India’s active wireless subscriber data shows diverging trends

Fitch Ratings has announced that the Telecom Regulatory Authority of India’s (TRAI) disclosure since December 2010 of the number of active wireless subscribers based on a visitor location register (VLR) provides a clearer view on subscriber market share and other key operating indicators such as average revenue per user (ARPU).

In particular, Fitch noted that the information diverges from the key data previously reported by revealing that market share for operators may have been distorted by the inclusion of non-active customers in the subscriber count. The data further revealed that the ARPUs of some telcos which have a lower active subscriber base are much higher than reported ARPUs figures.

The VLR is a point-in-time database of active subscribers in a particular cell site. The total VLR count for an operator represents the sum of all active users across all of its cell sites at any given point-in-time. As any one subscriber cannot be present in more than one VLR, this measure provides a more accurate representation of an operator’s total subscriber count.

According to figures published by TRAI on 4 March, active customers at end-January 2011 totaled 548.6 million against a previously reported 771.2 million, reflecting a much lower mobile teledensity of 46.1% against a reported 64.7%. Fitch believes that the introduction of mobile number portability from January 2011 should help reduce the exaggerated total subscriber counts by removing non-active users from the operators’ subscriber books to a certain extent over the long-term.

The TRAI data shows Bharti Airtel, Vodafone Essar and Idea Cellular to be enjoying a higher VLR market share of 26.3%, 18% and 13.9% against a reported 20.2%, 16.5% and 10.9%, respectively. Conversely, VLR market share is lower for Reliance Communications, Tata Group and Aircel / Dishnet wireless with 15.6%, 7.8% and 5.7% against a reported 16.7%, 11.2% and 6.7%, respectively. Mahanager Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited combined also have a lower VLR market share of 9.1% against a reported 12.2%.

The VLR data reveals that operators with a low proportion of active customers have significantly higher ARPUs than previously reported levels. MTNL, for whom active customers only represent 36.6% of its subscriber base, has an ARPU that is 150%-200% higher than the previously reported level. In contrast, Bharti and Idea, both of whom have the highest representation of active customers at 92.6% and 90.3% respectively, are shown to exhibit ARPUs that are only 9%-10% higher than reported ARPUs. For operators like Rcom and Vodafone, with 66.3% and 77.7% of active customers respectively, ARPUs are shown to be higher by 30%-50%.

The data also shows that in terms of network circles, Jammu and Kashmir have the highest proportion of VLR subscribers with 81.3% followed by Assam at 81% and Maharashtra (excluding Mumbai) at 77.6%. Mumbai has the lowest proportion with 59.6% followed by Kolkata with 62.45%.

Fitch believes that new entrants in the sector are facing increasing difficulties with few active customers and an uncertain regulatory environment. For instance, Etisalat DB, Uninor and Videocon Telecom all have a much lower active subscriber base at 33.5%, 46.7% and 49.7% respectively. For private incumbents, barring regulatory uncertainties, the credit outlook is stable on expectations of limited decline in average revenue per minutes and likely strong subscriber growth with moderate wireless mobile penetration. The agency expects telcos to continue investing heavily to expand 2G coverage and roll out 3G networks which should keep free cash flow generation for most Indian telcos in negative territory.

Nevertheless, Indian telcos are expected to improve their weaker balance sheets on the back of the planned sale of stakes in their tower businesses in 2011.