Idea Cellular see double-digit growth in Voice, OTT Threat to Long Distance Calls

Idea Cellular Focus on 2G OTT AppsThe management of Idea Cellular reiterated that it expects double-digit growth in the voice business as industry is still at ~62% VLR penetration, which offers strong growth opportunity in the voice business. However, one should note that IDEA’s FY14E traffic growth decelerated to 9% vs 17% in FY13, due to lower subscriber growth, so isn’t the Idea management a bit over optimistic here ?

How Idea Plans to Migrate users from 2G to 3G ?
IDEA’s 3G users consume 2.5x data vs 2G users, leading to higher data traffic on the 3G platform. Data subscribers currently stand at nearly 20% of the total, but 3G users are just one-third of data subscribers. The company targets to shift 2G subscribers to the 3G platform and incrementally adds 3G users to increase data traffic and capacity
utilization levels of 3G cell sites.

Idea sees OTT (Viber, Skype, etc) as threat to ISD / Long Distance Calling
IDEA management says the cost arbitrage for data consumption on voice over OTT vs a regular voice call is high on ILD and NLD calls, thereby affecting long distance calling; however, due to local call rates being low in India, the arbitrage is minimal. Our discussions indicate there is no specific math done to understand the revenue impact, and telcos could be negatively surprised by the revenue impact. Usually, voice over OTT requires 3G connection, which may offset voice revenue loss partially by increased 3G adoption.