Airtel’s 4G LTE a Contrarian Approach to Incumbent Idea Cellular

4G LTE Network AirtelAirtel’s Mobile Data traffic growth of ~18% qoq was much better than that seen in past two quarters while pricing decline accelerated to 4.7% qoq; data usage/sub jumped 8% qoq to 706MB. Although churn rate increased 80bps qoq to 3.3%, company attributed this to focus on acquisition of rural subscribers even as churn is still at industry leading levels. Data revenue grew 67%/12% YoY/QoQ. Sequential data revenue growth was higher than Idea’s 10%. ARMB fell 4.7% QoQ to 25.6p. Of Airtel’s total customer base, 9.3% is on 3G compared with Idea’s 10.3%.

Airtel Mobile Broadband Network Expansion
Airtel added 4061 3G sites in 1Q, lower than in 4Q but in line with average run rate in recent quarters. 3G BTS count is 36% of 2G BTS count for Bharti. In addition to this, Airtel also has >20,000 4G-LTE BTS, which it targets to take to 40,000 by end-FY16. Airtel emphasized that they are well-positioned to take advantage of this growth as they have already rolled out 4G services in 50 cities, which account for about 2/3rd of the country’s data revenues.

Contrary to Idea Cellular management, Airtel Management expects a rapid proliferation of 4G devices at Rs. 6k‐7k over next 2 years or so but still there would be a large number of 3G devices available at Rs. 3.5k which would drive demand for 3G services. Airtel now has 21mn 3G users and 49.5mn data customers as compared to 17mn 3G subs and 37mn data customers for IDEA

Airtel has a strong traction in India mobile and data traffic is likely to sustain given the virtually complete pan India owned 3G footprint (except Kerala) and roll out of 4G services in the top towns.

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