Despite acquiring good quality 800 MHz spectrum there is not much clarity on potential 4G launch by new entrants. However if the current 800 MHz spectrum can be converted to contiguous blocks, and at later stage if 4G entrants can add more spectrum in the same band, we would view that as meaningful risk for incumbent telcos.
Given its premium pricing, Bharti could be more vulnerable to any potential pricing disruptions caused by 4G new entrants (assuming new entrants launch in metro markets to begin with). However we have seen that high end subscribers are more sticky and hence
such concerns may not entirely play out in our view. Furthermore with Bharti deploying 900 3G network in metro markets, the subscriber churn could be limited in our view. On other hand 4G launch by new entrants may accelerate the need for Idea to deploy 4G at least in the key circles and may put meaningful pressure on capex and network costs in our view( particularly Idea will need a
catch up on backhaul investments with 4G upgrade). To sum up both Bharti and Idea will have their own set of challenges as and when 4G new entrants launch 4G services.
If RJio decides to get aggressive on pricing in order to gain market share, it might cause pricing pressure for both voice and data after the company?s entry. The question is not whether RJio will be successful and has worked out its economics, but whether RJio can inflict enough damage on the incumbents over the medium to long term. We think RJio can inflict damage.
