Strategy Shift: Telcos Prioritise Subscriber Retention Over Acquisition In Response To Stable Market Trends

In a significant shift in strategy, telecom companies in India are focusing on retaining their existing subscribers rather than acquiring new ones.

This move comes as data usage continues to grow at an unprecedented rate, and competition in the industry remains fierce.

In India, tele-density has been growing rapidly over the past few years, driven by the rapid expansion of mobile networks and the increasing affordability of mobile devices.

As of September 2021, the overall tele-density in India was 88.09 per cent, with 1.18 billion active mobile connections and 23.4 million active fixed-line connections.

Based on data from January 2023, the urban tele-density is 134.02 per cent, whereas the rural tele-density is 57.68 per cent.

These figures suggest that the rural market will account for the majority of the next wave of subscriber increases, although it will take some time for this to happen.

Shift In Strategy Of Telcos

Telecom companies (telcos) have traditionally focused on acquiring new subscribers to increase their market share. However, with data usage increasing rapidly in India, companies are now focusing on retaining their existing subscribers.

Telcos employ a variety of techniques to attract new subscribers, including tariff disputes, increased data caps, bundled OTT offers, and more. These tactics are intended to capture subscriber attention and turn it into subscriber market share.

Airtel Leads

As the telecom market in India has stabilised, it is becoming less likely that any significant subscriber additions will occur.

Therefore, it is now more important to track the active or VLR subscriber market share rather than the total subscriber market share.

In this regard, Airtel currently has the highest active/VLR subscriber base, while Jio is improving its position.

As of January 2023, Airtel continues to lead in active/VLR subscriber share with 99.3 per cent, followed by Jio at 92.6 per cent and Vodafone Idea (Vi) at 87.2 per cent.

During the Covid pandemic, there was a high rate of SIM consolidation as many subscribers using multiple SIMs switched to a single SIM. Airtel's focus on high average revenue per user (Arpu) subscribers helped it clear inactive and low Arpu subscribers, leading to a healthy VLR subscriber ratio.

Over the past year, there has been a consistent decline in Vi's net active/VLR subscriber addition trend, with the exception of a minor addition in March 2022. This indicates a port-out of subscribers from Vodafone Idea to either Airtel or Jio. 

In January 2023, the industry added 3.9 million active subscribers, with Airtel capturing 1.3 million, Jio capturing 3.5 million, and Vi losing 0.5 million subscribers

Growing Competition

The increasing trend of mobile number portability (MNP) in India indicates a rise in competition among telecom companies. MNP, which allows subscribers to retain their mobile numbers while switching to a different service provider, has made it easier for customers to switch operators and take advantage of better pricing and services.

The implementation of intra-circle MNP in 2011 and inter-circle MNP in 2015 has facilitated the movement of subscribers between operators and circles. While this has been beneficial for subscribers, it has made retention a challenging task for telcos, as they face increased churn and competition for customers.

To maintain their active/VLR subscriber market share, telcos have been adopting SIM-consolidation strategies.

However, the launch of Reliance Jio's 4G services in 2016 disrupted the market and changed the competitive landscape. Jio's aggressive pricing and focus on data commoditisation attracted a large number of subscribers, especially from rural areas.

Jio's entry also led to an increase in MNP, as subscribers switched to Jio from other operators. This forced other telcos to respond with competitive pricing and attractive services to retain their customers.

Way Forward?

Despite no clear trend visible in the net VLR subscriber additions of Airtel and Jio, both telecom operators continue to add subscribers, largely at the expense of Vi. Since Vi has not yet introduced 5G services, this trend is expected to persist unless the company embraces 5G.

Many wonder if 5G technology will improve subscriber additions and reverse the stable market share trend and increasing competition shown by MNP numbers.

However, 5G is mainly positioned as an enterprise-focused technology, and it is highly unlikely that it will result in significant subscriber additions.

Rather, the introduction of 5G is more likely to increase MNP, as Airtel and Jio are actively offering introductory deals, while Vi has yet to announce a clear roadmap for 5G.

In the next few months, there is a chance of another strategic battle among telecom operators, but this time, it will be more focused on retention rather than acquisition.