Driven by inflationary pressures, SIM consolidation and a slowdown in feature phone upgrades are expected to continue for several more quarters, analysts added. Market leader Reliance Jio lost the most active subscribers, a development that analysts said could delay major tariff hikes in the industry.
“Industry active subscribers declined by 4.5 million in Nov’22 (after a sharp addition of 2.8 million in Oct 2022) due to sharp decline of 3 million/2 million for Jio/VIL,” notes JM Financial in its report analyzing the latest subscription data released by the Telecom Regulatory Authority of India (Trai).
Bharti Airtel, on the other hand, added 1 million active users in November 2022. Active or Visitor Location Register (VLR), the data published every month by Trai, reflects the number of subscribers who are actively using a mobile network.
“Continued underperformance in Jio’s subscriber additions relative to Bharti, as seen on November 22, may lead to a delay in tariff hikes,” analysts at Jefferies added.
Experts attribute SIM consolidation as the main reason behind the decline in Jio’s active subscriptions. SIM consolidation refers to shrinking the number of mobile connections, including multiples, which can typically happen when tariffs rise or when telcos merge, acquire or cease operations.
“Bandwidth is improving, rates don’t vary too much between service providers and there are multiple options for making calls using OTT apps like WhatsApp, so users have less reason to hold multiple SIM cards. And Jio was the most used ‘second SIM’ for data usage,” said Mahesh Uppal, director of ComFirst, a communications consultancy. The decline in active subscriptions reflects a slowdown in the upgrade to smartphones. “From 5 million conversions per month before the pandemic, we are now seeing 3-3.5 million conversions per month,” said Shilpi Jain, research analyst at Counterpoint Market Research, adding that inflationary pressures are the main reason for this phenomenon.
Uppal added that the trend of muted growth in active subscriptions or even a decline is likely to continue for several months as the customer base settles into the single SIM phenomenon. “Telecom companies may not be too worried about subscription numbers as long as revenue is not affected, which it hasn’t been so far,” he added.
Another cause for concern is the drop of 2 million subscribers in rural added networks, said Pareekh Jain, CEO of EIIRTrend.
“With telcos eyeing rural areas as the next frontier for growth, it is a pressing concern whether the trend will continue. City phone density is fairly saturated at 130%. New additions will have to come from the village market,” he said.
In this light, it has become increasingly important for telcos to focus on increasing ARPU (average revenue per user) among urban subscribers to ensure growth momentum, he added.
Airtel saw active subscriber additions (0.1 million additions in Haryana and 0.2 million additions in Odisha) in markets where it increased its base pack tariffs.
The telco discontinued the Rs 99 plan in Odisha and Haryana circles in the second half of November, seeing an 80% increase in outgoing customers for the next Rs 155 plan.
Airtel gained subscribers and market share in both rounds, suggesting a limited impact of the tariff hike on its subscriber base. The full effect of the price hike will be seen in December, analysts at Jefferies said, as the entire subscriber base will not have gone through a recharge cycle until the end of November.