40 Months after the Launch of Airtel 3G Wireless Data Services in India, the company has been able to reach 25% of the coverage it provides on 2G. [We restrict ourselves to Airtel India Coverage] In the last quarter, Airtel saw an acceleration in 3G footprint expansion with the company adding 3,122 node-Bs qoq to take the end-quarter count to 31,301. 3G data usage growth is much faster than 2G data usage growth. 2G data yield is similar to 3G yield due to smaller denominations in 2G. Yield erosion in 4Q is still being studied. Though demand is strong, promotional offers to lure more users impacted yield. Also higher weightage of pay-as-you-go rates have dragged data yield down.
Airtel added 3.6 Mn data subs to its base and ended FY2014 with a data subs base of 58.1 mn (28% of total subs). 3G Subscribers were 11 Mn. Data volume growth was a healthy 20% qoq and 95% yoy to 46.7 mn MB. Data revenues grew 12.3% qoq and nearly 90% yoy to Es 13.2 bn. Data now forms 11.2% of Airtel India’s wireless revenues. Usage per sub improved further to 277 MB/sub/month while data realizations fell 6% qoq to 28.4 paise/MB.
In the Analysts Call, management highlighted that 3G will drive data growth in near term. In the next 18 months, 4G devices may reach US$100 price point spurred by China Mobile deployment, but 3G devices would be close to US$35-40 mark by then. When Bharti does rollout 4G, it will use 1800MHz to build coverage layer use 2300MHz as capacity layer.
Operationally, things appear to be broadly stable but the risk obviously is if/ when/ what Reliance Jio will do and how others react. Even though we, and others we assume, would have built in some conservatism on market shares and pricing outlook from here on, it is still an event and we need to watch.