Telcos may face dual headwinds in the coming quarters.On the one hand, the sharp rise in prices of entry level smartphones, due to memory prices quadrupling, is expected to slow the transition of subscribers from 2G to 4G or 5G in the price-sensitive Indian market.
On the other hand, curtailed leisure and corporate travel due to the ongoing West Asian conflict could dent telcos' revenues coming from international roaming.
"Rising handset prices might temporarily slow 2G-to-4G/5G upgrades among price-sensitive users, potentially stretching the migration curve by a quarter or two,' said Vinish Bawa, partner and leader, telecom, at consultancy PwC India.
"Ongoing West Asian conflict is expected to moderately slow the 2G to 4G/5G transition, as rising component and logistics costs push device prices higher, impacting affordability in the entry segment,' said Siddhant Cally, research analyst at Counterpoint Research.
"In the near term, the impact will be more pronounced among price-sensitive users, while a prolonged disruption could push the slowdown up to 35-40 per cent, driven by sustained pricing pressure and weaker consumer demand," Cally added.
The transition from 2G to 4G and 5G is a fundamental shift, offering the potential to nearly double revenue per user as customers move to modern broadband services, said market watchers.
India currently has about 200-250 million 2G customers, largely with Bharat Sanchar Nigam Ltd, Vodafone Idea, and Bharti Airtel. Reliance Jio, the largest carrier without any 2G customers, has been pushing for faster transition of India's 2G base to 4G and 5G.
"While upgrades to 4G/5G are strategic, the primary driver of near-term revenue growth comes from existing 4G/5G users upgrading to higher data plans,' said a senior executive asking not to be named.
-- Gulveen Aulakh, Business Standard
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