Brokerage firm CLSA thinks premium Airtel and Vodafone subscribers may switch over to Reliance Jio Infocomm’s 4G network when it launches in India. It thinks future competition will revolve around such high-spending data consumers as voice revenues continue to decline moving forward.
In a report, CLSA theorizes that high-ARPU (average revenue per user) customers are the ones most likely to try out 4G connectivity during its initial rollout. Vodafone and Airtel have the maximum number of such subscribers. The companies’ dominant market share in this arena is at risk thanks to Reliance Jio Infocomm’s impending entry.
Airtel may be able to defend its turf since it’s already launched its 4G network in 300 towns and holds a comparable amount of spectrum when seen against what Reliance Jio has. On the other hand, Vodafone possesses a limited amount of LTE bandwidth and is more vulnerable to poaching.
Vodafone had rolled out its 4G services in the second week of December, with Kochi being the first to receive it. It plans to expand to Delhi, Mumbai, Bengaluru and Kolkata gradually. Reliance Jio is expected to kickstart its high-speed network on December 28, which is the 83rd birth anniversary of Dhirubhai Ambani.
CLSA predicts data consumption rather than calls will drive the telecom industry’s long-term growth in the future. Revenues are expected to triple to almost $14 billion (Rs 93800 crore) by FY18 compared to FY15. As per the Economic Times, 3G penetration in India currently stands at only 93 million or 9% of the total number of mobile users in India.
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The top 5 markets for 3G are Mumbai, Kerala, Tamil Nadu, Delhi and Karnataka. The regions have a 40% higher ARPU compared to the industry average and further account for nearly 40% of 3G consumers across India. Airtel and Vodafone lead in these places, with a 58% combined revenue market share (RMS).
Reliance Jio is set to face an uphill battle in trying to market its 4G network to a 95% prepaid and low-ARPU sector, where it will have to convince people to start utilizing 4G handsets. Furthermore, CLSA states that high-spending consumers are found in fewer circles and are already loyal to operators such as Vodafone and Airtel.