4G Drives Telco Capex in India
Realizing the 4G market is going to be more about quality than basic coverage, India's telcos are committing much greater sums to 4G capital expenditure.
Bharti Airtel Ltd. (Mumbai: BHARTIARTL), India's largest service provider, is planning to spend around $3.4 billion in the current financial year, having previously guided for about $3 billion. A significant amount is to go towards 4G expansion and network modernization. While the operator already claims to be offering 4G services in nearly 300 towns and cities, it wants to boost coverage and quality before archrival Reliance Jio switches on its own 4G network.
Similarly, Idea Cellular Ltd. , India's third-largest telco, has upped its capex guidance from $755 million to $981 million for the current financial year. It has already spent nearly half that amount and plans to launch 4G services by the last quarter.
In the meantime, Vodafone India , India's number-two player, has indicated it will make similar investments this year as last, when it pumped 85 billion Indian rupees ($1.28 billion) into capex and rolled out nearly 23,000 sites.
Operators clearly understand that quality of services will be critical when it comes to boosting data revenues and hanging on to their biggest-spending customers. Besides investing more in the rollout of 4G, they are also keen to modernize and expand 3G networks. During a recent earnings call with investors, Bharti Airtel indicated that it would look to expand both its 3G and 4G footprints and plug holes in its coverage.
"One of the things that happens as you drive a lot more 3G is that voice quality also improves," said Gopal Vittal, the managing director and chief executive (for India and south Asia) of Bharti Airtel. "Do not forget that with the proliferation of smartphones you do see a substantial amount of voice traffic actually moving on to 3G networks."
That means 3G investments could additionally pay off by helping the operator to "unclog" its 2G networks and shift voice traffic on to newer infrastructure, according to Vittal. "In a way it is killing two birds with one stone," he said.
Besides investing in network modernization and 4G deployment, Idea Cellular recently acquired 1800MHz airwaves from Videocon Telecommunications Ltd. in the circles of Gujarat and Uttar Pradesh (West) for INR33.1 billion ($490 million). The operator intends to use this spectrum to launch 4G services in these two circles and aims to have covered around 750 towns by the end of next year's first half.
Clearly, all of this spending on 4G and 3G networks is welcome news to the world's network equipment suppliers, which will be vying for a bigger piece of the pie. As smartphone prices continue to plummet and data consumption skyrockets, India's operators may need to keep up the spending for some time yet.
— Gagandeep Kaur, contributing editor, special to Light Reading