4G IMPACT: Idea overtakes Vodafone as No 2 data operator in India

Even as Vodafone is yet to report its numbers for the April-June quarter, Idea Cellular officials are popping open the bubbly for overtaking the British company as far as wireless data is concerned.

Till last quarter, Vodafone was ahead of Idea in terms of wireless data, carrying around 29 bln MB of data per month.

However, with a strong 13% sequential jump in data volumes, Idea Cellular has now overtaken Vodafone as India’s third biggest wireless data company.

At the same time, Reliance Jio, which is still doing trials, is reported to have overtaken Bharti Airtel to take the No. 1 slot — completing a transformation of the wireless market.

Just a year ago, Bharti Airtel was the clear No. 1 in data traffic and Vodafone was the clear No. 2.

However, the emergence of 4G technology has changed the equations.

Vodafone, which was expected 3G to remain in vogue for another 2-3 years, did not make required investments in 4G spectrum, while smaller rival Idea today has nearly twice as much LTE spectrum as Vodafone.

As the market moved from 3G to 4G, Vodafone has found it difficult to match the growth rate of Idea, with the result that the company now seems to have fallen to No. 4 position in India from No. 2 just a year ago.

According to Idea’s latest numbers, the company carried a total of 93 bln MBs during Apr-June, and likely touched about 35 bln MB during June itself. Vodafone, in contrast, is likely to have carried only around 32 bln MB during the same month.

Idea’s total data volume is up nearly 50% year on year during the April-June quarter.

In addition, it is capturing 27.2% incremental data revenue generated in India today, according to the company.

AT A COST

All this, however, came a tremendous cost to Idea, both in terms of lower pricing and higher expenditure on network expansion.

From practically none about nine months ago, Idea had deployed around 20,000 4G towers by the end of June, or as Himanshu Kapania, the CEO remarked, it is erecting “one new broadband tower every ten minutes.”

However, pricing has fallen from around 24 paise per MB to close to 21 paise per MB during the last one year as the company chased volumes at the cost of profit.

Kapania said he expects the company to continue to face pricing pressures in the short term, but the market will recover faster than it did after a similar disruption in voice prices in 2009.
“The price of data will settle down.. It won’t be a free fall mode.. There will be a short period where everyone is trying to get customers on board.. Once subscriber number stabilize, then network quality” will become the more important factor, he told investors.

The obvious allusion is to the entry of Reliance Jio, the telecom arm of Mukesh Ambani’s Reliance Industries.

According to analysts, Jio currently owns over 50% of all wireless data capacity in India, and is expected to start selling SIM cards in the coming days.

The company has stated that its data rates will be “significantly lower” than prevailing prices and that it plans to take advantage of its modern and efficient network to keep expenses and prices down.

Idea said the Indian wireless data market will move from the current 3-horse race to one where there will be at least 4-5 competitors.

It also said it will not buy spectrum in advance and will prefer to purchase airwaves as and when it needs them.
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