Will Idea and Vodafone follow $9 bn network investment by Airtel

African smartphone user image by pri .org
At present, there is no clarity on whether Idea Cellular and Vodafone India will follow the Rs 60,000 crore network investment programs by Bharti Airtel in the next 3 years to take on 4G LTE launch of Reliance Jio Infocomm.

The significant increase in Capex – from Rs 3,836 crore in the second quarter of fiscal 2016 to Rs 20,000 crore per year on networks in India – by Bharti Airtel will create ripples in the Indian telecom industry.

First, both Idea Cellular and Vodafone are aiming for substantial increase in 3G coverage. Both are also looking for 4G presence. If Reliance Jio is looking for 4G launch in 18,000 towns in phases, Idea Cellular, Vodafone and Airtel cannot become spectators.

Communications and IT minister Ravi Shankar Prasad already welcomed Rs 60,000 crore investments by Airtel, saying he will be happy to see more funds coming from telecoms to avoid call drops. Last month, Vodafone announced Rs 13,000 crore or $2 billion investment in India, without specifying on time frame. It also did not say whether the $2 billion is in addition to the traditional Capex.

Indian telecoms always maintained that they are unable to release more funds towards network roll outs due to their over-exposure towards spectrum buying. Spectrum selling has become a yearly event for India’s telecom and finance ministers to mint the cash cow. With TRAI proposing to sell the 700 MHz spectrum for 4G services, 2016 will be yet another year of confusion for financially weak telecoms.

Interestingly, all the four telecoms – Airtel, Vodafone, Idea and Reliance Jio – are following a similar business pattern except for the device focus of Reliance Jio. Reliance Jio is looking at sourcing cost effective 4G devices and sell in India. Reliance Jio will also own media content, a strategy followed by American wireless majors such as Verizon which bought AOL.

Airtel investment strategy

When Airtel announced its Rs 60,000 crore investment plan, it did not mention about its content strategy. It’s known that Airtel has association with content makers and does not intent to bring its own content. Vodafone also follows a similar content strategy. When 4G demand peaks, telecoms need content to ensure customer experience and stickiness.

Airtel India, headed by CEO Gopal Vittal, will deploy 70,000 base stations in fiscal 2015-16, 160,000 base stations in 3 years; 60 percent network will be mobile broadband enabled; mobile broadband coverage in all towns and 250,000 villages by March 2016; mobile broadband in 500,000 villages in 3 years; spend on small cells, carrier aggregation solutions and Wi-Fi; promises 50 Mbps speed for home broadband users by 2016 and invest in 550,000 kms of domestic and international fiber.

Idea Cellular investment

Idea Cellular CEO Himanshu Kapania on October 23 said the telecom company will be spending Rs 6,000 crore to Rs 6,500 crore in fiscal 2016 against its earlier Capex of Rs 4,000 crore – primarily focusing on mobile broadband infrastructure.

Idea Cellular aims to expand its mobile broadband coverage on 3G networks in 13 service areas including the Kolkata metro in Q3 FY 2016. 4G services will be available in 10 telecom circles on 1,800 MHz Spectrum band from first half of 2016. The company has over 100,000 km of OFC spread over all 22 telecom circles.

The Aditya Birla group company, as per its discussion with analysts, will be investing in single Radio Access Network (RAN) technology that is capable of supporting multiple technologies in a given frequency band on the same hardware radio equipment. RAN implementation permits Idea to simultaneously run two technologies 2G and 3G on 900 MHz band and 2G and 4G on 1,800 MHz band.

Vodafone investment 

Vodafone Group CEO Vittorio Colao has earlier committed Rs 13,000 crore investment for network expansion in India. The UK-headquartered company is earmarking Rs 8,000 crore for network coverage expansion and upgrade; Rs 4,000 crore for Make in India program; Rs 3,000 crore to expand IT and customer experience centers; Rs 1,000 crore for data center and Rs 1,000 crore for mobile banking.

Vodafone India has made $550 million investment in India in the first half of fiscal 2016. Vodafone is gearing up to launch new 4G services on the 1800 MHz band in 5 circles in Mumbai, Delhi, Kolkata, Kerala and Karnataka beginning December 2015. Vodafone will continue to expand own 3G coverage to 16 circles across the country.

Sunil Sood, managing director and CEO, Vodafone India, said: “A robust and resilient network architecture with strong backhaul is being built to support the increasing volumes and need for speed from both retail and enterprise customers.”

Reliance Jio investment

Reliance Industries (RIL) Chairman Mukesh Ambani during the latest AGM said that Reliance Jio 4G will have presence in all 29 states of India, with a direct physical presence in nearly 18,000 cities and towns. Jio’s wireless footprint covers over one lakh villages. Jio aims to cover nearly 80 percent of India’s population by the end of 2015 and 100 percent national coverage within the next 3 years.

Jio has also deployed a network of nearly 250,000 route kilometres of fiber optics. Over the next 3 years, Jio will more than double this fiber footprint by deploying fibre optics in the last mile. It will focus on fibre-to-the-home (FTTH) deployment.

Indian mobile subscribers are looking for high speed broadband on mobile and their homes. They do not want call drops and poor quality voice service from telecoms. Shall we expect better telecom services at the end beginning of 2016 at least?

Baburajan K
[email protected]