EBITDA margins expanded on the back of better network utilisation, especially for Idea. The management contends that its network utilisation metrics lags that of Airtel and that it is yet to realise further margin upsides due to this.
Airtel outperforms Idea in network optimization: Two important metrics of network utility – minutes per co-location and revenue per co-location – suggest that Airtel is well ahead of Idea in leveraging in current infrastructure as shown below.
Airtel’s ability to monetise its co-locations supersedes Idea’s. A possible reason for this could be Airtel’s urban presence. According to the latest TRAI figures, Idea has the largest proportion of rural subscribers amongst all the operators in the country. Urban presence would increase utilisation per tower given the higher density of population. Furthermore, note that Idea has 1,800MHz spectrum in majority of the circles. Being of poorer spectral efficiency, the band requires more towers to achieve similar coverage as 900MHz, thus increasing tower-related expenses.
Bharti Infratel’s management stated that telcos have been withdrawing from cell sites in new areas and are instead looking to strengthen their coverage in their strong holds to provide better service there. Added to this, better addition rate of 3G subscribers seen in the previous quarters should improve this metric further.
Primary drivers for further growth could be higher usage per subscriber, especially is less-penetrated circles and more prudent infrastructure investments. Reducing competitive intensity may allow the incumbents to rationalise their investments in areas, with poor realisations and could encourage more sharing-based agreements like 2G ICR.