Airtel, Vodafone, Idea to invest 25% more in network capex over 2 years

By October 9th, 2016 AT 12:08 AM

Bharti Airtel, Vodafone India and Idea Cellular, which are already facing pressure due to the entry of Reliance Jio, may spend around Rs 80,000 crore in network capital expenditure (Capex) over the next 2 years, which is 25% higher than the aggregate network capex in the previous two fiscals, CRISIL Research said.


“This has come at a time when profitability and operational cash flows are expected to come under pressure with the launch of Reliance Jio’s services,” CRISIL’s Director Ajay Srinivasan said

Srinivasan added that these developments will increase incumbents’ reliance on external funding. Vodafone Plc recently decided to invest Rs 47,700 crore in its Indian arm to reduce debt and increase investment wherewithal.

Moreover, the spectrum auction has consolidated the competitive position of Bharti Airtel, Vodafone India and Idea Cellular. However, Reliance Jio, which has also fortified its spectrum holdings at this auction, will pose stiff competition for incumbents.

Bharti Airtel, Vodafone, Idea Cellular and Reliance Jio cumulatively account for over 90% of the aggregate spends at the auction, which witnessed moderate participation with operators eventually acquiring 41% of the over 2,350 MHZ of spectrum on offer.

“Operators clearly intended to ramp up their 4G and 3G spectrum holdings at minimal upfront cost, given the significant debt overhang (industry debt approximately Rs 4 lakh crore as of March 2016). Unlike the previous auction, there was no business compulsion to acquire spectrum this time,” Prasad Koparkar, Senior Director, CRISIL Research, said in a statement.

Koparkar said that Vodafone and Idea had to augment their spectrum holdings and network capacity to cater to burgeoning growth in data traffic and compete with Reliance Jio.

Indian telecom operators have committed around Rs 66,000 crore, half of which will be upfront payment to the government this fiscal.

“This is 43% short of the Rs 56,000 crore estimated in the Union Budget for this fiscal from the auctions, excluding licence and spectrum usage charges,” the firm said.

CRISIL said that Indian telcos are already facing rising network congestion in circles with high data consumption, mainly metros and Category A circles, which account for 60% of India’s data traffic. Consequently, the entire spectrum in the 2300 MHz band, 80% in 1800 MHz and over 60% in 2500 MHz, which can be used to offer 4G services, were bought.

There were also bids for spectrum in 2100 MHz, largely used for 3G services, mainly in select low-data-penetration markets (Category B and C circles).

In the auction, operators stayed away from 700 MHz spectrum, which was priced 14 times 2300 MHz and 4 times 1800 MHz, it said.

“Bidding interest in 2300 MHz and 2500 MHz was certainly higher than CRISIL Research’s expectations. It shows operators have opted to increase capacity to offer 4G services without coughing up huge amounts. However, since the coverage characteristics of these spectrum bands is distinctly inferior to 700 MHz, operators will have to spend larger amounts towards network rollout over the next few years,” CRISIL said.

Read more on:

Passionately following the Indian #Telecom Industry for over a decade from Business, Consumer and a Technical perspective. My primary focus area is Consumer & Digital Experience.

Leave a Reply

Photo and Image Files
1 Comment threads
0 Thread replies
Most reacted comment
Hottest comment thread
1 Comment authors
RAM DAYAL Recent comment authors
newest oldest most voted


Recent Posts

Hathway 100 Mbps Broadband Plan With 1TB FUP Limit Now Costs Just Rs 699 per Month

Hathway has been very active in the broadband segment competing with the likes of ACT Fibernet and Airtel Broadband. At...

Airtel Xstream Box: Android TV, OTT Apps and Other Top Features of this Hybrid Set-Top Box

Bharti Airtel started its series of Android TV boxes with the launch of Airtel Internet TV a few years back....

Tata Sky Mobile App Closes on JioTV By Offering Over 400 Live TV Channels

Currently, OTT applications and live TV applications are all the fad in the market. These apps have allowed the smartphones...