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Idea Cellular sees no war with Reliance Jio, hopes for partnership

ideaIdea Cellular said it does not expect a huge impact on data prices in 2016 due to the entry of Reliance Jio into the market, and said there will no battle of the corporates with the launch of latter’s 4G services.

However, during the three months ended December, Idea saw its data pricing fall by about Rs 11 per GB to around Rs 223 per GB from 234 per GB for the three months before that.

Over the last one year, the company has seen a decline of 17% in its data prices, which,Idea CEO Himanshu Kapania said was “much higher than our liking.”

Analysts are worried that Jio could price data at Rs 50 per GB or lower, forcing Idea to cut its prices further.

The company feels that any disruptive pressure from Jio will be felt only after a year (from the present), and that, unlike Jio, Idea’s target is not really the very heavy users. “Very heavy users with low profitability, Idea is not very keen to retain them,” Kapania said.

He said the current data price decline was due to “intense short term competitive pressures” caused by the launch of new 3G and 4G services. The pressures will remain for another one or two quarters, company officials said.

The last three months of the year saw Vodafone and Airtel launch new 3G and 4G networks across the country. Idea too launched its 4G services, for which it is charging only half of what is charging for its 3G services.

On the launch of Reliance Jio, Kapania said it will not be a ‘battle of the corporates’ as the media is making it out to be. Rather, he said, “it is going to be about partnerships and collaborations.”

“He will help grow the mobile data business. He will have to squeeze his way to get share in the mobile data business.”

4G EXPANSION

Meanwhile, Idea is all set to become the second biggest 4G operator in India by June this year when it will reach 750 towns and cities.

Airtel, currently biggest 4G operator, could slip to third place — after Jio and Idea — unless it is able to substantially increase its coverage from the current 330 or so towns.

Idea officials said they were pleasantly surprised at the speed at which its network team was able to launch 4G, and that is the reason why it has increased its outlay for network expenses for the ongoing financial year (which ends in March).

In April, Idea had said it would spend around Rs 5,000 cr this year on expansion. In June, it raised the figure to Rs 6,500 cr and now, it has again raised it to Rs 7,500 cr.

It is putting up around 30,000-32,000 new 3G and 4G towers and around 10,000-12,000 new 2G towers.

However, said Kapania, it is not a simple case of swap. Instead of simply adding a new 3G base station to its existing tower under the 2G equipment, it is taking the 2G equipment down and replacing it with a hybrid 2G+3G base station that sends both signals.

The 2G-only equipment is then moved to an area where Idea does not have any immediate plans of launching 3G or 4G services.

This will enable the company to switch its 900 MHz network from the current 2G technology to 3G without having to replace the equipment. Kapania said, some time in the future, the 900 MHz network will be migrated to 3G from 2G.

INCREASING 4G HANDSETS

The company said the number of people with 3G/4G handsets on its network nearly doubled during 2015.

While only around 28 mln of its subscribers had such devices at the beginning of the year, 55 mln had it at the end of the year. With this, Idea is home to nearly one third of the total 3G and 4G handsets in India.

It said 27 mln people upgraded their handsets from 2G to 3g/4g during the year.

A total of 80 mln smartphones were sold last year, the company estimates, and the total smartphones in India will reach around 600-700 mln by 2020.

AUCTION  STRATEGY

Kapania also said Idea will be extremely prudent and cautious as far as the upcoming auction is concerned and is under no pressure to buy any 3G or 4G spectrum, as it has enough such spectrum to cover 75% of its revenue.

Any purchase in the upcoming auction will be purely discretionary, he said.

NET NEUTRALITY

Kapania, whose company is among the most vocal in its demand to be allowed to price data access for certain apps lower than data access for other apps, said it is serious about entering the content and payments space.

Growing as “a plain simple pipe” is not the best way for the operator, Kapania said. Instead, he said, Idea is investing into technology to understand consumer behavior, and was very much interested in spreading its business into adjoining areas around the business of providing connectivity.

Internet activists in India have already started worrying that operators like Idea Cellular, Bharti Airtel and Reliance Jio will come up with their own copycat versions of popular apps and try to kill competing products by making them more expensive to access compared to their own products.

Airtel has taken the first step by making data usage on its Wynk music app cheaper than data usage on the apps of its competitors.

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