Inderpreet Kaur, Senior Analyst, Ovum

Just over two years into the launch of Reliance Jio, the share of long term evolution (LTE) subscriptions in total mobile subscriptions increased to 35 per cent at the end of 2018 from about 8 per cent in 2016. India has undoubtedly emerged as the world’s most disruptive and dynamic telecom market with significant changes in its technology landscape. Ovum expects the trend to continue with 2G subscriptions declining to about 20 per cent by 2023 and service providers adopting aggressive migration strategies to drive 2G users to 4G networks. How­ever, as India leapfrogged to 4G from legacy networks, service providers struggled to effectively monetise data-led services. With voice accounting for about 75 per cent of incumbent revenues, Jio’s campaign that was built around mobile data usage and free voice dented the industry’s ability to monetise its large base of voice subscribers. Between the first half of 2017 and the first half of 2018, the incumbents – Bharti Airtel, Idea Cellular, Vodafone and Bharat Sanchar Nigam Limited – collectively lost $2.1 billion in mobile revenues while newcomer Jio recorded gains of $1.5 billion.

Tapping the data savvy user segment

4G gave operators the opportunity to launch unlimited data plans. The transition to 4G over the past two years has unleashed a new segment of data savvy users. The unlimited data plans of Jio and the incumbents reflect the fact that the emerging  consumer segment has a huge appetite for mobile data. The Indian mobile subscriber consumed 7.5 GB of data per month on average in 2018, as compared to 3.9 GB in the developed market of South Korea. The rise in demand has been supported by lower pricing.

Achieving mass scale 4G migration and tran­s­­­forming the feature phone segment

The first phase of 4G transition was aimed at attracting both new and existing smartphone users to 4G services. To drive the second phase of subscriber acquisitions, the operators launched entry-level 4G-capable and VoLTE-enabled feature phones. They bundled it with unlimited VoLTE calling and free data usage to lower the effective cost of ownership. Two years into the launch of Jio Phone, the operator recorded 7.8x growth in VoLTE traffic on its network. The operator supported 6,000 million minutes per day of voice traffic on its VoLTE network, as of end-September 2018. Incumbents were quick to follow Jio and partnered with local device manufacturers to launch low priced VoLTE-enabled devices bundled with unlimited voice minutes, increasing voice usage.

Future-proofing 4G investments while maintaining the 5G outlook

While incumbents are exploring optimal ways to improve their ARPU and revenue growth, they must ensure their networks are ready to absorb the expected exponential growth in data traffic. In markets like India, where operators pay high prices for spectrum, the primary focus is on achieving spectrum efficiency through VoLTE, 4G and 5G. Vodafone Idea, for instance, has signed a contract with Ericsson to deploy 5G-ready LTE equipment for the rapid transition of sites to 5G through remote software installations. Adopting these new technologies that enable 4G radio networks to service 4G and 5G devices simultaneously, rather than being dedicated to one standard will help service providers future-proof their 4G network investments and achieve a zero-lead time in launching 5G once spectrum becomes available.

With the industry consolidating to three to four key service providers, competition will move away from the current pricing tactics aimed at acquiring subscribers. Differentiation strategies focused on quality of service (QoS) and content offerings will gain traction as operators look at incremental ARPU growth from high-value subscribers. Both Bharti and Jio have made significant investments to improve their content offerings. They will start charging for their content bundles at some point in time. In this scenario, offering better QoS by im­proving the video-watching experience will be a key differentiator.

Improving customers’ video viweing experience is a key use case of 5G. Service providers and their partners should work together to evaluate 5G’s role in improving the video experience, particularly live content that faces latency issues. Another benefit of enhanced Mobile Broadband (eMBB) will be improved opex. 5G will deliver data at a lower cost than LTE. With data consumption increasing at a faster pace than operators’ revenues, this is an important benefit. From the deployment point of view, operators will evaluate eMBB deployments in targeted locations to provide network relief in highly congested areas.