Four years into the commercial launch of 3G in India, we have tried to analyze the impact of 3G on relative market shares of 3G versus non-3G operators in this note. For our analysis, we have looked at the cumulative change in revenue market share (based on operator-wise gross revenues reported by the TRAI) from Sep 2010 to Sep 2014. We have tried to cut the data in multiple ways to test if 3G has delivered on the competitive premise.
Only three operators have gained RMS in their 3G circles – Idea (+522 bps), Vodafone (+229 bps) and Aircel (+61 bps). Idea is the only operator who has gained market share in all of their 3G circles; the company has in fact gained RMS in all the 22 circles, 3G or non-3G. Aircel’s gains have primarily come from circles where they had low (sub-10%) RMS in Sep 2010; they have not leveraged 3G well in their strong circles, however. Vodafone’s performance across its 3G circles has been a mixed bag – the company has gained RMS in six and lost RMS in three of its nine 3G circles.
Reliance Communications and BSNL / MTNL are classic examples of losing Revenue Market Share 3G or Non-3G as their promoters / CEO do not know what they are upto. In their respective 3G circles (22 for BSNL/MTNL and 13 for RCOM), BSNL/MTNL have lost 249 bps in RMS while RCOM has lost a massive 453 bps.
Airtel has lost an overall (pan-India) 105 bps cumulative RMS between Sep 2010 quarter and Sep 2014 quarter. It won 3G spectrum in 13 circles contributing to 69% of its revenues in Sep 2010 (70.6% in Sep 2014). Bharti Airtel’s RMS in these 13 3G circles combined has stayed flat at around 35.5%.
Idea Cellular’s overall pan-India RMS gain of 448 bps, gains across circles, faster growth in non-3G circles, leadership strengthened in key circles and critical RMS achieved in several challenger circles – there is little one can pick as a negative as far as Idea’s competitive performance in the period under review is considered. The 11 circles where Idea won 2100 MHz 3G spectrum in 2010 contributed 78% of its revenues in Sep 2010; the same came down to 73% in Sep 2014 on the back of Idea growing faster in its non-3G circles.
Vodafone has been the second best player on the RMS gain metric in 3G circles after Idea. The company won 3G spectrum in nine circles (mostly large metro and A circles) in the 2010 auctions. It has gained market share in six of these nine circles but has lost RMS in West Bengal, Gujarat and UP (East); Vodafone has succeeded in gaining RMS on the back of non-pricing factors like network quality, distribution and brand.
Reliance Communication’s RMS loss in 21 of the 22 circles (except J&K where the company has gained a modest 47 bps), a total 464 bps RMS loss pan-India with similar RMS loss across 3G and non-3G circles – we struggle to find a positive in RCOM’s performance in the period under review. The company has been among the big losers on the MNP front and has faced significant decline in its CDMA segment. GSM rollout and 3G launch have failed to prop the company’s fortunes as the company’s stretched balance sheet has meant lack of requisite network investments.
BSNL / MTNL have pan-India 3G spectrum and in general have higher quantum of spectrum than most other operators across circles and have performed the second worst in India in terms of RMS.
It is instructive to note that Idea had spent the lowest among the major operators on acquiring 3G spectrum in 2010. It is safe to conclude on a very important lesson – spectrum spends are not necessarily going to translate into market share gains.