In our previous story, we explained how the incumbent player, Airtel, can have its advantage as the first mover in the 4G turf. In this follow up story, we will discuss about Vodafone & Idea.
Vodafone India is currently the second largest mobile operator in India. When Vodafone makes a strategy, business is their first priority. They picked up 3G spectrum in only 9 circles in 2010, and the whole strategy was planned in such a way that they stuck to three metro cities and populous states states in terms of data usage. However, they rolled out 3G networks across India via ICRA with Airtel & Idea. The telco picked up 3G spectrum in 5 additional circles as they understood the demand for 3G services in other circles. Similar to Vodafone, Idea Cellular invested on building up 3G network in selected circles. In 2010, they acquired spectrum in 2.1GHz band in just 11 circles, and expanded over only 1 additional circle (Kolkata Metro) in 2015. However, Delhi will have Idea's own 3G network over 900 MHz. Idea already offers country-wide 3G via ICRA. Among the incumbents, Idea seems better positioned as they have the best 3G network expansion strategy. The investment they made on 3G expansion is helping the company in earning money from other ICRA partners, as well as higher revenues due to the trend of increased data consumption.
Vodafone maintains the stand that they are fearless, and in a recent media interaction their CEO, Sunil Sood, explained that they are not worried about competition. After Reliance Jio forays in the market, they will react to market's dynamics. The company believes that it is a big brand in the country, and they will continue charge a premium. He also clarified that they will invest in both 3G and 4G in the future spectrum auctions. They have acquired technology-neutral 1800MHz in 5 circles in the last auction. Vodafone announced in May 2015 that they are conducting 4G trials (LTE-FDD), and may commercially roll out services by end of this year. I personally believe that they might have already started trials - more on papers, less on field, and you may not get Vodafone 4G SIM card in the next 12 months. They just announced the roll out plan and it is more about sending the message to investors and subscribers that - "Yes we are also in the business. Customers please wait for our 4G services.”
One thing that makes Sunil Sood worried is the spectrum scarcity and fragmentation. They are looking forward for spectrum sharing & trading, swapping, as well as mergers and acquisitions. If they are really tensed, they must be looking to Reliance Jio's spectrum bank. Jio has spectrum over 3 bands, and all those bands are tech-neutral, and combining 3 bands can lead to launch of a faster LTE-Advanced network.
I think that Airtel, Vodafone, and Idea will cartel up their technology-neutral spectrum on 1800 MHz band to roll out 4G/LTE-FDD networks. Thus, they can avoid spectrum fragmentation as well as narrow band LTE roll out, and can bring wide-band LTE roll out in continuous channels. If their 3G ICRA is not illegal, then their 4G network sharing will not be a problem as government is initiating rules on spectrum sharing and trading. Airtel's 4G offering is the biggest threat to both Vodafone and Idea as of now. Airtel is offering free 4G data, hassle free 4G activation on selected 4G smartphones, and Airtel has partnered with several handset makers including Xiaomi. Vodafone and Idea are offering cheaper 3G data to selected customers to match with other mobile data players like Reliance, Tata DoCoMo, and MTS who are offering data at a price which is almost Rs. 50-100 less per gigabyte, though officially they are sticking to high cost 3G plans.
Back in October last year, Idea Cellular just shrugged away the fear of upcoming 4G services. They were confident about their 3G network expansion and better 3G uptake among customers. However, in the past few months, people have become aware of 4G, thanks to Airtel's promotion. Furthermore, smartphone makers are pouring ultra low-cost 4G smartphones in the market. Reliance Jio is also promoting its brand by offering free Wi-Fi in at least 8-10 cities in the country. In a recent report by LiveMint, apart from the battle on 4G turf regarding pricing and services, these operators will spend millions in brand promotion, i.e. advertisement war is coming.
Idea had plans to roll out 4G in 2017, but they took a reverse turn. The telco cited the reasons like rapid uptake of 4G devices, convergence between prices of 3G and 4G equipment, and increasing willingness of consumers. These key reasons pushed Idea's 4G to be launched in Q1 of 2016, which is in line with Vodafone's rollout plan. Idea will roll out 4G services in 10 circles initially. As of now, Airtel seems the only serious player on 4G among the three incumbents, and they are busy with LTE-TDD on 2.3 GHz band. Thanks to China Mobile's successful launch, and Jio's strategy to create own ecosystem, the 4G technology over 2300 MHz is seeing good growth in all the aspects. I believe that Airtel, Idea, and Vodafone will work together in rolling out 4G networks over FDD-LTE 1800 MHz, which accounts for nearly 40 percent marketshare globally, and has better ecosystem.