Post Airtel’s 4G launch we expect both Idea and Vodafone to commercially launch 4G in select urban cities, mainly from a branding/creating consumer perception perspective. The top 3 telcos are looking to offer 4G to prevent their subscribers from being poached by Jio, which will launch as a 4G-only telco. In our view, both Vodafone and Idea will launch 4G only in select cities (rather than entire states) where they are seeing material data uptake and an increase in improvement of 4G smartphones. Given declining 4G smartphone prices and considering that 4G data tariffs could be cheaper/at par with 3G, we believe that 4G uptake may positively surprise despite a smaller rollout.
Airtel launched its 4G because (1) its 4G network on a limited scale was largely to meet minimum service rollout obligations; and (2) To counter Reliance Jio’s 4G launch by having a first-mover advantage.
With the Jio launch and a focus on high-speed data services, we expect smaller telcos with limited data spectrum (and lack of 4G spectrum) to be marginalized, leading to the top 3 telcos garnering incremental market share. With voice tariffs not inching up and with an expected increase in competition on the data front, we see room for some of these telcos to selectively exit some of the circles.
4G LTE SmartPhone Sales Increase Rapidly
Of late we are seeing increasing sales of 4G smartphone shipments in India, led by scale economies benefits from China. For instance, in 2Q15, 4G smartphone shipments increased 159% qoq to 5.7 mn with almost all the top brands having affordable smartphones below Rs 10K. Based on our discussions with handset cos, we note that most of these 4G smartphones have dual SIMs – thereby helping Jio’s business case as a standalone 4G operator and helping to gain traction despite the lack of a traditional voice offering.
With an increasing array of affordable 4G smartphones coupled with improvement in 4G BTS technology (Single RAN equipment that accommodates 2G/3G/4G base-station in one box), we see telcos launching 4G earlier than expected.