India’s 4G user base is expected to grow to around 820 million in FY22 – an increase over the last fiscal – despite a rise in Covid cases, according to Crisil Research.
The research firm said that competition is likely to intensify with the three major players — Bharti Airtel, Jio and Vodafone Idea — set to use their freshly acquired airwaves to boost coverage and push the country’s remaining 250-to-300 million feature phone users to opt for 4G.
Increased competition among telcos
The growth in the subscriber base is attributed to increased competitive intensity as a result of major spectrum purchases by the big telcos in the March 2021 auction, which resulted in Bharti Airtel, Reliance Jio, and Vodafone Idea gaining spectrum parity in terms of Mhz/million subscriber.
According to the report, there is a market of 250-300 million active non-4G subscribers who will be on telcos’ target list for conversion to 4G users in order to boost revenues.
Though demand to attract this user base existed previously, operators exercised caution due to a lack of spectrum and 4G coverage. But with the recent spectrum acquisition, telcos are well-positioned to manage any spike in data traffic, resulting in increased competitiveness by players to gain market share.
As per the study, the emergence of the second wave of the pandemic, as well as the resulting restrictions, has resulted in a shift of labour migration. Furthermore, given the restrictions in major cities, smartphone sales are likely to be affected, restricting 4G subscriber additions in the current quarter.
As per the report, in the best-case scenario, 4G subscribers are expected to increase to 820 million by the end of FY22, up from 720 million at the end of FY21, if the current quarter’s restrictions are lifted. The number are expected to reach 800-810 million in other case, where lockdowns extend until the second quarter.
Telcos may not raise tariff
Crisil ruled out a price war, competition is expected to be indirect, in the form of tie-ups with smartphone manufactures for low-cost phones, increased bundling of over the top (OTT) content and lower entry points for upgrade customers. Accordingly, Reliance Jio has recently launched JioPhone 2021 plans (for JioPhone users) offering JioPhone handsets along with one- and two-year unlimited calling validity for Rs 1,499 and Rs 1,999, respectively.
According to Crisil, the build-up in competitive intensity also indicates that the industry is unlikely to see unanimous tariff hikes at least in the near term, limiting a large upside in average revenue per user (ARPU) in fiscal 2022.
Individual players are likely to raise tariffs on specific plans in order to boost ARPU. While all players accept that tariff increases are necessary, they have differing levels of urgency to implement the hikes, it said.
Crisil expects neither Jio nor Bharti Airtel “to bite the bullet and raise tariffs” as the top two players are running neck and neck on active subscriber market share. Active or `visitor location register’ (VLR) data, put out by the Trai, is a key metric that reflects the actual number of customers actively using a mobile network. As per Trai data, Airtel and Jio’s active user market shares were 33.7% and 33.6% respectively in December 2020.