worry for GSM players

Rising tariffs and retraction of freebies seem to be responsible for falling subscriber additions.

As per the Cellular Operators’ Association of India’s (COAI) report on GSM subscriber numbers released on Thursday, mobile subscriber base registered a marginal on-year growth of 0.47% in May with an addition of 3.11 million subscribers, taking the total GSM subscriber base to 667.56 million, up from 664.45 million in April and 660.9 million in March.

Sequentially though, the 3.11 million additions in May were lower than 3.51 million in April and  5.35 million in March.

The moderation in additions in May was seen in both Idea and Vodafone (0.87million and 0.9 million, respectively, against additions of 1.3 million and 1.4 million in April).

Only Bharti saw a rise in May additions to 0.85 million from 0.6 million in April.

In the last few months, GSM incumbent operators Bharti Airtel, Vodafone and Idea Cellular have discontinued free minutes and withdrawn discounts to pare rising cost of capital expenditure.

However, operators like Aircel and Uninor, which continue to offer discounted tariffs, have succeeded in adding more subscribers.

Aircel more than doubled its subscriber additions in May, adding 280,000 new subscribers compared to only 100,000 in April. Uninor and Videocon added around 150,000 new customers each in May.

Telecom analyst Rumit Dugar of Religare said, “Of the 3.1 million additions in May, as many as 2.4 million came in B circles. Metros continue to remain muted at 0.2 million. However, surprisingly, A circles had negligible additions, with Karnataka, Andhra Pradesh and Maharashtra seeing heavy subscriber declines which drove the weakness.”

Dugar thinks that sub-penetration is moderating and the fourth quarter (January-March) of last fiscal, which saw a spurt in additions, was more likely an aberration, led by exit of certain telecom companies (telcos).

Idea, Dugar said, is expected to outperform the industry in terms of subscriber additions, but other telcos would continue to stagnate, given the slowing growth environment, risk of imminent entry of Reliance Industries, stretched balance sheets and regulatory uncertainty.

Mohammed Chowdhury, leader - telecom, PwC India, said, “Growth in subscriber additions has slowed from 30% three years ago to 10% now and is likely to become 5% within the next 2-3 years. This is the normal growth curve for any mature market, where, after a point, telcos have to focus more on customer experience, new features and data to maintain subscriber base. The recent drop in 2G data tariffs is a way to increase data usage.”

However, Rajan Mathews, director general, COAI, said, “New subscriber additions will continue to hover around 3-5 million per month, as opposed to 8-10 million additions per month earlier, due to decreasing discounts, business consolidation, cautious environment and urban saturation. Now, telcos have to expand coverage to rural and Naxal areas to increase subscribers. We’ll still reach the 1 billion subscriber mark. But it’ll now take two years instead of one.”