Data services remain major thrust area for telecom companies as segment under penetrated

​New Delhi: The spate of deals for sharing and trading of communications spectrum is aimed more at consolidating resources for data, thanks to a 120 percent growth in the segment in the past two years with an appetite for more, ratings agency ICRA has said in a report.

"Data services remain major thrust area for telecom companies as the segment is relatively under-penetrated," said the report. "The voice market in India has largely matured. Although the current tele-density is around 82 percent, incremental revenues have been modest."

But not so in the case of data services.

"On the other hand, growth in data revenues has been robust at around 120 percent over the last two years. This has resulted in increased focus of the telcom companies on enhancing their data services," it said.

That's the reason why data has been at the centre of the spectrum deals between Reliance Jio and Reliance Communications, Bharti Airtel and Videocon and Bharti and Aircel Limited -- as also those that did did not materialise, like the one between Idea Cellular and Videocon, it said.

In the case of Reliance Communications, three major developments have taken place recently.

The Rs.4,600-crore worth merger of Sistema Shyam with itself in a cashless deal in November, the pact with Reliance Jio for spectrum sharing and trading in the 800 MHz space and the proposal to acquire Aircel.

"The growth in demand for data services and deterioration in the network quality of the telcos in the recent past have made spectrum availability and utilisation key aspects of the industry," the report said.

"Moreover, spectrum trading allows smaller telcos to monetize underutilized spectrum holdings and the larger telcos to attain spectrum outside the auctions. Thus the trend of consolidation of spectrum holdings of the telcos is expected to continue in the medium term."

Giving an update on total spectrum held by these companies, the report's chart says Airtel tops the list with 763 MHz, Reliance Jio is next with 596 MHZ, followed by Reliance Communications (304 MHz), Vodafone (295 MHz) and Idea (271 MHz).

At the moment, Bharti and Reliance Communications are the only two companies that have spectrum in all the 22 circles for both voice and 4G data services. Reliance Jio has this in 20 circles for voice, none for 3G data and in all the 22 circles for 4G.

In terms of acquisition of spectrum, the report said, Bharti has been quite aggressive.

"Since 2010, Bharti has spent a total of Rs.77,800 crore on spectrum acquisition -- in auctions and outside of auctions -- out of which around 50 percent has been to acquire spectrum with data capabilities," it said.

"These acquisitions have improved Bharti’s data spectrum holding and enhanced data capabilities in the 4G space across all 22 circles, ahead of the impending entry of RJio, which till now was the only pan-India 4G spectrum holder," it added.

Bharti's drawback: Absence of 800 MHz, considered among the best frequencies for 4G service.