Editorial: 4G to the fore

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Published: December 25, 2015 1:13:11 AM

Services roll-out fuels device upgrades.

The battle for getting a bigger share of the wallet of the Indian mobile data subscriber has begun in real earnest. As 3G services have spread, data accounts for 21.5% of Bharti’s ARPU in Q2 FY2016, up from 14.5% in Q2 FY2015. While it took three years for 3G services to gain traction in India, demand for 4G devices is already on the rise. International Data Corporation (IDC) data shows that over half of the 9.3 million smartphones shipped to India in October were 4G-enabled devices. The demand for 4G devices is happening at the expense of 3G devices. The trend started in Q3 2015, when a third of the 28.3 million smartphones shipped to India were 4G-enabled. Though 4G-enabled device sales are rising, there are still just a shade over 1 million 4G subscribers as opposed to close to 100 million 3G subscribers in the country. Demand for 4G services is slated to gain traction once Reliance Jio formally launches services in Q1 2016. Many existing 3G subscribers are likely to opt for faster 4G connections once services are rolled out in a big way. The quicker uptake of 4G is also because the Indian consumer is now well aware of the benefits of faster connectivity now than when 3G services were launched in 2011.

Also, as 4G devices are now available for R5,000, many users may simply skip 3G to go in directly for a 4G connection. That is likely to happen as operators are upping their annual capex driven by what Reliance Jio is investing. Analysts estimate that there will be 90 million 4G subscribers in India by FY 2018. That will happen as device prices are expected to fall further as more handsets are made locally under the Make-in-India initiative by then. Second, data tariffs are expected to remain competitive thanks to increased levels of competition from Reliance Jio. Already, Bharti Airtel is offering 4G at 3G prices. Expect more such schemes to be rolled out over the next few months. The big gainers from the delay in the launch of services by Reliance Jio are incumbent operators who are expanding 4G coverage. However, Jio can initially offer faster services on an empty network apart from differentiated content. Those advantages will go within a year of launching services. Despite the rising demand for 4G devices, analysts expect 4G subscribers to exceed 3G users in India only in 2023.

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