2011 is perhaps Indian telecom’s biggest year yet with launch of 3G services, mobile number portability implementation and 175 million new mobile phone subscribers in 10 months, taking the total subscriber base to 881 million.
However there have been challenges for the Indian telecom businesses-
1. 93 percent of users are low-spending pre-paid users
2. A low ARPU together with high energy costs for the diesel backup for a half-million towers, it’s a struggle for margins.
3. 3G licenses have come at a very heavy cost and the impact is in terms of cash strapped operations for many Telcos. The government made a lot of money and squandered off a little more, but that is a different story.
4. Inspite of huge investments on 3G, Poor user experience and a lack of content failed to draw users, killing all operator hopes of recovering that money.
5. Mobile number portability: 25 million users applied to switch operators while retaining their number, with 2.5 million requests pouring in each month. The churn is also taking its toll as Operators are responding with tariff cuts and deals.
A few future defining trends also shaped up in 2011 as markets evolved, matured and consolidated:
1. 2011 is possibly the year, when the Indian Telecom Industry moved up from a entry to a replacement market. The new sub adds plummeted to 6-7 million per month as against an average of 15-20 million activations in 2010.
2. Data emerges the hero as Telecom starts evolving from a some-what voice centric industry. 2011 should herald the decade of data for India with preliminary 3G and EVDO Rev. B launches. LTE is round the corner.
3. New classes of devices such as Smartphones and Tablets in the entry level with advanced OSs and application capabilities widen the consumer choice as well as the experience. Low cost Androidss are driving smartphone adoption rapidly across in ~$80 price segments
4. Tariffs bottoming out, Indian Telcos look for the next springwell of revenue and profits and new revenue models would start to emerge. Operators are looking at various VAS aided business models to augment their margins and profits.
5. The Aakash Tablet (and NotionInk’s Adam before that) established India’s status as a low cost innovator. Going forward with the markets in SE Asia and Africa being key to telecom growth, India will feature as a global innovation and R&D centre
6. The government has announced the NTP (National Telecom Policy) which is a proactive step in terms of defining telecom sector businesses going forward. The industry awaits greater clarity on a few issues such as mergers and acquisitions and we will see things get more clear and better as wel go along.
Gartner release on the size and growth projections of Indian Mobile handset numbers:
Mobile handset sales in India, expected to grow an annual 8.5 percent and reach 231 million units in 2012
Annual Mobile handset sales in India to top 322 million by 2015
Smartphone sales 6 percent of the total device sales in Q2, 2011. Gartner expects to go up to 8 percent in 2012
Average selling price ASP for a mobile device sold in India is about $45
75% of the Mobile devices sold costing below $75
These set of projections amongst other things emphasize the growth of the smartphone segment in the mobile phone markets. Smartphones are projected to grow by 45% as against a total market growth of 9% Y-o-Y 2011-12.
The report also speaks about the waning klout of the Tier A brands to the local and Chinese brands such as G’Five, Micromax, Spice, Karbonn.Going forward in 2012, the big global brands will continue to face competition from local and Chinese brands as some of these brands are building capabilities to compete at a larger level covering broader consumer segments.
Contribution of VAS or non-voice revenue of Indian mobile operators is 13% of the total revenue or Rs.13,026 crore in FY11. Higher spectrum bamdwidth to push VAS in India have been around for about and year now and there are movements which if not scape changing and huge, are definitively moving towards a wiser set of Value Added Services with deeper reach.VAS in India contributes approximately 13% of operators’ revenues, whereas in other countries its contribution is around 25-30 percent. On another note, it is an observation that, VAS services come to full bloom ion an average 2 years after the implementation of 3G. That has been the case in European and American roll outs. India was late to the 3G technology club, and hence VAS services have not found the required network environment to push higher end services.
Despite getting huge recognition and prominence in the telecom industry, Indian VAS players need to shake away a few more crucial bottlenecks to reach a full bloom. The VAS industry also faces challenges like reconciliation issues with operators, delayed payouts from operators, and lack of a common body to offer unified short codes, which work across all operators at the pan-India level.
Even though the VAS players know their customer’s demands, majority of content producers are only producing VAS content that has low cost of production, eg, wall papers, ringtones, astro, or other plain vanilla text based content. Since the content producers get extremely low revenue shares from the mobile operators, hence they are doing so. And, since the mobile operators do not get any specialized content, therefore they give low shares.
The mobile VAS industry needs to work towards building up an ecosystem where in each and every stakeholder should benefit in the value chain process. The time has come to break away from this vicious cycle and convert this process into a value chain.
Today, a typical value chain in the MVAS industry encompasses content creators/providers, mobile advertisers, aggregators, technology enablers, telecom service providers, and end-users or subscribers. Also, it’s to be noted here that in the value chain of MVAS, telecom service providers are a very big entity in comparison to the content providers/content aggregators who are basically SMEs.
Since there is no standard format of agreement between the telecom service provider and VASPs for VAS, hence the telecom service providers being the core of the MVAS value chain, usually dominate in finalizing the terms and conditions of the agreement.
The VAS industry in India is at a nascent stage. In the present scenario, there are quite a large number of small and medium sized content aggregators and technology enablers.
Generally, such VAS providers depend on the facilities provided by the telecom operators. Effective cooperation and collaboration among various stakeholders is a key factor to form a healthy value chain of VAS. Looking at the potential of MVAS, there is a need to develop a suitable framework, which will enable consumers to access a variety of VAS, promote entrepreneurship, and at the same time create additional revenue streams for the service providers.
to be continued
According to a study by FICCI and E&Y, demand of mobile phones in India is expected to reach 350 million units per annum by 2020. The same source estimates the current size of the domestic Mobile market is close to 130 million p.a. My estimate from a few other sources roughly put the current size of the Indian mobile phone market at 170 million p.a. Given the variance in numbers by about 30%, the CAGR calculated for the 350 million p.a number is around 7-10% (Depending upon whether you choose 130 million or 170 million as the base).
E&Y FICCI estimate 505 million handsets are estimated to be manufactured in India, during the same year (2020), which would thus establish India as a global exporter of entry level and feature phones. Towards this, the study establishes a need to set up handset manufacturing cluster parks that would enable a sustainable ecosystem for the manufacture of mobile handsets in the country. The study has found that average selling price (ASP) of handsets in the country is estimated to increase to Rs 2,950 by 2020 as compared to Rs 2,300 in 2010. Thats a healthy 40% increase in ASP of the phones.
Affordability of feature-rich handsets and consumption in rural markets is expected to be a key enabler of handset adoption.A favourable policy and regulatory initiative conducive for handset manufacturing in India is expected to drive sustainable growth in this segment.
The number of 3G subscribers expected to cross 300 million by 2020, fuelling the growth of 3G-enabled handsets.
Mission of NTP 2011:- To offer Broadband on Demand to all Indians and develop state of Art network special focus on rural broadband.
Vision of NTP 2011:- To provide secure, reliable and high speed broadband to all.
1) To increase the rural density to 60% by 2017 from 35%. And ultimately to 100% by 2020.
2) Provide high speed Broadband to village panchayat through the high speed fibre by 2014.
One Country, one license regime:-
1) Intra Circle MNP to be allowed.
2) Review of the roaming charges, with the ultimate aim of removing them.
1) To provide 500Mhz by 2020, 300Mhz by 2017 and further 200Mhz by 2020.
2) To allow pooling, Sharing and Trading (later on) of Spectrum .
3) Separate spectrum Act to be enacted for the management of spectrum.
4) Spectrum to be de-linked from license. And the price to be determined through market driven process.
5) Periodic Audit of spectrum to make sure that it is utilised efficiently.
6) Roadmap for spectrum every 5 years to ensure the future availability.
1) Affordable broadband on demand to 175mn by 2017 and 600mn by 2020, with minimum speed of 2Mbps.
2) Will seek TRAI’s recommendation on new licenses, migration to new licenses and exit policy.
3) To regulate VAS, in order to provide the converged services.
4) Change in the definition of broadband from current speed of 256Kbps to 512Kbps and finally to 2Mbps.
5) Delinking license from the usage of service- network provider is not necessary the service provider.
6) Promote the domestic manufactured equipments upto 80% of total requirement.
Inspired by the success of Telecom sector and the advent of mobility, the Government of India is relentlessly pushing for better services, reach and depth of telecom services as a economy support, enabler and growth engine for India. The policy makers think of Telecom as a medium to reach out to the far and inaccessible corners of a rather large state.
A couple of new initiatives are worth mentioning in this regard.
1. The Ministry of Human Resource development (mHRD) along with a UK based device maker DataWind have produced the cheapest tablet/ computing device in the world. Called Aakash (meaning Sky In Hindi), the 7” tablet combines Android 2.2 Froyo, a 336 MHz processor, a 800*480 WVGA resistive screen, 256 MB RAM and 2GB flash memory along with 32GB expandable memory with a 2100 mAH battery in what could be best termed as Frugal Innovation targeting the bottom of the period. The product is priced at an unbelievable $38 and the government is subsiding a lot of it to make it available to colleges and universities.
Not only does this mark the entry of a computing devices to Sec C,D and below consumers, it also opens up a new avenue for internet penetration. It is also expected to spawn off a hundred apps and other value added services
2. To support services through wireless, the government has also at least five new frequency bands, including the 700 Mhz band, for telecom services (mobile broadband). The 700MHz digital dividend was earlier being used for analogue TV signals. The other major spectrum allocation is the use of S-band has been opened up for broadband services. This band, falling between 2.5 Ghz and 2.6 Ghz, is being currently used exclusively by INSAT systems for satellite based services including meteorological data dissemination. If the Plan is implemented then telecom companies could get access to about 200 Mhz spectrum more, which could boost broadband coverage. However, the NFAP is only a broad guideline outlining the future roadmap for spectrum usage in line with international standards. The actual implementation of this Plan depends upon inter-ministerial negotiations.
Bharat Sanchar Nigam Limited (BSNL) which was provided with a largesse of 2.5MHz Broadband Wireless Spectrum for its WiMAX launch is reported dropping the business case for commercial launch of WiMAX and is surrendering the spectrum back to the government. At the same time, BSNL has also assured the government that it is willing to continue its rural WiMAX offerings as part of its social obligations. BSNL has so far deployed WiMax technology using this spectrum for connecting the Community Service Centres envisaged under the Government’s e-governance programme.
BWA licences were given away last year, to Airtel, Reliance, Aircel and Qualcomm through an open bidding process. BSNL was the only Telco which was doing a WiMAX over BWA implementation. The other players have announced their BWA networks on 4G LTE. Neither of these players have so far launched services using this spectrum.
BSNL losses have tripled to about Rs 6,000 crore for 2010-11. BSNL had paid Rs 8313.8 crore for broadband access frequencies last year and it is currently seeking a full refund.
The following reasons are being provided for the roll-out failure
1. BSNL plans to rollout WiMAX-based using BWA through the franchisee model flopped over procedural, legal and other punitive charges.
2. BSNL also doesnot want to stretch its resources into LTE and is now focussed on better rollout and consolidation in the 3G space.
3. BSNL being just a single company adopting the WiMAX platform, was also confronted with the possibility of isolation from an interoperability and roaming perspective. Besides, if BSNL were to offer 4G services on the LTE platform in the future as a natural evolution for its existing customers, the telco will be confronted with a redundant WiMAX network.
4. BSNL also offers competing CDMA EV-DO services that are an alternative to the services it might have offered using BWA spectrum.
Thus, the surrender of BW Airwaves by BSNL effectively means the death of WiMAX in India. It will be available as a part of the government rural connectivity plan, but commercially WiMAX may not be rolled out in the country.
The relentless growth rate of Indian telecom subscriber addition finally seems to be tapering off. After 12 quarters of double digit sub adds, most of it in the range of 15 million and above, net subscriber adds have hit a 6.67 million figure in July 2011, which is equivalent to the May 2007 level. The GSM net sub adds have tumbled from a 17.16 mln in November 2010 to 5.34 mln (excluding Tata and reliance numbers) in August 2011. That is a drop of 2/3rds in 10 months. This would be putting serious pressure on the revenues and earnings of Telcos.While they have started increasing tariffs to shore up profits, slowdown in new users may yet affect their revenues going forward. The total GSM users base to 611.75 million at the end of August 2011 and the total mobility figure topped 858 million even as tele-population stands close to 900 million at 892.55 mln. In an earlier report Informa Telecoms and Media had predicted the number of active mobile subscriptions in India to rise to 1.159 billion by the end of 2012 making it the largest mobile marketin the world eclipsing China. The Indian telecom market already has a higher subscription penetration rate (75%) compared to China(69%). However, from a revenue perspective, the Indian and Chinese markets paint a very different picture. Informa Telecoms & Media projects that by the end of 2013, the Chinese mobile market will be worth approximately US$107.5 billion, as compared to India’s mobile market, which is set to be worth approximately US$35.5 billion. China’s mobile data market by the end of 2014 will be worth more than the entire Indian mobile market. The intense competition dominating India’s mobile market has made its impact on mobile ARPU, which is on average nationwide now US$3, as compared to China where mobile ARPU is just over US$10. Informa projects that India’s mobile data market will be worth approximately US$9 billion in 2014, up from US$2.3 billion in 2008 as subscribers in urban areas increasingly use their handsets to access multimedia services, and utility type services such as mobile payments and banking become more widespread in rural areas and smaller towns.
Key strategic initiatives by Telcos in India now revolves around data services – the operator views non-voice services as being intrinsic to its growth strategy as its customer base continues to grow and as it seeks to offset the ongoing fall in voice revenues. The rising popularity of messaging services, future availability of 3G/DO services and strong growth of mobile Internet and broadband will boost mobile data revenues in India during the next five years.
Out of the total 858.37 Million subscribers, 601.73 Million subscribers were active subscribers on the date of Peak VLR for the month of July 2011. The proportion of VLR subscribers is approximately 70.65% of the total wireless subscriber base reported by Telcos. Ever since the introduction of MNP, roughly 2% (15.54 mln subs) of the mobile population have opted out of their older service providers to join others.
Data: Informa, COAI, TRAI
Broadband wireless access, a Rs.40,000 crore dream to offer high speed internet, media streaming and video services to users has been in the horizon for an year now. Inspite of the great big promise, there hasn’t been much that has happened on the BWA space. The eight operators who had invested in BWA, the govt bodies are still searching for solutions and answers in terms of technology, time of rollout and business model, respectively. Most of the operators, after getting the BWA license in June and spectrum in September-October, had said they they would launch the services in the second half of 2011, but it is now believed that operators have deferred the rollout plans to the 1st or 2nd quarter of next year.
The isn’t good news for spectrum starved India, in light of the fact that regulatory and legislative bodies are much undecided about the future course of action in Telecom Industry in the country and there are punitive initiatives against a lot of the operators around the 2G spectrum sale and the subsequent revenue loss to the exchequer.
Here’s examining the factors that could be responsible for the BWA roll out delay in India:
1. Lack of Global Precedents: Over the last one year many operators have announced their interests in LTE and most of them have made some kind of trials and deployments. However, the issue lies that, no operator globally has launched BWA services on TD-LTE. China Mobile which had launched 7 TD-LTE trial tests and provisioned for infrastructure accordingly is said to have deferred the launch of BWA services until 2014. That could have a big setback for the Indian operators who were waiting desperately to look at a case study before they go full steam.
2. Lack of an eco-system:Looking at the Indian scenario, where the spectrum is scarce and the mandate of providing broadband services to the masses is herculean, the need of the hour is to select a technology which is flexible, cost effective and future ready. However, one of the other stumbling blocks to LTE implementation is the lack of a developed ecosystem. Infrastructure companies, Operators, Cloud Service providers, Content owners and licences and other technology vanguards need to stake a claim to the Greenfield that is BWA. It is believed that while China has been the first in terms of conducting trials on TDD-LTE, it would be India which would lead the large scale deployment of the technology. The launch of BWA services on LTE technology has been done through dongles because the product ecosystem for LTE technology is also, yet to be fully developed.
3. Where’s the money?(Lack of a business model): Another big reason for the delay in rollout of BWA services in the country despite of getting permission for last 1 year, seems to be the lack of clarity on the business model. 3G, which had been launched in India by most of the operators, has not seen the success that the industry had anticipated and the flop-show of 3G is definitely be at the back of mind of the BWA players. The 3G license holders have spent close to `68,000 crore on just getting spectrum and must have spent a huge some on laying out the 3G network but so far the operators have failed to roll out services in all of their licensed circles and in most cases 3G has not rapidly augmented data revenues. It has instead served as a complimentary channels for the voice channel.
4. Waiting for Big Brother’s first move:What has also influenced the thought with regards to BWA is the presence of Reliance Industries-the only player to win BWA licences in all 22 circles. It is expected the Reliance will be the first mover in terms of BWA launch and Reliance’s opening move might well set the stage for other operators to follow suit.
Data courtesy: Voice & Data magazine
The Indian Telecom industry grew around 15% during FY11 to post a satisfactory revenue of `166,168 crore compared to the `144,600 crore in FY10. In light of the fact that the environment was not conducive for telecom growth in the country, Revenue as well as growth rate made it all the more satisfying.
In terms of numbers, the industry sold 227 mn new SIM cards (not added that many subscribers), taking the total SIM card base to 812 mn and showing a growth of 39% over the year and monthly average additions of over 20 mn. Interestingly, 800 mn was the target set by the government, to be achieved by 2015, but the industry did it in 2011, four years before the deadline, albeit, in terms of SIM cards and not subscribers.
Other significant segments of the telecom business like NLD, ILD, VSAT and broadband also performed better than expected last fiscal. The total NLD market stood at `22,812 crore in terms of revenue compared to `17,118 crore in FY10 showing a promising growth of 33%.
The ILD market has shown steady growth of 10% with total revenue of `22,607 crore in FY11.
On fixed line, service providers are bundling broadband and IPTV to retain and attract customers but it is not helping; the industry showed a negative growth of 15.6%. Both BSNL and MTNL, which had a monopoly in fixed line services, have been badly affected. In terms of numbers, the fixed line market is estimated to be around `11,206 crore.
In terms of revenue numbers, broadband services was pegged at `6,846 crore in FY11 vis-a-vis `5,591 crore in FY10. Broadband has shown excellent growth of 22.4% thanks to large operators, especially BSNL, which has increased its coverage. The company is present in 100% districts and 98% block headquarters. So, in toto, the broadband coverage is available in more than 5,000 cities and 170,000 villages.
VSAT services industry accounted to `467 crore, thanks to government, education, R-APDRP and RRB.
It is expected that the industry will build upon the growth maintained in FY11 and use BWA and 3G as levers for increased growth in the coming fiscal. 3G will play a bigger role and so will data services as they will have to go hand in hand.