Reliance Communications wants to cut down on Capex (capital spending), while Idea Cellular says GSM roll out will be completed in 12-18 months.
These are some of the alarming signals for telecom network vendors including Ericsson, Nokia Networks, Huawei, ZTE, Cisco, NEC, Alcatel-Lucent, etc.
Indian telecom operators are currently unable to offer top priority to technologies between 3G and 4G LTE. Globally, for several telecoms have 3G penetration of 50 percent comparing with 2G. In India, 3G subscriber base is nearly 50 million against nearly 800 million total mobile subscriber base. This indicates a low 3G penetration of – in single digit — against the world average of more than 50.
One could argue that low 3G subscriber penetration would create Capex. But telecom operators are not ready for huge investments. Idea Cellular, which adds 18 million mobile subscribers, is spending around $580 million as Capex for expanding its network. This is for both 2G and 3G. Usually, telecoms do not share their specific 2G Capex.
Though 3G subscriber growth is slow across India, Indian telecoms are not ready for 4G roll outs on FD-LTE spectrum. Reliance Jio Infocomm will launch 4G on both FD-LTE and TD-LTE spectrum in 2015 – five years after winning the BWA spectrum.
Idea Cellular Managing Director Himanshu Kapania said the company will be facing the end of its GSM investment cycle in the next 15 to 18 months.
The current focus of Idea Cellular Capex is related to expansion of 2G and 3G reach. Idea Cellular invests in capacity addition of HLR and MSC. This apart, fiber and IT are focus areas for Capex.
The company said coverage extension of 2G and 3G constitute to a small percentage of the overall Capex.
A larger percentage of Idea Cellular telecom infrastructure investment goes for capacity enhancement as well as other related expenses on non-coverage expansion Capex like fiber and IT.
Idea Cellullar’s Kapania says Indian mobile customers are not yet ready for 4G LTE services on 700 MHz spectrum which will be auctioned at a later stage.
Reliance Communications is looking at lowering Capex in order to improve profitability and reduce debt burden.
Reliance Communications has reduced its Capex to $230 million in fiscal 2014 from $643 million in fiscal 2013, $959 million in fiscal 2012 and $1,633 in fiscal 2011.
Bharti Airtel and Vodafone, on the other hand, is trying to expand their offerings. But Indian telecom sector does not expect a significant growth in their Capex. Majority investment will be in mobile data related offerings.
That’s why Nokia Networks India head Sandeep Girotra could not give a proper input to questions by telecom journalists on expected Capex by Indian telecom operators.