Telcos line up Rs 34,000-cr capex for 4G expansion

Large telecom operators plan to spend Rs 34,000 crore in the current financial year to roll out fourth-generation technology (4G) networks and boost their existing one, to address call drops.

Airtel, which had earlier said it would spend $3 billion for its India and global operations in FY16, recently said it might end up investing $200-$400 million totalling a capex of $3.2-3.4 billion (Rs 21,142-22,463 crore) because of accelerated 3G and 4G expansion in India.

Idea Cellular, the third largest operator, has already raised its guidance from Rs 5,000-5,500 crore to Rs 6,000-6,500 crore for the current financial year, out of which half has already been spent. Vodafone, the second largest telecom service provider, also said it would be stepping up investments.

ITS INCLUSIVE

• Not all the investments are into rolling out of 4G network
   
• Much of the investment also goes into strengthening the existing networks and increasing footprints in 3G

"In FY15, we invested Rs 8,500 crore on capex and rolled out 23,000 sites, taking our overall network footprint to 131,000 sites. We expect to make similar investments in capex this fiscal (FY16) as well," said a Vodafone India spokesperson.

All these operators have also announced their plans for 4G rollout. Airtel has already started offering 4G, while Vodafone is scheduled to start the services from next month. Idea is expected to launch 4G in the first half of 2016.

However, not all the investments are into rolling out 4G network. Much of the investment also goes into strengthening the existing networks and increasing footprints in 3G as well.

"A large part of capex, or almost a disproportionate part of that capex, could really be around expanding our footprint on 3G and 4G, gap circles on 3G as well as existing circles in 3G spreading it deeper," said Gopal Vittal, managing director and chief executive (India and south Asia) of Bharti Airtel, during an analyst call last month.

The investments in expanding the 3G network is also a way out to reduce dependence from 2G network for telecom companies.

"One of the things that happens is as you actually drive a lot more 3G, voice quality also improves... It creates the capacity to unclog 2G networks especially in a situation where our spectrum has been reduced for markets like Delhi," Vittal added.

The capex investment by the firms so far was visible as network equipment suppliers reported good results in recent quarter.

Global telecommunication equipment supplier Ericsson, which posted impressive revenue growth from India in the July-September quarter, albeit a fall in consolidated revenue, recently said the investment in mobile internet led to the growth in its India revenue.

During the quarter, the Swedish firm reported an income of 3.6 billion krone (Rs 2,762 crore) from India, a growth of 81 per cent from same period last year and 19 per cent from the previous quarter.

"We have done well in the year so far and our growth in many ways mirrors the growth we are seeing in the sector. The high level of mobile broadband investments, which started in the beginning of 2015, continued in the quarter with the main driver being mobile data traffic growth.," said Paolo Colella, head of Ericsson India.

Apart from the top telecom companies, Reliance Jio, which is expected to start its network services later this year, is reported to have spent about Rs 1 lakh crore for installation of towers and network expansion. Experts said the capex spend is likely to increase, which is good news for mobile network equipment providers.

"Increasing data usage and the need for better monetisation of data is creating the need for business process transformation as well as productisation of new ideas. Such a level of transformation also requires introducing new components to enable convergence of networks and services, creating opportunities for many telecom equipment suppliers as well as software solution vendors," said Amresh Nandan, research director of telecommunication technology at Gartner.