Newspapers are buzz with 4G perceived as a game changer technology which will once again open the floodgates of competition. However, we believe the technological backbone for providing voice services on 4G network is still in nascent stage of evolution and should not pose any substantial threat in the near term (at least 18 months).
Currently, Reliance Jio Infocomm has a pan-India 4G LTE licence and Airtel has started 4G services in Kolkata, Pune and Bengaluru. We believe operators can launch 4G services via three options.
Roll out data services only
In India, people till now have not used data as a standalone service, i.e., without voice (except for dongles). Second, even 3G has just started showing traction with fall in tariff and availability of affordable smartphones. Ergo, data as a standalone proposal may not be lucrative.
4G LTE with VOIP
4G operators can either deliver voice through Skype or can create their own VOIP environment. The only constraint to this approach would be the limited penetration level of smartphones (less than 10%). Currently, a smartphone is mandatory to use voice in VOIP + 4G environment.
4G with VoLTE
The only challenge is that this technology is at a nascent stage and will take at least one year to get into the smartphone market itself; much longer to get into the normal handset market. The pre-requisite is that one needs LTE chipset enabled handphones, which experts believe will come in most smartphones in the next couple of years.
While experts believe that within a year the 4G technology will be ready for take off, we believe it will take longer and that too will be limited to smartphones. So Reliance Jio Infocomm is not at all a near term threat for existing 2G Voice Business.