Telecom operators to boost network coverage, capacity in small towns, villages

According to data from investment research firm Bernstein Societe Generale Group, consumers in tier-II cities use more data compared to metros, at 35-40 GB per capita per month, which is 15-20% higher than metro cities. “Peak volumes of 50-60 GB have often been observed during sporting events like Indian Premier League," the research firm said.

It added that the amount of time Indian 5G users spend with an active 5G connection in tier-II cities is catching up with major cities. Tier-II cities such as Jodhpur, Ranchi and Lucknow are in the 35-40% 5G penetration (5G device/5G subscription), which is comparable to tier-I cities (40-45%), the research firm said in a note issued in October.

India telecom companies have seen strong growth, led by monetization across tier-II markets and increase in average revenue per user or Arpu amid rising subscriber demand.

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“We have rolled out more than 39,000 sites with continued expansion underway to cover the gap in five key circles... We believe that a bulk of the expansion is now done and our focus going forward is to sweat our deployment." said Gopal Vittal, vice-chairman of Bharti Airtel said last month at the second-quarter earnings call.

While Airtel did not comment on the recent contracts signed with network providers Ericsson and Nokia to deploy 4G and 5G across the country, a good part of it will be to enhance capacity in non-metro areas, said people aware of the details.

Beyond metros

The focus on the lower-tier markets also stems from the rapid increase in revenues they’re seeing when compared with metros. According to analysts at Jefferies, telcos’ revenues in the quarter ended September grew 7% year-on-year in metros, which lagged A and B circles that grew by 13%. Revenue grew the fastest - at 15% - in C circles. While active subscribers declined in metros, by 0.1%, A-circles witnessed sub-1% growth and B and C-circles saw 2-3% growth. “Arpu growth was 11-13% YoY for A/B/C-circles, but 7% YoY for metros," Jefferies analysts said.

Metros, A, B and C are categories of telecom circles or regions based on population or consumer base and revenue generation capacity. While metros have the highest population and revenue generation capacity, C category circles have the lowest on both counts.

Reliance Jio’s subscriber mix in tier-II and beyond grew at a 34% CAGR during FY17-FY24 and now stands at 212 million, accounting for 44% of its total subscribers. Jio has been able to capture more share compared to rivals on the back of JioPhone, a feature phone equipped with 4G capabilities, aimed at the broader population. it also offered a special tariff for JioPhone subscribers, to gain market share in tier II/III cities and towns where feature phones dominate. “Jio also aimed to capture the new set of subscribers where Jio would be the primary connectivity provider and not the second SIM as it was in the urban market in FY17," Bernstein said.

For Vodafone Idea, catering to the lower-tier markets is part of its network roll-out plan for the next three years, as it intends to invest ₹50,000-55,000 crore to enhance capacity and coverage pan-India, as well as to provide 5G service in key circles.

“In addition to renewal of 900-MHz spectrum in UP West and West Bengal circles, we also enhanced our 900-MHz spectrum holding in seven circles, namely Andhra Pradesh, Tamil Nadu, Karnataka, Punjab, Rajasthan, UP East and Kolkata. This enables us to dedicate adequate 900-MHz band spectrum for 4G, thereby enhancing the experience of our 4G customers in these large markets," chief executive officer Akshaya Moondra said in an earnings call last month.

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