India's 4G user base may grow to 820 million in FY22 as telcos expand coverage: Crisil

India’s 4G user base is slated to grow to around 820 million in FY22 despite a Covid spike as competition is set to intensify with the Big 3 telcos likely to use their freshly acquired airwaves to boost coverage and push the country’s remaining 250-to-300 million feature phone users to go 4G, said Crisil Research.

The ratings agency said “India’s 4G subscriber additions in FY22 will be more than in the last fiscal, despite the Covid19 second wave”. This, due to higher competitive intensity stemming from significant spectrum acquisitions by the big telcos in the March 2021 auction, leading to “Bharti Airtel, Reliance Jio and Vodafone Idea achieving spectrum parity in terms of the Mhz/million subscriber metric”.

In a bull scenario, Crisil estimates the 4G user base rising to 820 million by end-FY22, assuming Covid restrictions last only for the April-June quarter. But even in a bear case, where lockdowns get extended through the second quarter, it estimates the 4G user base reaching 800-810 million, well above the estimated 710-720 million level in end-FY21.

The ratings agency also expects Airtel and Vi to step up efforts to migrate their 2G/3G customers to 4G to reduce their network operating costs, especially as revenue inflows from interconnect usage charges (IUC) have disappeared since January. More so, since both incumbents have refarmed their 3G airwaves for 4G use across a majority of their circles, leading to significant 4G capacity addition.

Crisil expects the Big 3 operators to focus this fiscal on gaining and upgrading the 250-300 million feature phone users to go 4G.

“With the recent spectrum acquisition, telcos are well-positioned to handle any surge in data traffic, leading to increased aggression by the players to gain market share,” the ratings agency said in a research report.

In the 4G spectrum auctions that ended on March 2, Jio picked up 488.35 units of spectrum in 22 circles across India in the 800 Mhz, 1800 Mhz and 2300 Mhz bands for Rs 57,123 crore. Airtel acquired 355.45 units across the 800 Mhz and 900 Mhz bands, besides the 1800 Mhz, 2100 Mhz and 2300 Mhz, for Rs 18,699 crore. Vi bought only 11.8 units in five circles for Rs 1,993.4 crore that it needed to beef up its 4G holdings.

Crisil, however, expects the nature of competition among the big telcos to be indirect, in the form of “tie-ups with smartphone makers for low-cost phones, increased bundling of over the top (OTT) content and lower entry points for upgrade customers”.

Crisil expects neither Jio nor Bharti Airtel “to bite the bullet and raise tariffs” as the top two players are running neck and neck on active subscriber market share. Active or `visitor location register' (VLR) data, put out by the Trai, is a key metric that reflects the actual number of customers actively using a mobile network. As per Trai data, Airtel and Jio’s active user market shares were 33.7% and 33.6% respectively in December 2020.