Content next telecom battleground as videos drive data consumption

Content will be the next battleground for telecom players at a time when video streaming over various applications including YouTube, Netflix is driving the boom in data consumption in India.

Affordable data tariffs ushered in by new telecom player Reliance Jio in late 2016 led to this massive data boom which Indians have latched onto, not only in metro cities but also in states including Bihar, Assam, Uttar Pradesh, Odisha, Karnataka and Kerala.

Data is the only silver lining in the otherwise stressed telecom sector, which is offering voice calls that are virtually free.

Over the top players such as Netflix, Amazon Prime, Zee5, Hotstar, ALT Balaji have been critical to the data growth in 4G mobile services. Also, telecom operators including Airtel, Reliance Jio, Vodafone Idea already have their own application for streaming movies, TV shows, including regional content.

Experts say going forward key will be content offerings as tariffs have more or less become same across telecom service providers. The differentiator will be various content offerings through OTT (over the top) applications.

"The competition in the mobile space is set to move beyond tariffs and adding new use cases for data like content will become increasingly important to boost both data adoption and usage, which, in turn, will drive Arpu (average revenue per user) for telcos," analysts at CLSA said in a report.

As per a recent report by Ericsson, smartphone subscriptions in India are likely to grow from 560 million in 2018 to 1 billion in 2024 and data traffic per smartphone per month is expected to grow at a compounded annual growth rate of 14% from 6.8 GB in 2018 to 15 GB in 2024.

According to the note by CLSA, Bharti Airtel's expanding content partnerships have helped its video OTT platform gain 66 million subscribers since FY17. These partnerships are boosting mobile data usage and driving down churn to multi-year lows and adoption of data/bundled plans (voice+data) is key to Arpu recovery.

"Content will only achieve greater relevance as we move ahead. However, there are two support systems that have created artificial demand. One is the abnormally low data cost and second is that most of these services are either free or at a nominal price. For instance, Amazon Prime membership," said Faisal Kawoosa, founder of consulting firm TechArc.

However, it will be critical to see the reaction of the market once these freebies/low-cost offers are done away with, he added.

Currently, through various partnerships with broadcasters like Star, Zee and others, telecom players are bundling various forms of contents – TV shows, movies in many languages, kids content, etc.

"There is also a need to focus on creating content beyond entertainment. Right now, the content is just being enabled through another technology... whatever is available on TV through DTH, cable is being now enabled through the internet. This is the first step. The operators need to invest now in other forms of content which can be uniquely served through internet," Kawoosa said.

OTT industry in India is expected to reach a size of $5 billion by 2023, as per the findings of a report by The Boston Consulting Group titled 'Entertainment Goes Online'. Rural areas will play a big role in OTT consumption. About 48% of India's internet users (around 650 million by 2023) are expected to be from rural areas. "With increasing mobile penetration in tier-3, tier-4 and rural areas, there will be many consumers who will be OTT-first, who have never consumed content on TV," the CLSA report said.

Though data usage has been on an upswing, the margins or Arpu is on a constant decline. The number of internet users has been growing at a fast pace as access to data services and 4G-enabled handsets became affordable with the entry of Reliance Jio.

India has over 1 billion mobile users, but only 50-60 % of users are still on the 2G network, i.e, not on the internet. The battle for next round will be fought for these 2G users where every telecom player will compete to get the maximum pie of this number.

An aggressive competition in the telecom sector is expected to spill over to the coming year as Reliance Jio will continue to dominate the 4G space for the next six to twelve months. This means mobile tariffs are unlikely to go up anytime soon as Reliance Jio is unlikely to go for any tariff raise till it reached 400 million subscriber base, analysts said.

DATA IS KING

• Affordable data tariffs ushered in by Reliance Jio in late 2016 led to this massive data boom 
   
• Data is the only silver lining in stressed telecom sector