Reliance Q1, 2013 results possibly holds out light to the beleagured Indian Telecom Industry in terms of the business case. It signals the end of hypercompetitive era (and operator bleed), end of consumer sops (change of direction to quality of acquisition), increasing data revenue (that was inevitability catching up), Eco-system consolidation across Operators, ISPs, VAS providers and building alliances and emergence of EVDO +GSM devices.
1. RCOM has reported today 7.2 million 3G subscribers and 29.4 million data connections for the quarter ending March 31, 2012, and a 21% increase in data traffic quarter on quarter.
2. RCOM increased tariff’s by 20% on both GSM and CDMA. Reduced promotional offers by 65%, and are reducing discounted plans.
3. RCOM is trying to create a healthy ecosystem, forging relationships with leading global plans, and entering into exclusive partnerships with social media networks. RCOM has tied up with leading handset manufactuers for CDMA smartphones. RCOM entered into an exclusive arrangement with Lenovo. Phones will be attractively priced and work on CDMA and GSM, allowing switching calls between the two, based on the strength and quality of the signal.
4. There is also an exclusive partnership with Google, and RCOM announced partnerships with Whatsapp, Twitter in India. Twitter and RCOM has launched a Reliance Twitter access pack.
5. RCOM will move 9500 employees to partner roles.
2G is inking GSM Intracircle roaming arrangements. The first such agreement is with Aircel. These will increase RCOM’s national 2G footprint by 10,000 base stations. All other agreements will be completed by the second quarter of this financial year
6. The RCOM-Reliance Jio deal. Jio will utilize fibre across RCOM’s intercity fibre optics network. IT will have reciprocal access to Reliance Infocomm’s infrastructure in the future. This is the ‘first’ such agreement between the two companies (which means that more deals are being discussed).
7. Industry is facing virtual consolidation. Pricing power is coming back, and there are improvements in RPM. RCOM is rationalizing Prepaid tariffs, by removing free minutes and improving tariffs by 20%.
8. Revenue contribution of data- Wireless growth is 2.5%, but the growth of GSM and Data businesses are growth engines. 64% of wireless revenue for RCOM. One year ago, it was 59%, moving up 500 basis points as a contribution of GSM and Data.
Quoting Mr.Gurdeep Singh (President CEO, Wireless Business, Reliance Communication)
We changed course and aligned go to market strategy to as 3G metro, 3G lit markets and non-3G markets, relooking pricing, branding, distribution, and kept the go to market elements differently for all three markets. Quarter on quarter of GSM+Data is going up. We had consciously taken a call that CDMA network will be a high speed data network, by being a dominant player in the dongle market, and make an effort to bring branded handsets into the smartphone market. We will make efforts with HTC and Blackberry, and another few announcements are planned. What’s good about CDMA device ecosystem is that it is CDMA+GSM.
We don’t rule out rolling out EVDO+GSM phones.
The GSM + Data has grown 6% quarter on quarter in terms of revenues. We have been ahead of the industry growth in this segment in the last 3 quarters. We gained 100 basis points in revenue market share, and have an accelerated growth path. A large part of the revenue comes from 2G Internet (GPRS), and in light of some operators who have given up spectrum in some circles, which is increasing opportunity for RCOM in these circles. We’re seeing traction in that direction. GSM+data, the growth will be on data.
We’re not late with the ICR arrangements. Now that the hypercompetitive stage is behind, there is a good reason for us to consolidate our position. We’ll be smart enough to go for revenue corridor, data corridor. We want to get to the market quickly, make a good case to deploy our own assets.
2300 MHz needs far more sites than a 2G footprint, should Reliance Jio have an ambition to be a pan-India operators. Ours is a large portfolio of towers, and many of the towers in the main cities are fibre-ised.
We are in advanced stages of discussions to lease out towers to Reliance Jio.Our objective is to migrate customers to CDMA smartphones in the CDMA segment. We’ve raised prices of CDMA handsets. The attempt is to get a better quality customer. We’ll see the complete bleed stopping in CDMA in the next two quarters. The bleed is coming to a stagnation, and it will contribute as we populate more CDMA smartphone users.Growth in GSM+data will outperform the market.
As per latest stats from Gartner, India’s mobile services market is expected to grow eight per cent to Rs 1.2 trillion in 2013 but will account for only two per cent of the worldwide mobile services revenue as operators are struggling to increase profit margins. The revenues from mobile services stood at Rs. 1.1 trillion in 2012. According to Gartner, mobile connections in India are expected to grow to 770 million in 2013, up 11 per cent from 712 million connections in 2012. In current circumstances, the Indian telecom market will account for 12 percent of worldwide mobile connections, but just 2 percent of worldwide mobile services revenue (in constant USD) in 2013
Some of the factors are which are hurting the Indian Telcos significantly
• The Mobile ARPU hasn’t shown any pace in growth over some time now even though the drop has been arrested by the operators. Thus operators are not adding incremental revenues. The ARPU of GSM mobile operators have declined by up to 24% during the period between 2008 and 2011
• Over the top service providers such as Facebook and WhatsApp are eating into the SMS cash cow.
• The legislative and regulatory uncertainties over taxes and other payments and agreements are bleeding the operators.
• With the Metros and Tier 1 cities hyper connected, the next wave of growth would be the rural hinterlands – However, further rural expansion of mobile services will come at a cost.
Indian Telcos are looking at mobile broadband services to be the next wave of revenue growth. Coupled with innovative solutions and services, associations which cut through different other eco-systems (media transmission) and local mobile apps which is key to break thru the multi-lingual geographies – Telcos are putting in place, strategies for addressing the data revolution. While India plays catch up with the rest of the world in terms of mobile broadband adoption, telecom operators need to think of growing the top line through innovative services. A report on Indian telecom authored by AT Kearney, states that non-voice revenues of mobile operators will increase to 27 per cent by 2015 from 14 per cent in 2011, of which about 15-20 per cent will come from mobile data, which is expected to grow at 126 per cent. The voice revenues will decrease to 73 per cent from 86 per cent during the same period. Proliferation of smart devices is accelerating this shift towards data. In 2008, only 3.8 per cent of handsets sold in India were smart phones. By 2011, this had increased to 8.1 per cent and is further expected to grow to 25 per cent by 2016
Relevant Applications for various segments are being put forth and with the launch of 4G and increasing reach of 3G services, the data revolution is about to roll in. Innovation in utility apps that help bring efficiencies in a consumer’s life will bring in sustained revenue and will be relatively more difficult to replicate by new entrants. While social and video apps are doing extremely well in India, it is time to look beyond these and deliver apps that can have a sustained business model. India has a phenomenal pent up demand for mobile broadband and local mobile apps that solve everyday problems for consumers.
As SMS celebrates its 20th anniversary , Chat apps are overtaking SMS communication globally. The Operator cash cow is dying. Time for telcos to wake up & smell the data coffee.
A new study by Informa loads the dice up for Chat apps. For the first time, more messages are being sent via applications such as iMessage, WhatsApp and Viber than traditional texting. Messages sent using such apps outnumbered those sent through carrier-based SMS in 2012 and the lead is expected to widen this year as chat apps send twice as many messages as texting. Although traditional SMS has a larger user base, iMessage, WhatsApp or other chatting apps are sending more texts per user, giving them the momentum. Informa estimates that on an average, a chat app user sends 32.6 messages per day, versus just five for SMS. This despite there being 3.5 billion SMS users compared to 586 million among the top six messaging apps surveyed by the researchers.
Mirroring this sentiment, Ovum estimates that Indian telecom operators may lose $3.1 billion in SMS revenues by 2016. In 2012, the Indian telecom industry lost close to $781 million in SMS revenues, as mobile telephony subscribers increasingly used social messaging apps for quick communication. According to data from the Telecom Regulatory Authority of India (TRAI), the number of monthly SMS sent per GSM subscriber fell by 5.62 per cent to 36 for the three months ended September 2012 from 38 in the year ago timeframe. For CDMA users, this number was marginally up to 25 during the same period. Industry watchers believe that there is a secular fall in SMS revenues for both CDMA and GSM operators.
There are a couple of reasons that are driving the consumer growth in the chat apps segment
1. As smartphones outnumber dumb feature phones, app-based messaging is set to eclipse texting. The next evolutionary step is likely to be calling from Facebook, now in limited roll-out, and other social networks.
2. In addition to being cheaper, these apps are more interactive as compared to the traditional SMS. (We could see the popularity of messaging apps wane if they decide to charge for the service. WhatsApp, for instance, is reportedly considering a paid 99 cents a year subscription.)
The demise of SMS is perhaps most symptomatic of the evolution of communications underway. First was the voice call, which largely vanished as texting became common. As SMS slowly declines as a significant revenue opportunity, mobile Internet (broadband or narrowband) is steadily growing as a key revenue generator.
Carriers, globally are playing to the changing notes, and are giving away unlimited texting on data plans. The intent is to convert dwindling SMS revenues into a broadband revenue opportunity. Indian telecom operators seem to be cognizant of this shift. They are increasingly co-bundling free messengers and content services to push data usage as an alternative to cascading SMS revenues. Last year, Reliance Communications tied up with WhatsApp and Facebook, enabling its GSM customers to use the two services for Rs 16/month. Aircel, too, has taken the leap by tying up with Nimbuzz. Others have started this integration – Nokia recently launched a new phone, Asha210, which has a dedicated WhatsApp button
The Chat platform providers are riding the wave and are collaborating with telecom companies for monetising the chat platforms through operator billing
Manufacturers shipped 216.2 million smartphones worldwide in Q1, 2013, compared with 189 million regular cellphones, according to IDC. IDC Q1, 2013 numbers compare facorably to 402.4 million units in the Q1,2012 (YoY) and down from 483.2 million units in the Q4, 2012.Smartphones thus made up 51.6 percent of the 418.6 million mobile phones shipped. The shift to a global majority of smartphones is now being driven by consumers in developing countries such as China, India and Indonesia.
Samsung retains the smartphone crown taking 32.7% of the market shipping out 70.7 million smartphones – thus becoming the defacto Android standard. Samsung’s up 61% over a year earlier.Apple slipped in its numbers to close Q1, 2013 at 17.3% of the smartphone market share with 37.4 mln units. Apple’s market share market share fell to 17% from 23% a year earlier. Samsung’s dominance of the smartphone markets is so superior that it ships more smartphones than its next 4 competitors put together.
Total Mobile phone shipments increased 4% YoY driven solely by 41% increase in smartphones compensating 19% drop in dumbphones.
ABi research reports that the tablet market will grow this year by 38% to 150 million units. But the Microsofts and Blackberrys will contiunue missing the boat! With 3% of the current Tablet markets globally, Microsoft, Blackberry and other unidentified OS implementations don’t show signs of significant growth.
The ABI Research report says that an estimated 150 million tablets will ship in 2013, worth an estimated $64 billion.The total number of tablets will grow by a projected 38% over 2012, and the total revenue will grow a projected 28%. Last year, according to ABI, 60% of tablet used iOS, 37% used Android, and the remaining 3% was made up of “others”.
App publisher Animoca recently calculated the top 12 Android tablets, based on app usage, and it found that five of the top six are 7-inchers- and with iPad Mini touting the 7″+ form factor – Tablet markets in the foreseeable future could look to stabilize at 7″ form factor.
Theoretically, that could bode well for Microsoft, because the company is said to be at work on a 7-inch Surface tablet. Surface tablets haven’t sold well, but perhaps a less-expensive and smaller form factor would help. A possible winner would be a 7-inch Windows tablet that takes advantage of Microsoft’s partnership with Barnes and Noble and taps into B&N’s vast book repository and growing video offerings, as well as into Microsoft’s successful Xbox-based gaming ecosystem.
Still, if ABI Research numbers are right, Microsoft so far hasn’t been able to tap into people’s growing desire for tablets, and won’t in the foreseeable future.
As the industry waits with baited breath for reliance Jio to create the landmark disruption, there has been an uproar over VoLTE i.e Voice service over LTE spectrum. Reliance Jio paid Rs 1,658-crore fee to the government for supporting 4G VoLTE on its universal services licence. VoLTE was the final piece that would complete Reliance Jio’s portfolio of services. However is that really a disruptor as it is purported to be?
Voice Telephony on LTE is made possible through apps such as Skype. However, with prohibitive CAPEX on full carpet area coverage – Data connectivity in a wide carpet area will be patchy at best. It means no voice calls when driving or outside city limits.
The 2,300 MHz spectrum, is one of the worst when it comes to creating a large area network. Compared to a GSM/HSPA 900 MHz; LTE on 2300MHz requires exponentially higher number of towers in one shot. Voice is not profitable enough, to support such high infrastructure costs.
Thirdly, Voice requires a better quality of experience. A data subscriber rarely notices fluctuations in speed, but a user in a moving vehicle will expect the same call quality throughout. Thus, for data services can afford lower initial investments and expand incrementally afterward, but for voice telephony, all investments are needed up front.
The one way VoLTE might make commercial sense is if Reliance acquires or partners with an existing mobile operator, such that its current 2G or 3G network becomes the fallback network that will carry voice calls or data when 4G airwaves aren’t around. That appears to be the only way Voice can happen for Reliance Jio. (Or alternatively, a tie up with Reliance (Anil Ambani) could provide Mukesh Ambani the where with all to su[pport voicee services).
Thus VoLTE under the current understanding is not the disruption as many earlier thought it to be.
1. Mobile handset sales in India grew 20.8 per cent to 221.6 million units in 2012 (over 183.4 million units in 2011)
2. Feature phones sales grew 19.9 per cent to 206.4 million in 2012 from 172.2 million in the previous year
3. Although we see a huge market ‘hype’ around smartphones, the fact remains that the India mobile handset market is still dominated by shipments of feature phones.
4. This indicates India is still a ‘new phone’ market, where feature phones contribute to the bulk of shipments compared to replacements or upgrades
5. Smartphones comprised a small chunk of the overall handset market at about 7 per cent, the high-end category grew at a robust 35.7 per cent to 15.2 million devices in 2012 from 11.2 million units in 2011
6. The market remains largely fragmented across a huge number of Players – most of them white labeled Indian brands manufactured in China.
7. With the entry point of smartphones coming down to about Rs.3000-4000, 2013 could be the tipping point for smartphone adoption in India as buyers intending an upgrade purchase would make the jump to smartphones.
Presenting a few key take outs from the WCIR (Wipro Council of Industry Research) and IAMAI report on the Future of the India MVAS industry – Beyond what is now to where it could be headed in times to come.
1. Number of mobile Internet users in India set to explode by a factor 2X between December 2012 and March 2014, from 87.1mln to nearly 165 mln.
2. Indian MVAS market will grow at a CAGR of 25% between 2012 and 2015 to reach US $9.5 billion in 2015, from an estimated US $4.9 billion in 2012.
3. Even though 96% of the survey respondents accessed the internet on mobile devices, only 56% had subscribed to some form of paid MVAS
a. Most of these subscriptions are basic offerings such as SMS alerts and CRBTs
b. Paid services used today only enable limited value delivery to providers and consumers alike
4. VAS services available today are perceived to lack customization and are easily replaced with freely available options.
5. Complexity is consistently rated as a key barrier to service adoption. 64% of participants believed that advanced mobile health services would to be too complex to use.
6. Users express concerns about the unique aspects of the mobile experience that could compromise usability. 56% of participants were concerned about the screen size of mobile devices.
7. Researches such IAMAI and Wipro establish that they are willing to pay for services when they perceive value.
a. 80% of the respondents believe that enriched and transformational data services will save time.
b. Therefore, the use of basic services is projected to decline, while enriched and transformational services are projected to rise from current usage levels
c. Transformational services will reinvent the consumer experience – and may ultimately replace the brick and mortar alternatives or complement them
8. In terms of VA services, mEntertainment is expected to be the largest contributor to operator MVAS revenues and provides key opportunities in localized vernacular content, on-demand music and video content and live TV shows and events
9. Innovation in other MVAS categories such as mEducation, mFinance, mHealth has largely stalled out with basic SMS and IVR based information services.
10. Services available today only skim the surface of consumer experience. As categories reach higher and higher maturities, consumer requirements will evolve faster- driving a rapid shift in consumer preference from basic to enriched to transformational services
With acceleration in 3G/4G deployments, increasing smartphone penetration and MVAS maturity – Users will migrate from the basic services to enriched services aand furthermore to Transformational services – and that will drive dramatic growth in the industry. Listing down a few recommendations maximize chances of success in the Indian MVAS market.
Source: Beyond the tip of the Iceberg IAMAI/WCIR report
IDC in its most recent report indicates that Tablets will surpass Desktops globally by 2013 and notebooks by 2014. IDC indicates, global shipments of smart connected devices to have increased about 30% in 2012, surpassing last year’s 1 billion units shipped with $576.9 billion generated. Tablets pushed the growth rates with a scorching 78% YoY growth (2013 versus 2012).
IDC also notes shipments of desktop PCs will continue dipping, another 4.3 percent, in 2013
Notebooks will see a marginal growth of 0.9 percent.
Tablets, are predicted to register a new high of 190 million units shipped in 2013 with year-over-year growth of more than 48 percent.
IDC says smartphones will also grow another 27 percent, posting 918.5 million units shipments this year.
In terms of OEMs, Apple significantly closes the gap with market leader Samsung in the last quarter of 2012 with the combination of the iPhone 5 and iPad Mini bringing the company up to 20.3 percent unit shipment share as compared to 21.2 percent for Samsung.
Interestingly enough then, PC majors such as HP and Dell would increasingly get outmoded by the likes of Amazon – the antithesis of device majors.
So then, does this mean the end of the PC era? The Post PC era? … as Steve Jobs had crystal gazed. Well, it looks a certainity with these numbers and yet i would claim it as dawn of the PC plus era! Its a contrarian view given the convergence scenario – but i do believe that we will see a mobile stack of 4-5 devices going forward – Smartphone, Tablet, Notebook, Smart Watch or Google Glass and more (Smart TV, Smart Car and Smart Refridgerator not counted).
Tablets will occupy a unique place. PCs will occupy a unique place – Physical keyboards are actually really important. Both devices will co-exist with more and more convertibility and ability to work together. The convergence eco-systems will also work on platform portability across the range of converged devices.
Hence it is not so much as “passover” of the PC as the emergence of new computing devices which only add to the PC to further the case of always on ubiquitous computing.