India's RCom - Higher Than Average Usage Fails to Produce Premium ARPU

In terms of customers, Reliance is second to Bharti, with 18% market share, just ahead of Vodafone which has 17.6%. It operates both CDMA and GSM networks, with 46.8m customers using the US technology and a further 9.2m connected to GSM. The CDMA base grew 9.7% in the quarter, adding 4.1m connections, while GSM's 1.1m new customers equated to a 13.9% growth rate. On a year's view, the discrepancy is even more notable: CDMA produced a gain of just under 50%, while GSM far outstripped this, with an 83% improvement.

The Indian market is characterised by high levels of use. Reliance's AMPU dropped from 490 to 423 over the year, but the decline between the quarters of just one minute suggests this downward trend may be levelling out. That, in turn, suggests that the decline in ARPU which has characterised the last several quarters may also begin to flatten - though the chart (left) suggests this might be wishful thinking. ARPU has declined in each of the last six quarters, falling from Rp361 in Q3 07 to Rp271 in Q3. This is a 25% drop, though the most recent quarter was only down 3.9%. By way of comparison, Reliance's main competitors earn rather more from their customers. They too have seen reductions, but in Q3, Bharti reported Rp335 (after Rp350 in Q2), while Vodafone (India's third largest operator) reported Rp 305.

These numbers have, for the moment, been given precious little help from data or messaging services. Reliance's SMS ARPU peaked in Q1 07 at Rp6.41 and has been in continuous decline since then, dropping to Rp3.25 in the latest quarter. Spend on data is almost unchanged over the eleven quarters shown here, starting at Rp16.69 and ending at Rp 16.53. An optimist would say this represents a huge growth opportunity.

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