The just in time execution telecom specialist in India Idea Cellular owns 3G spectrum (900 or 2100 or both) in all of its top-5 circles and nine of its top-10 circles (except Karnataka, where it owns LTE spectrum). Idea owns LTE spectrum (1800 band) in four of its top-5 and six of its top-10 circles. It owns either 3G or LTE spectrum in all of its top-10 circles and owns 3G and LTE spectrum in five of the top-10 circles. Idea’s 3G spectrum footprint covers nearly 80% of its revenues, LTE footprint covers 61%, 3G or LTE footprint covers 87% and 3G and LTE footprint covers 53% of its revenues.
Having spectrum is important of course and so is having a certain minimum threshold; however, the linkage between spectrum market share and revenue market share is way too weak for drawing any conclusions based on this spectrum market share metric alone. Sample this: with roughly the same quantum of spectrum holdings as Idea, both RCOM’s and Aircel’s revenue market shares are less than one-third of Idea’s.
Going forward, (1) there will be opportunities to fill these footprint gaps in the form of the future auctions and/or spectrum trading transactions, and (2) ICR arrangements, at least on the 3G front, are serving and can serve as a stop-gap solution for some time. Lastly, on this aspect, given that we expect Idea to fill the gaps in its 3G/LTE spectrum footprint over time, we see reasons to worry only if not having 3G or LTE is going to be a material challenge in terms of the company’s ability to protect or grow its revenues or revenue market share.
Empirical evidence on the 3G front suggests that having (or not having) 3G spectrum has not impacted relative market share movements in the past five years and Idea’s 3G/LTE spectrum footprint covers its key circles fairly well; criticality of 3G/ LTE spectrum flows from the risk of losing quality subs on account of inability to offer these services. Now, does Idea own quality subs in circles where it is 3G/LTE spectrum-short at this point? Selectively, yes; but the gaps are not at all material enough for this to aspect to deserve the level of worry we see from some sections of the street.