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MVAS: The next wave of growth (Part I)

Posted in Industry updates by Manas Ganguly on March 28, 2012

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.

Growth Drivers
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.

to be concluded

Is there a Business case for LTE in India? (Part II)

Posted in Industry updates by Manas Ganguly on October 22, 2011

This post is the second of a two part series on the scenario around LTE network deployments in India.Read First post here

Aircel and Bharti Airtel are believed to be targeting the enterprise segment. While the enterprise segment are the biggest in terms of data usage, the success of LTE will depend on the fact that there has to be a compelling reason for large enterprises to move to LTE network.Initial traction on Data services will depend on how well the vertical applications are engineered for key industry verticals. Verticals like healthcare and banking, which have to be always-on are likely to be the early adopters of LTE, provided applications are developed around them. In case this happens, it might be possible to expect a much higher ARPU from LTE. Having said that, going by the 3G experience, it is quite clear that price is going to be a critical factor (if not the deciding factor!) for the uptake of BWA services.

Further to this, the government needs to put in place a telecom policy that could be instrumental in regulatory guidance and support which would impact faster roll-outs of the services at reasonable tariffs. Unlike 3G auction mechanism, where spectrum licences were bought by operators had extremely high bids leaving precious little CAPEX for network roll outs and resulting in high and unreasonable tariffs (for recovery of investment), government needs to play a more inclusive role in successful 4G LTE roll outs. In the 3G auction case, the only winner was the government who made a handsome lot through the bidding process. This time, the government could keep the bids controlled, lease the spectrum, sponsor the networks infrastructure (or cost share) and foster network infrastructure sharing arrangements between the service providers. This would leave a pool for the Telecom sector where investments could be made into value added ancillary services which would promote usage of the network.

Besides enterprise segments, some operators might also be looking at the rural market initially for LTE services. Experts believe that it will be sometime before Indian operators expect returns from this new service. They might have made huge investments, but right now it is unclear as to how long the investment will take to make profit.

Is there a Business case for LTE in India? (Part I)

Posted in Industry updates by Manas Ganguly on October 20, 2011

This post is the first of a two part series on the scenario around LTE network deployments in India.

Ten years of trailblazing performances and more, the Indian Telecom story needs a new super hero. This is necessitated by the demands of the bandwidth starved data hungry customers are placing an inordinate amount of pressure on the spectrum. The Indian government has been instrumental and forward planning to meet the challenges of increased data bandwidths. That is where 4G LTE services hold out a promise to provide super speed technology on high bandwidth spectrum.

Despite the initial success in field trials, a key question facing the operators is the financial viability and the unclear business models surrounding this emerging technology. Though the industry remains gung-ho about the potential of LTE TDD, it is imperative that the industry evaluates certain critical factors to decide on the business case of the technology. Of the 160 million broadband connections expected by the end of 2014, a good percentage is to come from LTE services which is expected to drive 60 per cent of next level mobile broadband growth.

However, post the lukewarm response to 3G, experts believe that operators need to have a viable business model, clear go-to-market strategy and a marketing campaign designed to target specific segments, niches and user segments of the society to make a business case from the soon-to-be launched Long Term Evolution Time Division Duplex (LTE TDD) technology. There has to be a proper strategy in place to make sure that all investment-related decisions (for LTE TDD) are being taken after due consideration. Operators are yet to make 3G a true business case in India, and if proper targets are not set, many operators may find it challenging to survive.

Contrarian to the earlier view, analysts also believe, what works in favor of operators in India is the relative lukewarm response to 3G, which leaves a lot of scope for LTE to make headway. However, on the flip-side, discouraging numbers for 3G uptake is likely to have some impact on LTE roll-out as well. If 3G has been unable to set the mobile broadband segment on fire in the country, what is it that LTE would offer which will make customers embrace it.

BSNL hangs up on WiMAX: Death of WiMAX in India?

Posted in Industry updates by Manas Ganguly on October 1, 2011

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.

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Exploring the reasons behind BWA launch delay in India

Posted in Industry updates by Manas Ganguly on September 6, 2011

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.

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Indian Telecom Story (Part XXIX):3G/BWA begins

Posted in Industry updates by Manas Ganguly on March 21, 2010

Over 2 and a half years after it was originally announced the 3G and BWA auctions finally seem to be underway with the March 19th deadline of bids of 3G and the March 21st bids of BWA spectrum being invited.

The reserve price for pan-India 3G spectrum is Rs 3,500 crore and for the BWA auctions, the reserve price is Rs 1,750 crore.

Predictably, the 3G auctions have attracted the existing 2G players with not even a single entrant:global or Indian in the list.The absence of global bidders is likely to ensure that the bidding will be conservative, and probably lower than the ambitious Rs 40,000 crore revenue target first announced by telecom minister A Raja. The BWA list has four new players — Augere, Tikona Wireless, Infotel Broadband Services and Qualcomm — while Spice is making a comeback into the telecom space.

However, the data revenue growth in the near term is not expected to be robust enough to justify extravagant bidding by the players. Given the absence of foreign players and an uncertain return mathematics, the mechanics of aggressive bidding will not be a part of the process.

The positive to all this is that Mobile VAS companies and the apps developer comunity in India which has been in an impoverished state for long, will find sudden traction given that all and most of these companies will try to maximize on revenues from the data stream. Airtel has sshown the way with 2.5 million downlaods of its Apps from its month old Apps store. Monetizing VAS downloads is going to be a different thing altogether.

There are those like MTS, Uninor and others who havent bid for 3G. Going forward there would a question of the seriousness of their efforts and commitment to the Indian Markets. We will watch the play here.

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