India's fourth-largest service provider, Reliance Communications, is planning to migrate its five million CDMA subscribers to Reliance Jio Infocomm's yet-to-be-launched 4G network in the coming months.
Reliance Communications Ltd. aims to move CDMA subscribers over to GSM technology before they finally end up on Reliance Jio 's 4G system. The two operators signed a spectrum-sharing agreement earlier this year under which 4G services will be offered to RCom's subscribers. (See RJio & RCom Enter Spectrum-Sharing Pact .)
While customers will remain with RCom, the services will be delivered over RJio's 4G network. This is a perfect strategy for the debt-laden RCom, which will be able to avoid making huge investments in its own 4G network. RCom will also eliminate the risk of competing against and losing 4G customers to RJio. Its strategy therefore promises both capex and opex savings.
But the migration of CDMA subscribers to RJio's 4G network is unlikely to be without issues. To begin with, the company would need to offer significant device subsidies to persuade its customers to choose 4G services.
These subsidies would be hard to bear for the indebted player. Ratings agency Moody's recently downgraded RCom from stable to negative because of delays to the sale of its tower business. The operator has been planning to hive off its tower business for a long time but without much success.
Another issue for RCom is comparatively low customer spending among those using CDMA technology. Average revenue per user (ARPU) among CDMA customers was around 106 Indian rupees ($1.5) per month at the end of September 2015, while that for GSM subscribers was about INR122 ($1.8).
RCom has also recently acquired India's only pure-play CDMA operator, Sistema Shyam TeleServices Ltd. , which operates under the brand name of MTS India. It was also quite recently reported to be in talks with Aircel regarding a possible acquisition of assets. (See RCom-Aircel Fine-Tune Merger Terms and MTS India Merges With RCom.)
Under the scheme with RJio, RCom will start the 4G migration process in the four circles (service areas) of Haryana, Himachal Pradesh, Uttar Pradesh and Odisha. These will be followed by the metropolitan cities of Mumbai and Delhi. RCom hopes to complete the migration process by August 15, India's Independence Day.
The company will join the other incumbents -- Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Vodafone India and Idea Cellular Ltd. -- which are already offering 4G services in the country. RCom may need to ensure that competing with those companies does not damage its profitability.
— Gagandeep Kaur, contributing editor, special to Light Reading