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The country's mobile service providers have been adding a combined 6.5 million subscribers every month, making India the fastest growing telecom market in the world.
However, since most of the new subscribers are coming in at the entry level, the money they are making from each - measured as the average revenue per user, arrived at by dividing the revenues by the number of users - has been dwindling.
Bharti Airtel, the country's largest mobile services provider, suffered 4.91 per cent decline - from Rs 427 to Rs 406 a month per subscriber - in its ARPU during the quarter ended March 31 this year compared with the previous quarter. The figure fell 8 per cent when compared with the fourth quarter of 2005-06.
Idea Cellular fared only marginally better, as its ARPU fell 1.6 per cent to Rs 317 from Rs 322 a month a subscriber in the third quarter of 2006-07. However, compared with the corresponding quarter of 2005-07, the figure fell a worrisome 15.1 per cent.
Says Idea managing director Sanjeev Aga: "There are two reasons (for the fall). There was this mandatory reduction in roaming rates, which kicked in in the middle of February and affected both ARPU and rate per minute, and in the fourth quarter, it was for the first time that we took the impact of our three new circles."
It was a mixed bag for Reliance Communications. While its ARPU for the full year remained stable at Rs 377 a month, it was lower 1.3 per cent in the fourth quarter.
"We have been expanding our network coverage and moving to newer towns and cities. With the new customer additions happening mainly at entry-level tariffs, the ARPUs are slated to take a hit," said the company's chairman, Anil Ambani, at the press conference called to announce the company's results. According to TRAI's performance indicator report for the quarter ended December 31, 2006, the ARPU of GSM operators in the C class cities was as low as Rs 280 a month in C cities. For CDMA operators, the lowest was even lower - Rs 175.
Says Sumit Modi, a telecom analyst with Emkay Research: "The increase in customer numbers for telcos mainly happens at the lower usage segment, pulling down the ARPUs. However, with subscribers maturing or becoming comfortable with the service, this trend could see a reversal."
Besides, the falling ARPUs are not a concern so long as the minutes of usage increase, making up for the fall in ARPU.
As Modi points out, all service providers have been recording rising MOUs. Idea registered an increase of 26 per cent in average minutes of usage at 364 minutes per user during the fourth quarter compared with the previous quarter. Bharti Airtel's MOU rose by about 2 per cent to 475 minutes in the fourth quarter from 467 minutes in the third, while RCom's rose to 541 minutes from 454.
Still, what can be done to arrest the falling in ARPU? According to RCom president (wireless) S P Shukla, there is a solution. Increase the usage of value added services and push for more usage of data card and data services.