The research wing of Credit Suisse, the international financial services and brokerage firm, said Reliance Jio — the telecom arm of Mukesh Ambani-led Reliance Industries — is already far ahead of market leader Bharti Airtel and other competitors in total wireless network capacity.
It found that Reliance Jio is home to a whopping 58% of the total wireless high-speed data capacity in India. Airtel accounts for 23% and Idea 8%.
It reached this conclusion after multiplying the number of base stations owned by each operator with the quantum of spectrum and adjusting it for technology efficiency. Credit Suisse analysts Sunil Tirumalai and Viral Shah assumed that 4G base stations would give 50% more capacity for the same amount of spectrum compared to 3G and that 3G would give 50% more capacity than 2G.
If after taking 2G capacities, they found that Reliance Jio is the leader, commanding 32% of the total network capacity in India across all wireless technologies. Bharti Airtel is at second place with 22%, followed by Vodafone at 13% and Idea at 11%.
The numbers are important as they point to the scale of the impending roll-out of 4G services by Jio.
DATA PRICES TO CRASH?
But they are also important due to another key reason: their impact on data prices going forward.
Credit Suisse pointed out that such a massive increase in wireless capacity can only have one result — a sharp decline in the price of wireless data.
At present, the three main 3G operators charge around Rs 230 per GB of wireless data, making wireless broadband more or less totally unaffordable for the vast majority of Indians.
However, with the advent of 4G technology — pushed by players like Reliance Jio — the price of wireless data is all set to crash to more affordable levels.
Even though companies like Idea Cellular has not converted most of their spectrum to 4G, they are already struggling with low utilization of their capacities and base stations.
For Idea, pointed out Credit Suisse, total utilization of data capacity has fallen to 15-25% from 40-60% a few quarters ago.
In other words, even if Idea can sell 4-6 times as much data as it is selling now without seeing a big jump in operating expenses (though it would create congestion in inner city areas and during peak hours.)
Ideally, an operator aims for a utilization number of around 50-60% or so to ensure both optimum utilization as well as a decent experience for its subscribers.
“Falling capacity utilisation with slowing growth shows the sector is ripe for sharp data tariff
cuts (we almost wonder why the incumbents are not taking pre-emptive price cuts already,
instead giving new entrant an opportunity to offer that as a differentiator to customers),” the analysts said.
4G OVERTAKES 3G
The reason for the sudden increase in network capacity is the introduction of 4G technology.
From financial year 2011 to 2014 — when most of the expansion was on 2G and 3G — network capacity was growing only by around 11% per year, said the analysts.
However, starting from April 2014, network capacity (voice + data) has exploded at 37% per year due to the introduction of 4G base stations by Reliance Jio and Bharti Airtel. As a result, the total wireless capacity has jumped 88% in the last two financial years.
This also means that 3G is unlikely to be a dominant technology in India in the same way 2G was.
Total network capacity on the main 3G band of 2100 MHz today accounts for just 13% of the total, and together with 900 MHz 3G (so-called platinum 3G), total 3G capacity is just 16% of total. In comparison, total 2G capacity in India is 45%.
In other words, with just 59% of the towers as 3G, LTE already offers close to two-and-a-half times as much data carrying capacity in India today.
Out of the 39%, nearly half — or 18 percentage points — is provided by the 2.3 GHz band (band 40), with the rest being split between the 1800 MHz (band 3) and 850 MHz (band 5).