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Idea Cellular likely to expand 4G offers this year

Idea Cellular, India’s third biggest telecom player by revenue, is likely to see its 4G data capacity rise to three times the current level over the next nine months, which is likely to push the price of data down further.

This could impact Reliance Jio’s ability to stop its discounts and move to ‘full pricing’ by end of 2017 or early 2018.

In the three months from April to June this year, Idea’s data price fell by more than half to about 52 rupees per GB compared to the three months before that.

However, going by its aggressive 4G network expansion plan, these prices could decline even more this year. Besides the supply factor — Idea’s limited success in getting its customers to take up 4G plans also point towards further decline in data rates for the company.

NETWORK EXPANSION

Idea indicated that it would grow its 4G network capacity by three times in nine months.

In the three months ended June this year, Idea Cellular added 5,700 4G towers, taking its total to 46,576. In comparison, it added only around 1,600 3G towers, taking the number of such base stations to 70,810.

The company said it is currently using only 30% of its 4G network capacity.

By the time it is through with its expansion program for this year, the company said, its total capacity would be 10 times larger than the current 4G traffic, implying that it would be 30% multiplied by 10, or 300% of the current capacity.

LOW TAKE-UP

Besides the increasing supply, the second factor pointing towards low data prices is the poor response so far from the company’s subscribers to its 4G offerings.

Like Reliance Jio, the company offers 1 GB per day for 84 days for Rs 400. Idea extends the offer to those are seen as customers at risk of being snatched away by a competitor. In this case, these are primarily those with 4G handsets. As a result, nearly everyone on the company’s network with a 4G phone is eligible to get its Rs 400 offer.

However, it has had limited success in persuading its these subscribers to use its network for data.

For example, Idea had 32 mln 4G handsets on its network in June, out of which only 6.5 mln have also subscribed to 4G data packs.

This suggests the company is able to convince only 20% of its 4G device users to put their Idea SIM on the 4G-enabled slot of their devices and use it for data.

Moreover, the number of 4G devices is also rising fast: 7.5 mln Idea users upgraded to 4G devices between Apr-June. However, instead of increasing the number of data users on its network, this actually decreased the number because the buyers of these new 4G phones preferred to get another company’s SIM card — such as that of Jio — instead of activating Idea’s LTE service.

In an ideal situation, at least half of this 55 mln subscribers should be using their Idea SIM for accessing data.

However, to increase the proportion from 20% to 50%, the company will have to be more aggressive with its tariffs and promotions — which indicates that prices have only one way to go.

DATA EXPLOSION

But if it is able to do so, this can also mean an explosion in data traffic.

If 4G device growth continues at current rates, the company will have about 55 mln 4G device users on its network, almost all of which will be dual-SIM devices.

Unlimited, or daily-data users on the network consume about 5-6 GB of data per month, slightly less than the 8 GB or so consumed by Jio’s customers.

As a result, 22 mln users on unlimited 4G plans will consume about about 130 mln GB per month. In comparison, Idea’s current 4G data traffic is around 22 mln GB, and taking it to 130 mln implies a six-fold jump.

The company also said that it would carry out its expansion in such a way that when it is time to complete its merger with Vodafone India, the two companies will have complementary networks and coverage. In other words, Idea’s roll-out of network will be focused on those areas where it dominates, while Vodafone will focus in areas where it is stronger.

Even though the total number of 4G base stations increased only by 14% in the last three months, the number of people covered by the company’s LTE signals jumped by 30% to 35.3 cr, spread over 20 license areas out of the total 22 in India.

This indicates that much of the incremental towers were installed to expand the geographic footprint, rather than to increase the data-carrying capacity of the existing network.

In comparison, main rival Reliance Jio Infocomm has its signal covering a population of around 125 cr people.

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