Ronnie05's Blog

The Telco versus Broadcast battle

Posted in The future Telco by Manas Ganguly on June 11, 2014

I am blogging after a long time – – on a break evaluating couple of priorities and a new avatar possibly

As I write this, there are couple of things happening in the Indian telecom industry level

1. Reliance Jio is investing in a FTH (Fibre to Home) network mesh.
a. I am assuming that this being a costly exercise will be limited to top 40 towns and most possibly to residential and office densities.
2. Telcos such as Airtel, Reliance and Idea are aggressively investing in media houses.

If you put the two together, there appears a paradigm in the near future, where Telcos of the current day morph into broadcasting organizations – offering data, voice-over-data/telephony and television. Most of us have heard of triple play services – but given the erratic nature of Indian networks coverages and the widespread geography – these have never fulfilled into real time.

FTH operations will allow Telco model migration to broadcasting model. Why do I call this broadcasting model? Because these will typically involve a larger eco-system to share holders – targeting a customer and in return subsidizing services.

Sample this: “Super A” category localities get different TV ads versus Sec.A localities. So for the same program, a “Super A” category individual gets to see a Jaguar Ad where as a Sec.A locality person sees a Corolla Ad.

What is the potential of this? Google created the No.1 company of the world, basis online analytics. Broadcasters/Telcos have the opportunity to create more wealth by combining geography/location, content, analytics, real-time onground profiles of users. Additionally, Telcos cater to one platform at a time, Broadcasters will typically be multi-platform presence.

Is it a Telco battle in the first place? It would be the hybrid Broadcaster Telcos to initiate this change to broadcasting – there first level revenue pool would be the core Telcos. There would be a disruptive pricing across all current voice and data plans. Plain Vanilla Telcos will have difficulty in preserving revenue/profit pools in the face of such disruptive pricing. The user subsidy would be made good with advertising revenues from the service. The multiplicative effect on advertisements from multiple screens and the analytics would drive the advertising revenues. Depending upon the plan scalability, the ad revenues would account for service subsidy as well as the bottomlines for the broadcasters. Then there could be the fillip to online / digital wallets – we shall mention this as fringe benefits.

It is the Telco’s battle to loose anyway. There could a few questions about laws and regulations – but they are all expendable and changeable – we all know that, don’t we?

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China tips it in TDD LTE’s favour

Posted in Industry updates by Manas Ganguly on February 17, 2014

China recently allocated TD LTE licenses to its carriers on the 2300MHz band. This is a significant event in the technology life cycle of LTE as TD LTE develops as mainstream standard and is set to massify on the global scale. The debate between TD and FD LTE has hovered around the lines of GSM versus CDMA and the emergence of one technology as the dominant standard. However, with technology and eco-system maturities, TD LTE emergence alongside FD LTE is now seen as a complementing effort and effect. This would create technology inter-operability between TD and FD LTE.

Why is the China LTE launch key to LTE eco-system world over?

China LTE implementation is all about scale – China Mobile for instance has deployed 200K BTSs for the LTE pilot covering 500 million people initially. That’s the size of the whole of Europe put together. The number of 4G base stations is expected to increase to 500K by the end of 2014. In addition, China Mobile is set to offer more than 200 different 4G-compatible handsets this year, including a handset priced at CNY 1,000 ($165) and a number of self-branded 4G devices. Apple’s iPhone portfolio has also recently been made available to China Mobile customers. Similarly, China Telecom plans to launch entry-level 4G smartphones at similar prices to its rival in the first half of the year before introducing mid-range and high-end models before year-end. By this time it expects to have 60,000 4G base stations. In contrast, China Unicom confirmed in December 2013 that although it has been issued a licence for TD-LTE (like its rivals), but it remains focused on running the majority of its 4G network via FDD-LTE – for which it is yet to receive a license. It is likely we will see a rather slower start to the 4G era for China Unicom.

China mobile connections by technology generation, 2000–2020

China mobile connections by technology generation, 2000–2020

With such large-scale rollouts underway, China Mobile and China Telecom will have the fastest initial 4G migration rates seen outside of South Korea, with close to 10% of their combined total connections migrating to 4G by the end of this year. According to new GSMA Intelligence, take-up of 4G-LTE in China will happen twice as fast as the earlier move to 3G HSPA networks. By contrast, it took twice as long for China Mobile and China Telecom to migrate their 2G customers (on GSM and CDMA2000 1x networks, respectively) on their 3G networks (TD-SCDMA and CDMA2000 EV-DO) following launch. For example, it took China Mobile 14 quarters to migrate 10% of its 2G connections base to 3G, but it will take approximately half that time to reach the same milestone in the move from 3G to 4G. Subscribers are estimated at 900 million 4G connections in the China by the end of 2020, up from around 100 million this year.

It is important to note that FDD and TDD LTE are two flavours of what is essentially the same standard, marking a different situation to when two technology standards (GSM/HSPA and CDMA) were competing for 2G and 3G hegemony. The availability of dual-mode FDD-TDD chipsets help mobile operators running either LTE variant to offer a wider choice of attractive 4G devices. Device manufacturers can therefore generate greater economies of scale given that dual-mode FDD-TDD chipsets remove the need to create multiple variants, serving to lower costs. Currently TD LTE accounts just over one in 40 LTE connections globally. However, China Mobile, China Telecom, Reliance Jio and Airtel could alter these TD LTE subscriber numbers by a wide margin. Even though there could be more instances of FD LTE launches by operators, number of subs on TD LTE networks could outweigh those on FD networks.

Airtel Apps Central: The case study for Apps Store feasibility in India

Airtel Apps Central recently completed its first 4 months. It has flashed a very impressive set of numbers to emphasize the success of the Apps store format in India. Indeed, there are very interesting set of numbers and facts in 4 month results.

1. The number of apps offered tops 71K, a huge improvement over the 1250 apps it started off with initially.
2. The apps compatibility stands at 780 devices. It started with 550 devices, 4 months back.
3. 75% of the Apps featured are paid, the rest 25% are free.
4. The unique mode of payment, where the post of a paid application gets deducted from the Post paid bill or the Pre paid balance has made acquisition of these apps easier for the consumer.
5. The 71K applications have been categorized under 25 categories
13 million downloads at the rate of 1.2 downloads per second in four months. (That just proves the opportunity for Apps stores in India)
6. More than 32% of the apps downloaded are paid.
7. Tier 2 cities in India made the bigger contributions in terms of downloads (in line with the internet consumption habits of India). The top 5 cities being Surat, Udaipur, Pune, Mangalore and Thiruvananthapuram.
8. The top 5 category of downloads are Social Networking, lifestyle, Books, Entertainment and Games.

Airtel is now working on a downloadable version of App Central so that one won’t need to access it through a web browser but through an icon on the menu. App Central is also aiming to offer local and regional apps for customers across the country.

Two things that will determine the success of the app stores would be
1. Relevance of Apps: As blogged about earlier, Apps would have to dig deeper than Astrology, Bollywood, Cricket and Devotion to establish itself firmly in the minds of consumers. The Mobile phone changed the way a lot of things were done by the Sec C and Sec D class of consumers. The same kind of relevance wil have to be built around these Apps stores
2. Delivery medium: English is the de-facto medium of delivery. This would have to change to Vernacular languages. English by itself has a 10% cut off in population reach. Theres a 90% market that the vernacular languages cover and this is a big opportunity yet again.

The Apps central model will possibly be perfected in India after which Airtel would want to take it to Africa which is the next biggest blossoming telecom market. The parallels and the modus operandi is just so obvious. For a change then, Airtel is making inroads with data traffic in India.Intereting space given that Vodafone and Reliance are already in and Aircel may jump in any given moment now.

India’s own “desi” Apps store: Airtel App Central

Posted in Value added services and applications by Manas Ganguly on February 24, 2010

The first “desi” Application store, Airtel’s App Central is live. Consistent with Apps Stores world over, App Central is an open platform for developers to create apps for any and all handsets and operating systems. While there is the Apple iTunes, Nokia’s Ovi Store and Blackberry’s App world, Airtel’s Apps Central is unique in its being platform independent irrespective of handset or OS. The App Central is a cross platform offering that will even work on ultra budget handsets that run on the JAVA OS.

There are still quite a few websites third party websites that allow content download for all mobile operating systems but the App Central is far more convenient. The system is designed to recognize the operating system and showcase apps that are appropriate for the same. For a start, the App Central features 1250 applications across 25 categories available for download on more than 550 compatible devices.Applications are available for as low as Rs. 5 and go upwards of Rs. 25. Airtel expects vernacular content to contribute 20-25% of the downloads and vernacular content would be one of its biggest differentiators against the iTune, Ovi and others.

App Central also stores all the applications a user has downloaded in a section called “My Purchases”. This makes it very convenient to change handsets. The user would simply go to the My Purchase section at the bottom of the page and download and install apps. This reduces the time of having to look for them all over again. If apps have been previously paid, there’s no additional charge for downloading it again. Airtel is also working on a downloadable version of App Central to do away with the need to access it through a web browser.

Mobile application creators have been invited by the Airtel to submit their applications at this developer platform and CellMania will be powering the entire back end – right from the applications submitted by the developers to the AppCentral storefront.Developers registering with CellMania’s platform can expect to receive 28 percent of revenue share of the total sales of the application.

Bottomline: Even though Airtel App Central may not be at par with some of the OEM’s stores just yet, it will be, given time. It will also be interesting to see how vernacular mobile content performs. An interesting move by Airtel and we shall be watching the progress of the App central through the days and months to come.

Indian Telecom Story (Part XV): Net Operating margins at risk!

Posted in Industry updates by Manas Ganguly on July 25, 2009

An extension of an earlier post, which has discussed the problem of reducing operating margins for Telecom Operators in India in the of falling ARPUs and high operating expenditures; this post profiles the predicament for Airtel. If Airtel being such an established player in the market is facing a crunch in its operating margins, the performances of other marginal players and new comers could be under serious doubt!

 Airtel II

Airtel registered a 17% YOY revenue increase. However, its quarterly sequential revenue growth seems to be tapping out at 1.19%. Thus the revenue growth is slowing down. Net profit is up 26% but that is mainly because of lower financial costs and spends. Operating profit margins are reduced from 30% in last year to 27% this year.

 The concern for Airtel is that the growth in number of subscribers is hitting a plateau. With more competitors, the subscriber figures growth may actually dip. The ARPU has decreased 20.6% YOY. With both these numbers going south, it would be difficult for Airtel to keep up its performance in the next few quarters.

 Applying the same analogy to other operators and the new comers, one would expect some congruence in the statuses. The overall market situation is same in all cases and thus the performances would not be very different for other operators. It is in this context one needs to evaluate the price discounting options that the new operators are resorting to. It may be a short cut to establishing a quick base but sustainability and profitability are very big questions. Couple that with the high initial spends of getting a toe hold in the market, the break even seems to be distant. Ask Virgin Mobile for validation.

Bharti – MTN: The making of a Telecom Behemoth

Posted in Industry updates, The Technology Ecosystem by Manas Ganguly on May 30, 2009

Bharti MTN

The Indians are going places and they are doing it fast and furious. The case in point is Bharti which has now emerged as a front-runner for equity stake in South African MTN. This would make Bharti-MTN the 4th largest Telecom Operator in the world leap frogging big names such as Verizon, AT&T and the likes. Only the Chinese Telcos would have more subscribers than Bharti MTN. One of the most important reasons for Bharti to emerge as a frontrunner for equity stake in MTN is its leadership position in the Indian Telecom market.

After almost an year, India’s Bharti Airtel and South Africa’s MTN Group are back to the talking table. The duo have restarted merger talks to create $20 billion telecom entity. In fact, at a time when global giants are complaining about a cash crunch and putting ambitious plans on hold, Bharti Airtel has relaunched its audacious merger bid with MTN that could create a $61-billion transnational telecom Goliath with combined revenues of $20 billion and over 200 million subscribers across Africa, Asia and Middle East.

The Bharti-MTN deal, if it goes through, will usher in the next round of the Indian telecom M&A story. At an estimated ticket size of $23 billion, this will be the biggest cross-border deal that India Inc has been involved in, and twice as much as what British telco Vodafone paid to acquire a little over half of Hutchison Telecom International’s Indian operations in early 2007.

The Proposed $23-29 bn deal would be biggest ever M&A transaction involving an Indian company, almost double the previous highest of $13bn paid by Tata Steel for Corus. It would be the third largest deal in the world in 2009 so far, after Pfizer’s $64bn buyout of Wyeth and Merck’s $46bn deal with Schering-Plough Excluding pharma, Bharti-MTN deal would be the largest in world this year so far. Bharti-MTN’s combined subscriber base of 200m would make it the world’s 4th-largest telecom entity, and largest outside China. The top 3 are China Mobile (472m), China Unicom (247m) and China Telecom (237m). If the deal goes through this time, it will make Bharti the largest telecom entity in the world (by number of subscribers) outside China. Add MTN’s 100 million subscribers to Bharti’s 100 million, and the combined figure of 200 million will see Bharti comfortably leapfrog US giants Verizon (122m) and AT&T (108m), among others.

Fund managers with exposure to Bharti feel that with the Indian telecom market showing signs of saturation, the stock-swap deal will be critical for the company’s next phase of expansion. The deal is a good opportunity for Bharti to enter into a lesser-penetrated market like Africa, especially when the company is generating free cash flows.The valuations that have been offered by Bharti may be at a premium to MTN’s share price, but its valuations are cheaper than Bharti’s.

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The Indian Telecom Story: What Downturn? The party continues…

Posted in Industry updates by Manas Ganguly on February 26, 2009

 

TRAI’s report  dated 20th February 2009 has the following updates on the Indian Telecom market.

 

  • Subscribers base crosses 400 million
  • 15.41 million wireless subscribers added in January 2009
  • 5.65 million subscribers in Broadband segment
  • Teledensity reaches 34.50% mark!
Interestingly, 15.41 million new mobile subscribers takes the mobile connectivity number to 362.30 million. Comin on the back of a downturn and economic meltdown, the subscriber additions dont show any slow down as they beat the sub-adds in December 2008 (10.81 Million) by almost 50%. While the stock indices over the world are flatering, here is one index that is still going and growing strong. Broadband penetration statistics pale in comparison as it registered an increase of .2 million over a December base of 5.45 million in January (3.6% growth).

 

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The other significant bit in here is the launch of Reliance GSM services. http://technologyandtelecom.blogspot.com/2009/02/ada-reliance-telecom-exercising-muscle.html
The link in here is an earlier post on how the competitive scene was heating up between Reliance and Bharti with the launch of Reliance GSM services in the country. Reliance muscled its way in January 2009 adding 4.95 million subscribers compared to Bharti Airtel’s 2.73 million subscriber additions and Vodafone’s 2.4 million subscriber additions. Certainly Reliance got a super start and has got it 4.95 million subscribers into its network in the first month of operation. At this rate, Reliance will beat Vodafone’s no 2 market share position by March 2009. There is no surprise that Airtel feels threatened!
Already there is a renewed push to register more and more users into the Post paid services. (By Vodafone). The idea here is by reducing call, SMS, data browsing, VAS and STD charges on Post Paid, customers are lured to Post paid connections which is supposed more sticky and loyal than the Pre Paid option.
It is going to be an interesting battle for the top honours in Indian Telecom market. Watch this space.
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