India's Airtel to award $1B 4G expansion deals – report

　　India's Bharti Airtel plans to award contracts worth $1 billion over the next three years to expand its 4G network in remote and rural areas, according to local press reports.

　　Airtel, India's second-biggest operator, is likely to award contracts for 300,000 basestations to Ericsson, Nokia and Samsung, with Ericsson expected to land 50% of the work, Nokia 45% and Samsung the remaining 5%. These are the same three vendors to which Airtel awarded 5G network contracts.

　　The move forms part of Airtel's strategy to transition its 2G subscribers to 4G to grow sales. The operator is also under pressure to reach these areas ahead of rivals. Reliance Jio, the market leader, has been banging on about its 2G-mukt Bharat (2G free India) offer for several years now, while Vodafone Idea, the number-three telco, is also targeting rural coverage. India still has around 200 million users who have not moved from 2G to 4G, typically because of high smartphone cost or 4G unavailability in their areas.

　　The 4G coverage map of Airtel reveals vast areas in the states of Bihar, Madhya Pradesh, Odisha, Gujarat, North East states and West Bengal where it lacks a 4G presence. Expanding 4G in these areas would give 2G subscribers the opportunity to upgrade to 4G. Airtel currently has around 90 million 2G subscribers and around 250 million 4G subscribers.

　　Media reports say Ericsson is likely to win a contract for the 11 circles (service areas) of Rajasthan, Haryana, Delhi, UP-West, Himachal Pradesh, J&K, Assam, NorthEast, Andhra Pradesh, Tamil Nadu and Karnataka.

　　Airtel is likely to award Nokia the contract for the nine circles of Mumbai, Gujarat, Madhya Pradesh, UP-East, Bihar, West Bengal, Odisha, Maharashtra and Kerala, leaving Samsung with a deal for the two circles of Kolkata and Punjab.

　　Why is Airtel focusing on 4G and not 5G?

　　There may be several reasons for Airtel's focus on 4G expansion rather than 5G. To begin with, the cost of 5G devices remains high while the price of 4G smartphones continues to fall. This is crucial since the spending capacity of people in remote and rural areas is typically on the low side.

　　In addition, while 5G might be required for high-end use cases, 4G is good enough for high-speed mobile broadband. This is particularly true in rural and remote areas, where people using mobile broadband for the first time seem unlikely to need 5G's more advanced capabilities. Furthermore, 5G monetization is still a challenge. Airtel CEO Gopal Vittal has raised this issue on several occasions

　　Nevertheless, he recently said Airtel has stopped all investment in 4G and plans only to invest in 5G capacity enhancement.

　　“There is limited monetization on 5G but the way we see it is the overall return of the business," he said during a recent earnings call. "So today all of the capacity investments are going behind 5G."

　　"We have stopped investing on any capacity investments on 4G," he added. "As far as the overall capex is concerned, we have always mentioned that FY2024 will be an elevated and peak level of capex and I expect to see clear moderation going into FY2025."