Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

4G launches may taper off with first phase almost complete

Analysts expect the next round of circle launches to happen as late as November or December, after the next spectrum auction is concluded

New Delhi: Now that the leading telecom service providers (telcos) have almost completed the first phase of deployment of 4G (fourth generation) services, the launch momentum of high speed wireless data services in India is likely to taper off—until Mukesh Ambani-promoted Reliance Jio Infocomm Ltd (RJio) launches its services.

This means that the next phase of 4G launches, at the circle level, could be as late as the third quarter of the next financial year.

Till date, Bharti Airtel Ltd has launched 4G services in 15 circles, Idea Cellular in eight and Vodafone India Ltd in five circles. While Bharti is expected to roll out its services in one more circle—Madhya Pradesh—Idea is expected to launch in two more circles, Maharashtra and the North East, by March 2016. Vodafone said it completed its first phase of circle launches last week with the rollout in Mumbai.

“They (the telcos) will focus on expanding the network within these circles where they have launched 4G and continually improve the 3G services in the remaining circles. The circles where they have launched the services are where they get the highest data revenue. They have most of their high-end subscribers here," a Mumbai-based telecom analyst with a multinational brokerage firm said.

“The first move advantage in these circles allows them to retain the revenue market share and keep the valuable high-end subscribers from Jio," added the analyst who did not want to be named.

On Sunday, in an interview with Fareed Zakaria on CNN, Ambani said that R-Jio would commercially launch its services in the second half of 2016, covering as much as 80% of the population.

In an interview last week while his company introduced the service in Bengaluru, Vodafone CEO Sunil Sood said the 4G ecosystem had yet not developed to the extent where it made sense to launch the service everywhere.

“Out of our 194 million customers, 70% have a data-enabled handset of any type. Only 30% of them have a 3G-capable handset and about 40% of them have only a 2G-capable handset. Only 4% have 4G-capable handsets. These are the numbers as of January," Sood said.

“The 30% who have 3G handsets are being provided 3G services. So, today, when we roll out 3G in any city, town or village, there are only 30% of 194 million, close to 60 million, whom I can target. There has to be an ecosystem," he added.

Vodafone has plans to focus on expanding its 4G services in these circles while improving 3G services in the remaining 16 circles where it has spectrum.

Similarly, Idea Cellular that launched its 4G services in Odisha, the eighth circle, is expected to launch services in Maharashtra and the North East by March 2016.

Following this, the telco is expected to launch services in Gujarat and Western Uttar Pradesh circles by June 2016, using spectrum it acquired from Videocon Telecom last year.

In an interview in January, Himanshu Kapania, MD, Idea Cellular said he expected the 4G ecosystem to take another two-three years to fully evolve in India.

“In Idea’s 180-million total subscriber base, there are 55.5 million smartphone owners and about 6.2 million 4G handset users," he added.

On Sunday, Bharti announced that it had upgraded its 4G network in Kerala to give speeds as fast as 135 Mbps. The company had started rolling out its 4G services in 2012 in Kolkata and Bengaluru. After a brief pause, it started offering its services across the rest of the country, including Kerala, in August last year.

Analysts expect the next round of circle launches to happen as late as November-December, after the next spectrum auction is concluded.

“They will first compete on the quality of the services and content discounts and things. The incumbents will compete on availability in key areas. The telcos will go in to saving mode for now, since there is likely to be a tariff war once R-Jio launches, and then there is also the spectrum auction," the unnamed analyst cited above, said.

Bharti, Vodafone and Idea did not respond to email queries on the issue.

Meanwhile, Mumbai based Credit Suisse Securities Research & Analytics, took note of R-Jio’s “enviable" spectrum holdings.

“Over the last 24 months, R-Jio has swiftly acquired large amounts of spectrum in the 1,800 MHz and 850 MHz bands through auctions, and sharing or trading deals with Reliance Communications Ltd (R-Com) led by Anil Ambani," the 21 February report by Credit Suisse said.

“We see R-Jio increasingly moving towards probably the best spectrum holdings across private operators in India. Currently being the only operator with pan-India sub-1 GHz liberalized spectrum, and 30% share of all liberalized spectrum (vs 20% for Bharti Airtel Ltd), R-Jio’s spectrum portfolio has now become quite enviable," the report said.

P.R. Sanjai in Mumbai contributed to the story.

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