4G User Additions To Gain Pace In FY22 As Competition Intensifies: Crisil Research

Crisil Research expects 4G subscriber addition in the ongoing fiscal to be more than last year because of higher competitive intensity on account of significant capacity addition by telecom operators after the spectrum auction in March and removal of interconnect usage charges.

That’s despite another quarter of subscriber churn with the onset of the second Covid-19 wave and resultant curbs. Also, given the restrictions in major cities, smartphone sales are likely to be impacted as well, which would slow 4G subscriber additions in the current quarter, the research firm said in a report. Still, “the pace of additions should pick-up gradually over the remainder of this fiscal as competitive intensity in the wireless telecom market increases”.

• Crisil’s bull case: 4G subscribers rising to 82 crore by March 2022, assuming restrictions last only for the current quarter.

• Crisil’s bear case: If lockdowns extend through the second quarter, 4G subscribers are expected to be at 80-81 crore.

In 2020-21, India’s 4G user base was at 71-72 crore.

The country’s wireless telecom subscriber base rebounded to the pre-pandemic levels of 115.9 crore in January 2021, Crisil Research said. That came after a massive churn on account of a reverse migration during the nationwide Covid-19 lockdown last year. Also, low smartphone shipments slowed 4G user additions. There was a recovery in the quarters that followed, but growth in 4G subscriber additions remained below the pre-pandemic rate, the report said. But the quarter ended March 2021 would have been better.

What Will Aid 4G User Addition

Capacity Addition

The acquisition of spectrum in March 2021 auction has led to three major carriers — Bharti Airtel Ltd., Reliance Jio Infocomm Ltd. and Vodafone Idea Ltd.— almost achieving spectrum parity. With the recent spectrum auction, the telecom operators are well-positioned to handle any surge in data traffic, which will lead to increased aggression by the players to gain market share in the feature phones segment.

The competition is expected to be indirect, in the form of tie-ups with smartphone manufacturers for low-cost phones, increased bundling of over-the-top content and lower entry points for upgrade customers, the report said.

Also, over the last two years, Bharti Airtel and Vodafone Idea have re-farmed 3G spectrum for 4G use across most circles, leading to significant 4G capacity addition.

Removal Of IUC

Elimination of the IUC regime will push the incumbent operators having 2G/3G operations to migrate to 4G-only network to reduce their operating costs. Operators will focus on gaining, retaining, upgrading the 25-30 crore active non-4G subscriber base, comprising mostly non-data users sporting feature phones.

Unanimous Tariff Hikes Unlikely

The increased competitive intensity indicates that the industry is unlikely to see unanimous tariff hikes at least in the near term that will limit a large upside in average revenue per user in 2021-22.

Also, the active subscriber market share of Bharti Airtel and Reliance Jio is nearly equal and neither of the two is ready to raise the tariffs, Crisil Research said.

But individual players, it said, will most likely increase tariffs on selected plans given their immediate need to improve average revenue per user. While all carriers agree that tariff hikes are paramount, they have differing levels of urgency to implement the hikes, the report said.