Airtel sees end of 3G in India; only 2G, 4G co-existing

The 3G networks in India will close down at a faster rate than other countries, allowing the spectrum to be refarmed and used for offering 4G services, according to Bharti Airtel.

"With no 3G smartphones being sold anymore, Bharti Airtel management believes the market for 3G may shrink soon, allowing for shutting down of 3G networks and refarming the spectrum for 4G," Credit Suisse said in an analyst note after the conference call on their first quarter financial results.

However, Airtel doesn't have any such plan as of now.

According to experts, India has moved to 4G technology at a faster rate overtaking the adoption of 3G services. While, 2G services -- basic voice services with the internet at low speeds, will continue to co-exist with 4G services, which offer the internet and allow download at high speeds. 3G services were launched in India around 2010 but it has not taken off that well.

According to Bharti, the 3G networks will shut down in India at a rate faster than other countries while 2G will continue to co-exist with 4G, another analyst report by Bank of Merill Lynch said.

Also, Bharti Airtel has adopted a wait and watch policy on JioPhone.

Reliance Jio, owned by Mukesh Ambani, recently announced the launch of a 4G-enabled feature phone -- JioPhone -- to target the feature phone users at about 500 million.

"Bharti has traditionally not entered the handset market and does not intend to change this policy. It plans to monitor the response to JioPhone, and believes this feature phone will open up a new segment of revenues that were earlier not available," the Credit Suisse report said.

However, given the move to bundled usage, the company may stop disclosing voice and data revenue/Arpu metrics separately. Vodafone took such a move globally a few years ago, it said.

Bharti Airtel on Tuesday had posted 75% decline in its net profit at Rs 367 crore for the first quarter ended June this year, bogged down by intense competition triggered by entry of Reliance Jio in the sector. The net profit for the corresponding quarter previous year stood at Rs 1,462 crore.

"The pricing disruption in the Indian telecom market caused by the entry of a new operator continued with industry revenues declining over 15% year on year, creating further stress on sector profitability, cash flows and leverage," Gopal Vittal, MD and CEO of Airtel's India & South Asia operations, had said in a statement.

However, Reliance Jio which entered the market with free voice calls and cheap data rates started charging its users starting April this year. Though, it's still minimal tariffs.

Bank of Merill Lynch said with the most aggressive operator Jio curtailing discounts, it saw less competitive intensity in the telecom sector but interconnect rate cut staying a key risk.

Airtel's interconnect usage charges (IUC) payout has increased during the quarter because traffic from other operators to its network had risen. However, the asymmetry with Jio continues, with Airtel receiving 90% incoming traffic from Jio

Telecom regulator Trai is in the midst of formulating its views on interconnect charges, which one operator pays to another for connecting the call on its network. While the existing operators including Bharti Airtel, Vodafone and Idea Cellular have demanded an increase in IUC charges which currently stands at 14 paise. However, Reliance Jio has demanded zero IUC charge.