There was virtually no impact on the India (wireless) businesses of Bharti Airtel & Idea Cellular from waiting-in-the-wings operator Reliance Jio until the end of March'2016. Till that point Reliance Jio had offered sim cards only to it's employees & some business partners, totaling just about half a million in number. But in the month of May'2016, Reliance Jio opened the gates for outsiders to also get an opportunity to use their 4G services via the Preview Offer, where a customer buying a LYF handset (in-house brand) would get a complimentary Jio sim card with 90 days of Unlimited usage of Data, Calling & SMS. The news of the availability of Preview Offer started spreading and by the first half of June'16, thousands of heavy Data consumers across the country were buying the LYF handsets everyday, purely to enjoy unlimited 4G service for 90 days. It is expected that Reliance Jio enrolled about 1 million 4G customers in the month of June alone and July to be better. By now we are seeing Jio's signboards even in all small towns and even many villages along the highways. The operator seems to be almost ready for a commercial launch now.
Coming back of Bharti Airtel & Idea Cellular, their June-Quarter results have thrown up many important signals of things to come. (In this analysis I have focused only on the India Wireless Data business of the two operators.) These signals are not surprising at all as I have been saying it since last year that All Existing Operators will take substantial hit because of Reliance Jio's entry into the market. We just have to
keep an eye on how efficiently each operator is facing the competition. Let's start with growth in 3G/4G Data subscriber base of the 2 operators:
Bharti Airtel's 3G/4G subscriber base was just 7.4 million in Sept'13, which has now increased to 36.6 million by June'16, that means an addition of 29.2 million subscribers in 11 quarters at an average of 2.65 million per quarter. The Dec'15 quarter was the best for the company when it added 7 million new users in this category, followed by addition of another 4.6 million in March'16 quarter. But Airtel has quickly lost all momentum with addition of a paltry 1.1 million Wireless Broadband (3G/4G) subscribers in June'16 quarter. Idea Cellular has had a much more linear growth even in the recent quarters. It's 3G/4G subscriber base has increased from just about 5 million in Sept.'13 to 27 million in June'16, that means an addition of 22 million users in 11 months at an average of 2 million per quarter. And June'16 proved to be it's best quarter here when it added 3.4 million Wireless Broadband users. Out of these 3.4 million new users that Idea Cellular added, about 1.1 million were on the 4G network, after having added about 0.7 million 4G users in March'16 quarter. That means the aggressive rollout of 4G network in 10 circles, where Idea holds 4G compatible spectrum, seems to be helping the company add more users than it's larger competitor, which now has 4G compatible spectrum across all 22 circles of the country. After the recent acquisitions of Videocon's 1800 MHz and Aircel's 2300 MHz spectrum in nearly a dozen circles, Airtel now becomes the only operator other than Reliance Jio to hold a pan-India 4G compatible spectrum in either 2300 MHz or 1800 MHz bands or both (in a few circles). Now a lot depends on how quickly it manages to roll out 4G networks using these spectrum bands and also the quality of it's coverage. Idea Cellular has done a superb job of 4G network rollout in several cities & towns in the 10 circles that was possible to the operator.
Strong subscriber addition number for Wireless Broadband services in a particular quarter not just has an impact on the Data consumption
in that quarter, but also has a spillover effect in the following quarter. Have a look at the chart alongside. The Quarterly Data consumption on Bharti Airtel's networks (2G/3G/4G) has multiplied four & half times in the last 11 quarters from about 34 million GBs in Sept'13 to about 158 million GBs in June'16. Nearly 90% of this growth has been propelled by the proliferation of 3G networks initially and 4G networks in the recent couple of quarters. The situation is even better with Idea Cellular, which has seen it's Quarterly Data consumption on it's networks to multiply five & half times over the last 11 quarters. It was just about 17 million GBs then, which has now reached 93 million GBs. Idea's Data consumption number had posted an extremely weak growth in March'16 quarter on the back of nearly 10% Q-o-Q drop in 2G Data volume and a relatively slow 7.5% growth in 3G/4G Data volume. But the operator has bounced back smartly with over 16% Q-o-Q growth in 3G/4G Data volumes and over 13% growth overall in June'16. That is a big outperformance over Bharti Airtel's volume growth of under 8% in June'16. Out of the most recent 9 quarters, Idea Cellular has managed to post better Q-o-Q Data volume growth than Bharti Airtel in 5 quarters. With wider 3G & 4G coverage across all 22 circles, Bharti Airtel is certainly expected to do better than Idea Cellular in both subscriber additions as well as Data Volume growth. But it seems Idea Cellular is not going to take it lying down with superior performance in the 17 circles where it holds either a 3G license or a 4G license or both. This fight will be very interesting in the coming quarters. Both operators have recently announced substantially higher usage limits on existing Data plans, which is probably the initial steps to counter the pressure being felt from Jio's Preview Offer. We could see more upward revisions in the usage limits in the coming few weeks as the pressure keeps piling up as Jio's commercial launch gets nearer. This is the only way that the existing operators can try & maintain it's Data Volume growth.
Both Bharti Airtel & Idea Cellular have seen their Quarterly Data Revenues multiplying about three and half times over the last 11 quarters. With Reliance Jio effect expected to start kicking in from Sept.'16 quarter onwards, it will be interesting to see how long do these operators manage to continue posting growth in their Quarterly Data revenues. Frankly I am expecting almost all existing operators to report Q-o-Q drop in Data revenues over the initial couple of quarters of full-scale commercial launch by Reliance Jio, though of varying degrees. The drops experienced by each operator will depend on how well these operators are able to offer Good Quality of service at not-so-expensive tariffs compared to Reliance Jio.
I am expecting the Drops to be more severe for smaller operators like Aircel, Tata Tele & Uninor, who offer 3G or 3G-like services in very limited number of circles. Amongst the biggies, Vodafone is expected to take the biggest hit mainly because of it's limited 4G presence currently. Vodafone is expected to be the most aggressive participant in the upcoming Spectrum Auctions scheduled to start on 29th September'16. Both Idea Cellular & Bharti Airtel are a little better placed at the moment, but both of them will still experience some bit of drop in Revenues. Reliance Jio's 4G coverage across the country is expected to be currently way superior to 3G/4G coverage of any of the existing operators. Data Speeds on Reliance Jio's 4G network may not be the best at all locations, but it will certainly be better than 3G speeds offered by any of the existing operators, and priced much more aggressively. Apart from Data speeds, Reliance Jio is expected to offer Free Jio-to-Jio VoLTE calling across the country, bundled with it's Data packs. That means the existing operators have not just the Wireless Data business to worry about, but even it's bread-and-butter Voice business too.
Let's see how Reliance Jio's commercial launch unfolds (hopefully in this quarter) and how the Sept.'16 quarterly numbers turn out for Bharti Airtel & Idea Cellular.
Bharti Airtel's 3G/4G subscriber base was just 7.4 million in Sept'13, which has now increased to 36.6 million by June'16, that means an addition of 29.2 million subscribers in 11 quarters at an average of 2.65 million per quarter. The Dec'15 quarter was the best for the company when it added 7 million new users in this category, followed by addition of another 4.6 million in March'16 quarter. But Airtel has quickly lost all momentum with addition of a paltry 1.1 million Wireless Broadband (3G/4G) subscribers in June'16 quarter. Idea Cellular has had a much more linear growth even in the recent quarters. It's 3G/4G subscriber base has increased from just about 5 million in Sept.'13 to 27 million in June'16, that means an addition of 22 million users in 11 months at an average of 2 million per quarter. And June'16 proved to be it's best quarter here when it added 3.4 million Wireless Broadband users. Out of these 3.4 million new users that Idea Cellular added, about 1.1 million were on the 4G network, after having added about 0.7 million 4G users in March'16 quarter. That means the aggressive rollout of 4G network in 10 circles, where Idea holds 4G compatible spectrum, seems to be helping the company add more users than it's larger competitor, which now has 4G compatible spectrum across all 22 circles of the country. After the recent acquisitions of Videocon's 1800 MHz and Aircel's 2300 MHz spectrum in nearly a dozen circles, Airtel now becomes the only operator other than Reliance Jio to hold a pan-India 4G compatible spectrum in either 2300 MHz or 1800 MHz bands or both (in a few circles). Now a lot depends on how quickly it manages to roll out 4G networks using these spectrum bands and also the quality of it's coverage. Idea Cellular has done a superb job of 4G network rollout in several cities & towns in the 10 circles that was possible to the operator.
Strong subscriber addition number for Wireless Broadband services in a particular quarter not just has an impact on the Data consumption
I am expecting the Drops to be more severe for smaller operators like Aircel, Tata Tele & Uninor, who offer 3G or 3G-like services in very limited number of circles. Amongst the biggies, Vodafone is expected to take the biggest hit mainly because of it's limited 4G presence currently. Vodafone is expected to be the most aggressive participant in the upcoming Spectrum Auctions scheduled to start on 29th September'16. Both Idea Cellular & Bharti Airtel are a little better placed at the moment, but both of them will still experience some bit of drop in Revenues. Reliance Jio's 4G coverage across the country is expected to be currently way superior to 3G/4G coverage of any of the existing operators. Data Speeds on Reliance Jio's 4G network may not be the best at all locations, but it will certainly be better than 3G speeds offered by any of the existing operators, and priced much more aggressively. Apart from Data speeds, Reliance Jio is expected to offer Free Jio-to-Jio VoLTE calling across the country, bundled with it's Data packs. That means the existing operators have not just the Wireless Data business to worry about, but even it's bread-and-butter Voice business too.
Let's see how Reliance Jio's commercial launch unfolds (hopefully in this quarter) and how the Sept.'16 quarterly numbers turn out for Bharti Airtel & Idea Cellular.
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