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Idea added 9M new devices mostly from big towns in Q2 FY17

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Idea added over 9 million new devices to its network during Q2 FY17, which is significantly higher than the 6.5 million devices that it added in the preceding quarter (Q1 FY17). During an analyst call, the company’s CEO Himanshu Kapania said that the growth in device additions is due to consumers moving on to buy new 4G enabled smartphones in the market. He added that the earlier Idea added only “2 million to 3 million device” every quarter.

Kapania said that Idea has been focusing coverage into populated towns in the past few quarters, and most additions of devices came from larger towns compared to the smaller ones. According to Idea’s estimates, there are currently over a billion mobile phones in India, and Kapania differentiates these into:
i) 2G/3G market with 850 million feature/smart phones
ii) 4G market with 150 million LTE enabled phones.

He further pointed out that in the combined 2G/3G market, “battle is among the top 3 operators,” while the smaller operators in the same market are in the mode of exiting. “The (2G/3G) market will consolidate and because the market will consolidate, all of us are in the race to add subscribers,” Kapania added. “There is no point responding at this point of time,” he said, referring to 4G segment where Jio is currently providing free service; Idea plans on revealing new tariff for 4G once Jio moves on from free to paid services.

Jio’s lifetime free voice is ‘marketing gimmick’; 4G market will be ARPU led: Kapania

Kapania said that since Jio has already announced tariff plans along with its free welcome offer, they are in “promotion mode” and that the life time free voice offer is a “marketing gimmick”. “What it is actually is a bundle of voice and data,” which is where the 4G market is headed to, wherein operators will offer bundled (voice+data) packages, he added. This means that the focus will not be price led but rather ARPU based, according to Kapania.

Idea’s currently makes Rs 0.187 per MB on 2G, which is higher than 4G realization rates, while Kapania said that 3G realization rates was almost the same as 2G without providing a number. Idea will focus on getting more data volumes in the 4G sector using bundled plans once the new entrant Jio starts charging its users, he added. Currently Idea will be prioritizing on users who churn out a higher ARPU and look to retain them.

“We will wait to see how the customer will enjoy free services and we will wait at the side rather than react…So, our current focus is primarily on ring-fencing rather than aggressively go and acquire customers for data till the free service gets over,” Kapania said during the call.

Idea will focus on consolidation to combat hyper-competitiveness

Kapania said that no operator can survive in the market by focusing on just one type of service i.e voice or data. “That is why we’ve been repeatedly talking about consolidation,” he said. Idea will focus on improving market share in the long-term and retain new customers by offering both voice and mobile broadband services. “Any operator who has chosen not to participate in growth of wireless broadband will find it extremely difficult to be able to compete in the marketplace,” added Kapania.

Idea said that it has not expanded 3G in all circles, rather stuck to providing a single technology rather than 3G+4G in some circles. “In extensive markets we’ve chosen one technology either 3G and in most of the markets it’s 4G,” Kapania said. Idea reported 30.6 million wireless broadband customers in Q2 FY17, and out of this, only 3.1 million are on 4G while the rest 27 million customers are on 3G. The company’s 3G growth is still not yet in par with 4G growth, Kapania pointed out. Note than an Idea user on 4G will automatically drop to a lower technology (3G) in case of non-availability of 4G in a service area.

On falling voice rates and dual-SIM usage

Kapania claims that the impact of Jio’s  on Idea’s voice minutes “is a very small percentage” although he does not provide a data point for this. The company’s voice minutes realization rates during this quarter were at Rs 0.331 per minute, down 3.4% from Rs 0.343 in Q1 FY17. The reason behind the smaller impact is that not all existing customers are not porting out from Idea, according to its internal estimates with data taken from top 3 operators. Most customers on Idea buying “new SIM cards”  are using them for availing data services rather than voice, he added.

Some highlights from Idea’s data & voice usage rates

Idea’s 9.4 million existing 2G feature phone customers upgraded their phone to 3G/4G smartphone in this quarter.
-Nearly 40% of Idea’s 178.8 million customer base now owns smartphones. Total 3G and 4G smartphone count has risen to 70.4 million in this quarter. In this, 19.3 million smartphone owners have 4G capable devices
-Mobile data revenue contribution was at 21.9% of service revenue in Q2 FY17.
-Only 17.2% (30.7 million users) out of the overall 178.8 million customers are on mobile broadband.
-Total data usage on 3G and 4G grew 85.5% YoY to 79.9 billion megabytes in Q2 FY17 from 43.1 billion megabytes in Q2 FY16.
-Average data usage per user is at 922 MB in this quarter, an increase of 120 megabyte per user over last one year.
-ARPU on broadband data this quarter is Rs 160 against Rs INR 202 in Q2 FY16.
-Voice ARPU declined this quarter to its lowest ever of Rs 122 compared to INR126 in Q2 FY16.
-Average voice consumption per subscriber was at its lowest ever at 368 minutes in this quarter.

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