Airtel to shut down 3G pan India, speed up 4G

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1st Gen 4G devices launched in 2012

Bharti Airtel, one of the top three telecom companies in India, said it plans to shut down its 3G network across India over the next six months.

“We intend to shut down 3G services by december,” said CEO Gopal Vittal today, speaking to investors.

The company has already shut down the 3G network in Kolkata, and plans to do so in another 6-7 zones by September.

Vittal said the move will free up about 2 to 3 chunks of 3G spectrum in each circle. This will help the company increase the capacity of its 4G network by about 20%.

Vittal pointed out that the move will not involve any major capital expenditure as there will be no swapping of heavy equipment. It is unlikely to have any major impact — on the plus side or on the minus side — on the operating expenses, he said, adding that it may save some money in the form of lower annual maintenance charges to its network partners.

The addition of new spectrum is likely to further improve customer experience on Airtel’s 4G service.

At present, Airtel uses primarily two bands of spectrum — 1800 MHz and 2300 MHz — to provide 4G services. It has been adding more and more spectrum to these networks as the number of customers increased.

However, pointed out Vittal, the company has more or less fully deployed whatever spectrum it had in these bands.

Any incremental capacity can only be created by splitting existing cells into smaller ones, or by adding spectrum from other bands such as the 3G band (2100 MHz).

Airtel said it did not expect customers to suffer any major inconvenience on account of the shutting down of 3G services.

BETTING ON THE WRONG HORSE

What is interesting is that both 3G and 4G are of similar age in India.

Both were introduced soon after 2010, when India first released 3G and 4G spectrum to its telecom companies.

Airtel won both spectrum in the 2010 auctions, and proceeded to roll out both services soon after. Idea and Vodafone focused only on 3G, while Jio purchased only 4G airwaves.

While Airtel’s 3G services were rolled out across the country, 4G services were introduced only in the big cities, such as Bangalore and Kolkata, which saw 4G launches in 2012.

In the first couple of years, Airtel 4G was however largely used for stationary purposes such as home users. Handsets with 4G support started hitting the market in late 2013 and early 2014 – unleashing the LTE era.

Even though some consultants had been warning that 4G was the technology of the future, mobile companies — particularly Vodafone and Idea — failed to anticipate that LTE would gain momentum in the country so quickly.

Even in 2012-13, when these operators were investing thousands of crores on ordering new 3G equipment every year, it was clear that 4G held the edge as it supported 2-3 times the data throughput compared to 3G using the same amount of spectrum.

Even as late as 2014, Himanshu Kapania — who headed Idea Cellular at the time — was urging the government to issue more and more 3G spectrum, as, in his opinion, 4G was unlikely to take off anytime soon.

“Customers are not ready for it… World wide, in countries like US, Japan and Korea, where 4G has been launched, there 3G penetration had crossed 50% of 2G,” he said at the time.

Equipment makers — eager to monetize their R&D investments into 3G — too pushed the idea that 3G would first become mainstream and be then followed by 4G.

The situation led to Idea Cellular and Vodafone both more or less ignoring 4G and focusing on 3G. “With India’s per-capita income, we cannot afford expensive LTE, both in terms of equipment cost and handsets,” Kapania said in July 2014. “It is only when the adoption around the world reaches billions of customers, when the overall ecosystem becomes far more favorable in terms of equipment supply as well devices that LTE should be launched.”

However, Mukesh Ambani’s Reliance Jio Infocomm changed the rules of the game by launching a humongous 4G network a few months after Kapania said the above words, and followed it up by flooding the market with cheap LTE handsets starting at Rs 2,999.

Given that the cost of delivering data on a modern 4G network like Jio’s was a fraction of the cost of doing so on the existing 3G networks, Jio was able to sell 4G data at around Rs 3 per GB, while these operators were selling 3G data at Rs 250 per GB.

The ensuing crisis led to the many of the telecom operators shutting down, while Vodafone and Idea were forced to merge their businesses and invest tens of thousands of crores of rupees to re-architect their network and focus it on 4G.

Even today, Vodafone Idea — the merged entity — is still in the process of re-architecting its network and is expected to finish the effort by June next year. The company is expected to stop making the kind of losses that it continues to make once its new network is in place.

Bharti Airtel was quicker to realize the writing on the wall for 3G, and started investing in its network to upgrade and modernize it under a program called ‘Project Leap’ in late 2015.

It is also likely that none of the three companies fully recovered the investments they made in their 3G networks, even as they today prepare to switch off 3G services.

On a positive note, much of the equipment purchased for running 3G services, including the antennas, can be re-used for delivering 4G signals.

So far, Vodafone Idea has made no announcements about switching off its 3G service entirely. It is, however, likely to do so soon after Airtel does so.

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