Bharti Airtel - the New 4G King??!! - Media creating Sensation!!

I was highly surprised to read the headline flashed by ET-Telecom last week saying Bharti Airtel is the new 4G king post the Videocon spectrum deal. The article is so pathetically researched and it's headline is clearly trying to sensationalize the recent development in order to promote Bharti Airtel's position. The article even quotes reports from reputed Brokerages/Research Houses like Goldman Sachs & UBS. I seriously doubt that the reports from these reputed institutions actually meant something like what ET-Telecom's headline suggests.

The article/report also considers the combined paired spectrum volume. Spectrum in 1800 MHz band alongwith that in other bands like 800 MHz, 900 MHz and 2100 MHz are paired frequencies, where spectrum is always allocated in pairings for separate Uplink & Downlink units (FDD technologies). Unlike this, the spectrum in 2300 MHz is unpaired as both Uplink & Downlink can happen on the same frequency unit (TDD technologies). This is unfair comparison as paired units cannot be used on a standalone basis as Uplink frequency cannot be used for Downlink purpose & vice-versa.

For the time being let's focus only on the headline. Is Bharti Airtel truly the new 4G king after the Videocon deal? I tried to collect data on 4G compatible spectrum holdings of both Reliance Jio Infocom and Bharti Airtel to bring to you the true comparison (Hoping that my information sources are correct. :) ). As per information available in public domain, 4G service is currently possible on 3 different frequency bands primarily: 800/850 MHz (FDD), 1800 MHz (FDD) and 2300 MHz (TDD). Only BSNL holds spectrum in 2600 MHz in a few circles, but I am not sure how it plans to use it. BSNL is already shutting down the WiMax service it had launched some years ago.

The table alongside gives circle-wise & band-wise spectrum holdings of Reliance Jio Infocom and Bharti Airtel. I have only considered 4G compatible bands as the question is about who is 4G king. Apart from these bands, Bharti Airtel also holds spectrum in 900 MHz and 2100 MHz bands, which are 3G compatible. RelJio has no holdings in those bands as it's focus is purely on 4G.

RelJio had announced it's entry into Telecom space in 2010 by winning one 20 MHz unit of 2300 MHz band across all 22 circles of the country in the spectrum auction. In the same auction, Bharti Airtel had won 20 MHz unit only in 4 circles in the same band. Later it acquired Qualcomm's spectrum holding in 4 other circles in the same 2300 MHz band to increase it's number to 8. A few months ago it has announced acquisition of Augere's MP circle spectrum and now Bharti Airtel holds 2300 MHz spectrum in 9 circles, which includes the 3 metro circles and a few Category-A circles too. These 9 circles contribute just over 40% of Airtel's AGR. But here RelJio is the clear leader as it holds spectrum in 2300 MHz band across all 22 circles. Still we will have to wait & watch how much of an advantage RelJio has from this spectrum & how it is utilised, as it's a well-known fact that 2300 MHz spectrum does have indoor penetration problem and long distance propagation. Hence it needs installation of many many more BTSes and/or Small-Cells.

When it comes to 800/850 MHz spectrum, RelJio again has a very clear advantage. It has managed to win a 5 MHz unit each in 10 circles in the last auction. RelJio also plans to share/trade for spectrum in this band with Reliance Communications for some or all of the remaining 12 circles where it does not hold it. Details for the same are still not available and hence we cannot consider it currently. There are several operational advantages for this spectrum, exactly the ones which are missing in 2300 MHz band. Long distance propagation and indoor penetration are both excellent for spectrum in 800/850 MHz band. The handsets that Reliance Retail is selling under the LYF brand support this band as well. Soon after launch of RelJio's 4G service, other manufacturers too will start selling handsets with support for this band. Bharti Airtel has no presence in this band. But Airtel does hold 900 MHz spectrum in certain important circles, where it is launching 3G service under the 'Platinum 3G' brand. It will try & use this service to combat RelJio's 4G service in 800/850 MHz band.

Coming to 1800 MHz spectrum band, the fight is much more interesting & crucial too. Bharti Airtel has a minimum of 5 MHz or more quantity in this band in 18 circles (post Videocon deal). RelJio has the same in 16 circles and hence is quite closely matched to Airtel's holding. It is said that an operator needs atleast 5 MHz of contiguous spectrum in this band to offer good quality & capacity for 4G service. In other circles where both operators hold less than 5 MHz or nothing in this band, they will try to win the same in the upcoming auction or via spectrum sharing/trading with other operators.

One important point about the quantity of 1800 MHz spectrum held by Bharti Airtel: It holds quantity substantially more than 5 MHz in about 8 to 10 circles. If it is able to utilize all this spectrum for 4G, it could offer it substantial advantage to Bharti Airtel in those circles in terms of capacity. But we cannot forget the fact that Bharti Airtel also needs to support it's HUGE existing subscriber base, majority of which is still using 2G voice service primarily. Hence Bharti Airtel needs to implement dual-tech hardware on this frequency band to support both existing 2G as well as future 4G subscribers. On the other hand, RelJio does not have any such restrictions and hence can fully utilize it's 1800 MHz spectrum holdings purely for 4G service. Hence, whatever quantity advantage Bharti Airtel holds in the 1800 MHz band, it loses because of the need to cater to the legacy business.

4G Spectrum Gaps: RelJio has 4G spectrum in atleast one of the three bands across all 22 circles. Excluding the circles of Punjab & UP (W), RelJio has 4G spectrum in atleast 2 bands across the remaining 20 circles. In 6 circles, RelJio can offer 4G service in all the 3 bands. In case of Bharti Airtel, it does not hold any/enough quantity of 4G spectrum in any band in 3 circles of Assam, J&K and West Bengal. Bharti Airtel can offer 4G service on 2 spectrum bands in 8 circles. In the remaining 11 circles, Bharti Airtel can offer 4G service on either of the two bands. Isn't it obvious now that even without considering the strong possibility of sharing/trading agreement with RCom, RelJio has a clear advantage over Bharti Airtel when it comes to 4G spectrum holdings.

Now the important question if that of Coverage within these circles. As per media reports & past announcements, RelJio intends to have 80% of the country covered under it's 4G network by the 2nd half of 2016. This will bring RelJio's coverage very close to Bharti Airtel's 2G+3G+4G coverage as of now. If this really turns out to be true later in the year, RelJio will have a very clear advantage in terms of ability to offer high-speed internet access service across maximum areas of the country. On the other hand, Bharti Airtel's 4G coverage alone is lagging far behind with presence in about 400 cities & towns currently. Even in these 400 cities & towns, there are several pockets where the 4G signal is absent & it falls back on it's 3G network. I am sure that Bharti Airtel is working overtime to plug these gaps as well as extend coverage to more & more cities/towns with every passing week. But if RelJio does launch it's service next month, as is widely expected, then Airtel will lose the first mover advantage in thousands of cities/towns across the country. With when Airtel's existing 3G coverage is combined with it's 4G coverage, it may not be able to match RelJio's 4G coverage in the initial few months or quarters. Airtel will certainly try & catch up as soon as possible.

Summary: Any which way one looks at it, RelJio has everything it takes to shake up the market and snatch market share from each & every operator currently operational in the country. Some of the smaller operators may have to shut down their operations due to unviability at some point, if they are not able to merge/consolidate with another operator. Amongst the larger operators, Vodafone India could prove to be the biggest market share loser, followed by Idea Cellular. Both these operators have very little 4G coverage compared to both Bharti Airtel and RelJio. As per my guesstimates, Bharti Airtel could lose the least in terms of market share. This is one company which has been most aggressive in changing it's focus to high-speed wireless broadband as soon as it realised the potential size of the threat from RelJio. I am looking forward to this very interesting market share fight. We will hopefully have some concrete number to discuss a couple of quarters down the line.