Vodafone sees scope for further market growth. India remains a young market, with 50% real penetration. The top 3 operators are taking market share overall, (ca90% of market revenue increase), and also Vodafone sees towers (Indus) as a source of value.
Vodafone is of the view that post the recent spectrum auction, all of the operators (large and small) believed that voice prices would likely rise, partly in order to offset the high costs of spectrum (and debt-laden balance sheets). This can of course occur without headline price increases, as the realised rate is significantly below advertised due to discounting, which will likely decrease in our view. The regulator also agreed with this logic.
Vodafone on Mobile Data Growth
All the major operators cited how they saw a clear strong demand from smartphone data, with scope for further upselling and usage as 3G penetration remains modest. Spectrum scarcity prevents many of the smaller operators from competing effectively in a data world, with the recent auctions showing a further consolidation of the lower frequency spectrum. There are pockets of disruption, such as cheap CDMA dongles, but pricing appears rational.
The Vodafone Network
Vodafone Doubled 3G sites in 2 yrs. Vodafone reckons speeds are 20-40%+ above next best peer. Will start 4G rollout this year, but slowly. Have focused strategy on network densification due to spectrum shortage. Some sites less than 100m apart. Only 10,000 sites have fibre backhaul (7% of total – increasing 1pp per year).
On Reliance Jio Infocomm’s Entry
Most of what we see and hear suggests RJio’s business model opens up a new household broadband revenue stream in India that has the potential to create significant value on a 3-5 year view, rather than being an outright disruptor upfront. Vodafone sensed Jio is likely to target the TV and Dongle market near term rather than simple voice / smartphone data which remains a limited part of Vodafone revenues. Reliance Jio remains a material longer term threat in India, in the near term there is uncertainty around strategy, pricing and timing for the upcoming Jio launch. We do not expect any major impact in 2015.