Airtel, Vodafone and Idea [A-Vo-Id Operators] have come up with a very clever strategy to counter Reliance Jio Infocomm’s Mobile Data revolution. A-Vo-Id lobby will split the Indian Telecommunications services market based on Voice Vs 3G/4G Mobile Data. Justifying their stand, they put up an argument that 2G phones still dominate. Of the approximately 1 billion connections, there are 750m/200m/50m 2G/3G/4G handsets. [We estimate there are 65 Mn 4G handsets expected to reach 100 Mn by end of 2016] The 4G market will move to bundled plans whereas 2G/3G will remain unbundled.
Annual subscriber additions in India is about 75 Mn. A-Vo-Id lobby further assumes around 400m subscriber additions likely over the next 3-4 years which would lead to 800-850m 2G/3G subs and 250m 4G subs. Even though the handset pricing difference between 3G and 4G has converged, incumbent operators who are left with big blocks of 3G spectrum may have plans to differentiate once again between 3G vs 4G to keep their cash registers ringing.
All the 3 incumbent operators are now going for aggressive CAPEX in Urban Markets to push Mobile Data Services via 3G/4G enabled BTS. Data yield is likely to decline 50% (from $4/GB) over 2-3 years.
Airtel has abundant telecom spectrum to counter Jio 4G Data services and other incumbents in Voice offering as well with circuit switch fall back network. Idea renewed its spectrum holdings in 16 key markets for 20 years. The pending circles are low value circles. Idea will transition to a 4G operator with 500m pop coverage in 17 markets and 80,000 4G sites. Idea can service 2x the current subscriber base at twice the current usage with its current data capacity. Vodafone is planning to acquire Telenor and has already got a $6 Bn fresh fund infusion to grow its business in India which will be the largest market outside Europe.
Jio might likely take a leadership position in 4G, Digital Infotainment and Commerce due to their focus if executed well.