This was presented by me to Accenture on 31st January 2014 and defines the challenges in terms of technologies, standards, networks and the investments and costings underneath.
The pace of innovation is outstripping the RoI recovery cycles for Telcos worldwide and then again, there is no single standard and one unified eco-system. Betting and hedging on future is a difficult task for even the most seasoned Telcos.
The new radiation norms for mobile phones in India will come into effect from today. This entails no more than 1.6 watts over 6 minutes of usage. All handsets to be sold in India from now on will have to display exact how much radiation they emit/ SAR value.
With the new SAR norm, India would become one of few countries that are following the most stringent norm of 1.6 watt per kg average over six minutes period on 1 gram of human tissue.
This would be the death knell to the GSM standard mobile handsets in favour of the WCDMA/3G handsets. Devices on the WCDMA/3G/CDMA platform are inherently less harmful than mobiles on GSM standard as has been proven by the following studies-
1. Studies by Joel Moskowitz at UC Berkeley indicate GSM phones to emit 28 times more radiations compared to CDMA/WCDMA/3G phones.
2. The November 2009 issue of “Journal of Clinical Oncology,” indicates usage studies on GSM/WCDMA standards indicate that 37 percent of GSM phone studies indicated a link to tumor risks. About 15 percent of WCDMA/3G phone studies found a similar link.
3. April 2011 issue of the “International Journal of Science Technology and Management cites GSM cell phones to increase brain activity between four and 24 times greater than WCDMA/3G cell phones.
4. The reason for the difference between EM radiation of GSM versis CDMA/WCDMA cell phones is the use of higher transmission/transmitter power. On an average, GSM phones use 2watt/sec transmission power, where as WCDMA/CDMA technology uses a tenth of that power (200 mWatt/sec). This is manifested by the higher dBm (deciBell milliWatt) ratings of the GSM phones.
While exposure to EM Radiation cannot be strictly zeroed on cell phone usage – annecdotal evidence supports cell phone usage with increase in exposure to radiation. Exposure can be minimized by use of landline phones, phones on CDMA/WCDMA standards and use of earphones to increase the distance between the human body and the device.
This new regulatory statute would thus serve in favour of WCDMA handsets and would kill off GSM devices on the whole. Increasing WCDMA volumes would also mean greater affordability for such devices – and thus the economies of scale and penetration would step in.
Total number of net adds for Q4, 2012 accounted 140 million.
In terms of new subs/net adds, China leads the fray with 30 mln subs, followed by India (11 mln), Bangladesh (9mln), Indonesia (8 mln) and Nigeria (5mln).
Mobile subs have grown around 9% y-o-y and 2% q-o-q
In Q4, mobile broadband subscriptions1 grew ~125 million to 1.5 billion, reflecting a 50% year-on-year increase.
There is continued strong momentum for smartphone uptake in all regions. Approximately 40 percent of all mobile phones sold during 2012 were smartphones, compared to around 30 percent for the full year 2011. Only around 15-20 percent of the worldwide installed base of mobile phone subscriptions uses smartphones, which means that there is considerable room for
By the end of Q4, 2012, Global mobile penetration reached 89% totalling 6.3bln connections- However, actual number of subs is around 4.4 bln, since many users have multiple connections
GSM/GPRS/EDGE subscriptions grew ~44 million and WCDMA/HSPA grew ~70 million. Together these technologies represent ~80 percent of total net additions. LTE subscriptions grew from 14 million to 57 million. GSM/GPRS/EDGE + WCDMA/HSPA + LTE accounted for 90% of the global mobile net adds.
World wide data traffic continues a healthy uptrend and shows significant and stable growth. Data traffic has doubled Q-o-Q Q4, 2012 versus Q4, 2011 with a 28% quarterly growth between Q3, 2012 and Q4, 2012.There are variations in data consumption patterns across geographies and maturity of markets.
Source of data and Infographic: Ericsson Mobility
Data is the new revenue mantra for the Indian telcos as voice revenues have pile drived. According to Nokia Siemens MBIT report on the data consumption in India, there has been a 54% increase in mobile data traffic in India between December 2011 and June 2012. While the over all mobile traffic grew by 54%, the growth in 3G traffic (78%) was more than 2G, which grew by 47% over the same period last year. 3G data traffic has seen a surge this year, especially in last 3 months thanks to over 70% slashing on 3G rates
The Mbit Index report also revealed that 2G users in India are consuming three-quarters of the total mobile data traffic, on average, while 3G users consume four times more data than 2G users. At current pace, the report expects that India’s mobile data consumption to double by June next year.
Although the 3G consumption has growth thanks to 3G rates coming down and availability of cheap Smartphones & 3G phones, there is still quite a lot of room for improvement in 3G services. Even today, except for most urban areas, 3G coverage is rather minimal. Additionally, 3G data services have lot of scope of improvement in terms of consistent data transfer rates.
In most cases, even today, 3G transfer rates vary a lot from area to area depending on the coverage and network provider.
Other Interesting Highlights from Mbit Index Report
- By the end of June 2012, 3G has outpaced 2G in terms of data traffic growth.
- 2G traffic currently generates over 75% of the total data traffic generated.
- A first time 3G user consumes close to 400 MB (megabytes) of data every month compared to about 100 MB consumption over 2G.
- Recent tariff reductions in 3G services have resulted in doubling 3G data traffic month on month.
- Web browsing contributes 81% of 2G data traffic
- Only 17% of 2g traffic is used for downloading videos.
With traditional revenue sources for the operators like voice and messaging at bottom levels, the subscriber churn, as a result of mobile number portability, it is quite natural that the operators are taking a safer route and betting on VAS as the next big opportunity to sustain and succeed in the market.
According to PwC, the mobile VAS market in India has the potential to generate Rs.55,000 crore by 2015. As per V&D100-the annual survey of the Indian communications industry-the Indian cellular market for FY11 is estimated to be around Rs.102,230 crore, ie, $22.3 mn and this market is growing at the rate of 16.6%. Of this total amount, VAS or non-voice revenue for mobile operators contribute around 13%, which translates to Rs.13,026 crore. It is expected that the Indian VAS market is bound to increase to Rs.32,000 crore in FY15. All this will happen only when operators provide stable 3G and 4G network and quality of experience so that data services improve considerably.
The Indian VAS market is also bound to grow as operators have already invested around ‘100,000 crore in terms of 3G and BWA auction, and they are presently in search of a series of killer applications that will help them recover their auction money. Not only this, they are also looking at killer applications that are less bandwidth consuming and can bring a large chunk of revenue.
The launch of 3G services in India opened up a plethora of opportunities for VAS players. With 3G services, the operators will now be able to offer richer services such as mobile internet and video, as there is greater bandwidth available to deliver an enhanced service experience. While the operators will continue to offer pre-3G existing VAS, such as ringback tones, messaging, and infotainment services; there will be an opportunity to offer services that require more video or image based content, such as telemedicine, wireless teleconferencing, and e-learning.
VAS will also play a critical role in bridging down the digital gap between urban and rural masses, with operators coming up with innovative offerings to suit customer demands in all regions. Of late, VAS has also helped in digitally empowering the masses as it continues to play a major role in m-governance and m-commerce. Offerings like medical facilities, an SMS away, or mandi prices for farmers on phone, have even made the government to take a keen interest in the development of VAS. Innovations such as location based services, mobile TV, m-wallet have given the best breed of personalized services on mobile devices.
Market growth drivers on the supply side include declining ARPU, brand differentiation needs, and growing focus on entertainment-related content; demand-side drivers include the booming Indian economy, increasing user comfort with basic mobility services, personalization of content, devices, and cheaper handsets. From the early days of ‘Person-to-Person Short Message Service’ (P2P SMS), the industry is witnessing the growing portfolio of services including graphics/wallpapers downloads, ringtones and caller ringback tones (CRBT), SMS contests, and games.
Telecom, especially wireless, was supposed to be India’s ticket to economic development. Most operators contend that the government is trying to extract too much from them. The top four firms for instance must have paid close to $15 billion over the last four years itself as revenue share, licence fee, service tax and spectrum charges. Industry watchers contend that if they (the government) tries and extracts more, it will only be counter-productive.
One of the biggest obstacles faced by operators when it comes to breaking even is cost of spectrum (when you consider the rock bottom tariffs), especially when acquired through auctions. In India, spectrum is expensive, scarce and unpredictable. Those need to be changed for operators to be able to innovate around long-term investment plans.
Auctions must encourage competition between not just players but also technologies, say, 2G vs. 3G or GSM vs. CDMA. Technology neutrality is absolutely critical because just like you don’t want a player to have an undue advantage, you should also make sure a technology too doesn’t have one. When regulators pick a technology before the auctions, they’re essentially picking winners
Doing this allows savvy operators to marry the most efficient technology to the spectrum they purchase. Naturally, they’ll pick one that’ll have maximum consumer value.
A unified licence should mean an operator is free to offer whatever combination of technology [it] wants, even if that means a 2G plus LTE data card. The unified licence automatically takes care of revenue leakage.
There is also a case for offering slightly preferential treatment to those operators whose licences got scrapped and are re-bidding, versus those that are completely new. Globally, it’s a well-accepted strategy among regulators to reserve blocks of spectrum for new entrants and provide them certain handicaps. But that is now a political question in India. Incumbents believe that subjectivity and artificial restriction on the number of bidders will only lead to market distortion.
The long-term goal for the regulator must be to figure how to bring more spectrum for auction, more frequently. What is considered reasonable spectrum in most markets like the US and Russia for an operator is 15-20 MHz? That should actually be higher in India, given the size of our market. On the contrary Indian operators have to contend with 4X the number of consumers on networks working on fourth of the spectrum.
Unfortunately we have too much spectrum divided in narrow slices across too many operators, in itself leading to greater wastage. Every time spectrum is divided between two operators, guard bands are reserved around them to prevent accidental interference between them. The more the number of operators, the more the bands. About 15 percent of our spectrum is currently lost due to such guard bands, and in some cases I’ve even heard of 20 percent
After issues around the migration of Defence spectrum are sorted out, next up should be a comprehensive spectrum plan that includes more of lower bands that offer greater propagation at lower cost. Unnecessary secrecy and lack of transparency are three-fourths of the problem in telecom. If you reveal all relevant information in an auction, then players can decide for themselves
Indian Telecom’s New Deal too will need the “Three Rs”—Relief for serious operators and poorly served consumers, Recovery of the sector’s vast potential and Reform in order to bring lasting transparency and fairness.If we don’t get it right this time, the next 10 years of Indian telecom will be like the last 10 years.
This crisis really, never mind the cliché, is an opportunity.
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.
The spectrum auction for broadband wireless access (BWA) services fetched the Government of India an unprecedented Rs.38.543.61 crores (USD 8.56 billion) after 16 days and 117 rounds of auction. 11 companies were a part of the auction. The pan India licence price stood at Rs. 12,847.77 crore ( USD 2.85 billion), which was 634% (6 times) the base price set by GoI at Rs.1,750 crore. Unlike the 3G event, Infotel Broadband won a pan India license, while Aircel bagged 7 slots, Tikona got 5 slots, Qualcomm and Bharti 4 each and Augere 1. The others failed to pick up any stakes in the BWA circles. The total revenue of the government from sale of spectrum for both 3G and BWA touched over Rs.1.06 lakh crore. Reliance Communication, Tata Communications, Vodafone Essar, Spice,and Idea missed picking up even a single circle.
BWA spectrum is essentially for rolling out WiMAX services enabling handheld devices and laptops to access Internet.
GoI has been pushing for more widespread access to broadband usage in the country which is at a paltry 9% of the population currently. McKinsey study projected that a country GDP improves by 0.6% for every 10% increase in penetration levels of Broadband.
1. The high prices (above expectations) paid in both auctions, which were too rich for several major cellular operators who dropped out of the second BWA auction, ease the strain on the country’s public sector deficit for this fiscal year.
2. At the same time they exacerbate the financial difficulties of the two state-owned operators BSNL and MTNL which although automatically awarded both 3G and BWA spectrum are obliged to pay the same amounts for their spectrum as the winning bidders.
3. Furthermore, the outcomes of these auctions introduce additional players into India’s mobile market, whose supply structure, absent consolidation, is already unsustainable with an uneconomically large number of competitors.
4. The real impact and value of allocating this new spectrum for mobile broadband will depend upon sensible consolidation between operators – which will require a change in M&A regulations – and the establishment of roaming arrangements between operators.
5. The combination of very high spectrum prices (e.g. $1.34 per MHz/pop for 20 MHz of BWA spectrum at 2.3GHz in Delhi) will intensify the pressure that winning bidders will exert on the prices offered by equipment vendors for network rollouts to minimize capex, while the need for intercircle roaming agreements will favor technologies that are widely supported.
6. Qualcomm which won BWA spectrum in 4 circles – including Delhi and Mumbai – will be looking for roaming agreements with operators in other circles that deploy either WCDMA 3G (Qualcomm is the pioneering supplier of 3G/LTE chipsets) and/or TD-LTE networks.
7. Infotel Broadband is being acquired by Reliance Industries Ltd. This thus enables Mukesh Ambani who was barred under a family non-compete agreement from entering the telecom sector to re-enter and establish himself in the telecom sector.
8. Qualcomm which won BWA spectrum in 4 circles – including Delhi and Mumbai – will be looking for roaming agreements with operators in other circles that deploy either WCDMA 3G (Qualcomm is the pioneering supplier of 3G/LTE chipsets) and/or TD-LTE networks.
9. Infotel’s (Reliance) choice of technology will be critical in terms of introduction of TD-LTE. It will be influenced by Infotel’s ability to offer roaming as long as its network does not have nationwide coverage, as well as by the pricing of alternative technologies, and even the availability of international roaming arrangements (since target customers for mobile broadband customers will include the most internationally active of Indian customers).
Mobility has touched the lives of 50% Indians and with the launch of 3G and enhanced spectrum, the numbers would see a bigger boost. As discussed in an earlier post, India is now going through a Data revolution. More and more people are accessing internet through their mobiles phones. Here are a key factors enabling the spread of Mobile Internet in India.
Proliferation of mobile internet
In 2011, Smartphone search rates are expected to exceed PC search rates of 2007.
In India alone, the GPRS users are estimated at 20 to 25 million, which is also estimated at 40% of desktop Internet users. Over 2009 internet traffic from metros from India grew 2.5X times other global carriers: Nearly half of this traffic was from Mobile phones.
India Smartphone penetration
Data from Admob shows that Internet traffic is mostly based on Feature phones accessing Internet through WAP sites. However, the smartphone penetration is also increasing across the country and 3G compatible devices are breaching the Rs.5000 mark. This provides an opportunity to replacement consumers to buy into higher end devices which have greater internet capability than the earlier devices.
Sample this: The Highest Mobile Traffic Mobile in India is the Nokia 5130/3310, which for most of its life was a 4K device. A user who bought into this device an year ago today has an option of upgrading to a more feature rich-internet enabled smartphone at 5-8K. That is where consumers are beginning to migrate to the internet
New Age Browsers: The start of a platform transition
With the smartphone entry price points close to the 5K, the browsing game now shifts from Mobile WAP browsing to full scale HTML browsing. While the former is optimized for Mobile, uses minimal navigation is quick loading and is without Frills to suit the limiting computing power of the mobile, full HTML browsing offers PC like browsing experience with multiple page support. The browsing experience will be aided by Location, direction and motion sensor, web apps and rich media experience.
Affordability of data plans
Mobile internet is set to surge see a surge as data plans now break down the price barriers and more and more competitors increasingly commoditize the voice revenues streams. A survey by Google puts the entry threshold for mass acceptance of data plans to Rs.100 per month citing that the volume increment in that case is a 5X multiple. As we go along, data revenues will continue spiraling downwards to the point of pay per downloads.
Two cases of Iran in 2007-08 and Algeria in 2008 prove the direct correlation between data plan affordability and surge in Internet traffic numbers.
A combination of the four factors has been and will be the driving force behind India’s Mobile internet growth in the near future.