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Shutting down 2G biz and adopting a 4G strategy may not work for RCom

RCom's average revenue per user (Arpu) of Rs 58 per month for Q1FY18 is the lowest in the industry

Kiran Rathee 

Reliance communication, rcom

Shutting down business of (RCom) will turn out a boon for other incumbent operators as most of its feature phone customers look likely to switch from the carrier. According to analysts and industry watchers, RCom's 2G customers may not migrate to 4G as most are feature phone users with very low monthly spending and little willingness to invest in a 4G-ready smartphone. In fact, going by a Goldman Sachs' report, RCom's average revenue per user (Arpu) of Rs 58 per month for Q1FY18 is the lowest in the industry, over 50 per cent lower than the industry average, a signal implying most customers to be voice users. The average Arpu of the industry stands at Rs 130-140. Analysts say adopting a 4G-focused strategy and shutting down its 2G business and asking customers to migrate to 4G may not be a feasible business as most of its users generate lowest Arpu in the industry, them being feature-phone owners. The Anil Ambani-owned company had lost 95 per cent of its subscribers in five service areas - West Bengal, Assam, Bihar, Northeast and Odisha - in 2015 when it did not renew its 900 megahertz (MHz) spectrum (used for 2G services). had 24 million active subscribers in these five areas as on September-end 2015 and by June-end 2016, they reduced to one million. According to Telecom Regulatory Authority of India, as of July-end 2017, had a total subscriber base of 81 million, of which 13 million were wireless broadband (3G plus 4G) users. "We see little merit in a telco running a pan-India network to support only about 13 million subscribers," Goldman Sachs said in a report. The revenue market share of stood at 3.3 per cent as of Q1 of FY18. Goldman Sachs said in a scenario where shuts down its wireless business altogether and reallocates its revenue market share equally among top operators, the FY19 revenues of Bharti Airtel, Idea Cellular, and Reliance Jio could increase two, three and four per cent, respectively. "We expect incumbents, especially Bharti and Jio, to continue benefitting from consolidation at the tail-end of the market," Goldman Sachs said. Reliance Communications 2G users may port out Regarding spectrum, has a total of 444 Mhz airwaves, of which 70 per cent is liberalised and tradable with others, without attracting any additional costs. The liberalised spectrum portfolio comprises airwaves in 800-MHz, 900-Mhz, 1,800-Mhz and 2,100-Mhz bands. Based on prices seen in the last auction, the spectrum is worth $1.7 billion (for its remaining life).

Reliance Jio is already in a spectrum-sharing arrangement with in most circles for 800-MHz band. "Bharti, Vodafone, Idea have widely used 900- and 2,100-MHz spectrum to deploy 3G, and to some extent 4G. However, in our view, all the incumbent telcos have enough spectrum to take care of their data demand needs for the next three to five years," the report said.

First Published: Fri, October 27 2017. 08:16 IST
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