Telcos' subscriber base growth to be modest, says Icra

Growth in telecom-subscriber base is expected to remain modest as operators continue to consolidate their operations by deactivating inactive customers and focusing less on adding  new users, ratings agency Icra said on Thursday.

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"Going forward, the growth in subscriber base is expected to remain modest as the prevalent level of active teledensity (61 percent) indicates limited potential for  subscriber addition, and the fact that there is a  reduced focus on adding new subscribers wherein acquisition costs outweigh the revenue generation," Icra senior vice-president Sabyasachi Majumdar said in a report.

The telecom industry witnessed some positive traction in the last quarter of FY13 in terms of growth in subscriber base with addition of 6.1 million gross subscribers, the report  said, adding that the operators are continuing to  consolidate their operations by deactivating inactive subscribers.

Icra further said another sign of consolidation of operations is the continued decline in churn levels in Q4 of FY13 as reported by three large telcos. This corroborates the reduction in competitive intensity  in the industry and  restoration of some degree of pricing power. While this has allowed most of the incumbents to initiate tariff hikes, the same has not led to material improvement in the rate per minute (RPM) levels so far, it said.

There has been an industry-wide increase in the total minutes on network and minutes of usage per subscriber, which has driven the average revenue per user (Arpu) levels. "Going forward, a 2-3 percent increase in RPM level is  expected given the recent tariff hikes announced by the telcos," Majumdar said.

Icra said data is the next growth driver for the industry and the trend in data uptake has continued its positive growth trajectory, albeit on a low base, though over the past two years the number of data subscribers has been  increasing strongly.

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