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Idea believes its voice network is far superior to VoIP; still wants VoIP regulation


“Our belief is that circuit switched voice is far superior to voice over IP (VoIP) technology, and the current quality of services (of VoIP) does not compete with the circuit switched quality that we offer”, Idea Cellular CEO Himanshu Kapania said during the company’s Q4-FY15 earnings conference call. He also mentioned that the trend at this point in time doesn’t suggest that VoIP will be able to take a larger portion of voice revenues, and the global trend doesn’t suggest otherwise either.

However, Kapania added that as they’ve mentioned in their submission to the TRAI, it is important that same type of services (VoIP vs voice) are governed by the same set of rules. He specifically stressed on the rules regarding consumer protection and security norms.

Interestingly, in reply to TRAI’s consultation paper one of the points Idea made contradicts what Kapania said in the earnings conference call:

Proliferation of unregulated VoIP/Internet Telephony at a massive scale is leading to a significant disruption in the existing voice business of TSPs and would discourage TSPs capability and incentive to invest in infrastructure.

It also needs to be pointed out that for the quarter ended March 31, 2015, Idea’s revenues from mobile data contributed 16.9% to overall mobile revenues, as compared to 15.7% in the previous quarter and up from 10.1% in the same quarter last year. So, the other argument that telecom operators have been making against net neutrality – decline in revenue from traditional revenue sources not compensated by increase in data revenues – also seems to be on a shaky ground. A look at the overall mobile Internet related numbers reported by Idea in Q4-Fy15 reveals that contrary to telcos’ claim data revenue is actually playing a big role in increasing overall revenues. Idea reported 33.4 million mobile data subscribers (as of March 31, 2015), and a blended mobile data ARPU of Rs 150, up 44.23% from Rs 104 in the same quarter last year.

Voice over LTE

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Kapania also seems to believe that voice over LTE is the future. He said, “In the long run, VoIP will have a far superior technology, and the coming technology is voice over LTE. That’s where the high quality work has been done.” Looks like Idea considers Reliance Jio as the primary threat, because they’re only worried about voice over LTE. Kapania also mentioned that “at some stage we will have to launch our 4G services. We have to expand in the 500 towns that we have identified. Before we do that, we have to prepare as a company. We have kept higher allocation so we can have the capacity. The fiber part of the activity, we are doing now, and electronic we will do later.” Idea currently claims to have over 90,000 km of fiber either laid out themselves or shared with other telecom operators.

However, Idea doesn’t seem to have any plans of competing with Reliance Jio is some of other segments that Jio is looking to enter. Kapania said, “Will we do 100% conversion of our 2G sites and have a fiber pop? The answer is definitely no. We will continue to follow the current pattern. We have no intention for fiber to home and any intention of enterprise fixed line business. We will remain a pure mobility player, and we will build capacity just in time for where the consumption is there. Following that as a strategy has worked very well for us, and we will continue to follow the same going forward. It will always be a mix of fiber and microwave equipment, to deliver the speeds that the consumer expects.”

On pace of 3G adoption:

“We’re very pleasantly surprised. It gives us a lot of confidence to go ahead and make the investment now. We have seen that there is sufficient RoI. For us, the capex investment is RoI led. There is a reason why we’re increasing our guidance, because there is sufficient RoI available and helps us in our growth journey. What we are observing is that there is all round improvement in usage, and the applications that consumers are expecting are far more varied, and a lot more newer applications are being accessed. The largest application accessed are the video apps, across various sites. Other (major pointer) is time being spent on social media (sites). There is significant usage of e-commerce, mobile banking and specialised services. In terms of handsets, primarily the lower end of 3G handsets are fueling the growth, 4-4.5″, in a price bracket which is Rs 4500 to Rs 7000. More and more consumers are upgrading their Rs 1500 2G phones.”

Idea has upgraded around 37% of their existing 2G base station to 3G. They plan to move to markets where there is no high speed internet services – in mid-sized towns, small towns and rural areas. The company said that 3G is delivering over Rs 115,000 per 3G site, and hence the expansion has become important.

Idea 3G facts & figures:

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– 3G data volume contribution to overall data has risen from 48% in Q4 FY14 to 56% in Q4 FY15.

– Nearly doubled 3G data user base, adding 8.5 million new 3G data users in the last 1 year, with overall 18.7 million 3G consumers using voice and mobile data services.

– As of 31st march 2015, 36.5 million Idea subscribers are on a 3G device, a penetration of 23.1% of the base, but only 51% of 3G phone users use Idea 3G services.

– Idea 3G users consume 777 MB data per user, and the 3G data ARPU is Rs 209.

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