Indian mobile market to grow 11 percent in numbers and 8 percent in revenues in 2013

The analyst firm, Gartner, has published its new report on the Indian mobileservices market. The highlights of the report are –

·     Indian mobile service market is expected to reach Rs.1.2 trillion (US$22.8 billion) in 2013, up 8 percent from 2012.

·         The mobile connections in India will grow to 770 million in 2013, an 11 percent increase from 712 million connections in 2012.

·         The mobile market in India will continue to face challenges if average revenue per unit (ARPU) does not grow significantly. India will account for 12 percent worldwide mobile connections, but just 2 percent of worldwide mobile services revenue (in constant USD) in 2013.

·    Two major challenges that India Telcos will face in near future - growing their profit margin in the face of intense competition and successfully competing with over the top service providers, such as Facebook and WhatsApp.

·      With the increased use of voice over IP (VoIP) and the probable termination of national roaming charges, mobile broadband is the area of opportunity for operators. Smaller mobile broadband plans using a sachet-style usage pattern appeal to Indian consumers.

·         Further rural expansion of mobile services will come at a cost.

·  In India, 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. Operators need to insert themselves into the value chain of these new apps and services.

BSNL & Reliance Industries Ltd (RIL) set to enter into telecom solution deal

Mukesh Ambani’s Reliance Industries Ltd (RIL) is set to sign a five-year communications solutions deal with Bharat Sanchar Nigam Ltd (BSNL) estimated to be worth Rs 500 crore - reported Economic times. As per the deal, BSNL will link all undertakings of the group during this period, connecting 2,500 petrol pumps, about 15,000 retail outlets, 14 manufacturing units, all its upcoming SEZs and also provide global connectivity to RIL, sources close to the development told ET. The deal envisages that BSNL provide mobile, basic, broadband services, leased lines, virtual private network (VPN), multi-protocol label switching (MPLS) and enterprise solutions to RIL. BSNL will also provide the bandwidth for RIL’s captive network, which interconnects all its outlets and offices. Reports also indicated that the contract would involve providing about 60,000 mobile connections to RIL employees, which could be scaled up later.
The contract with RIL, when signed, would be similar to its agreement with ICICI. BSNL interconnects and provides telecom solutions to all ICICI outlets (including ATMs) in the country, and industry sources estimate the value of this contract to be Rs 100 crore per year. State-owned MTNL, which offers telecom services in Delhi and Mumbai, also stands to gain from BSNL’s contract with RIL. This is because, MTNL will provide all communication solutions to RIL in the two metros, where BSNL is not present.

Earlier, this year, RIL had joined hands with the Bharti group to source mobile and enterprise communication services, which includes mobile, broadband and leased line services, for its retail venture. However, the catch here is that Bharti also plans to use these solutions for captive use for its own retail venture with Wal-Mart. At the same time, Reliance is also planning a pan-India WiMax network for back-end communication needs of its SEZs, which may be extended to meet needs of its retail venture in the long run. Reliance plans to invest about $750 million (Rs 3,400 crore) to obtain spectrum and lay out the network.

TRAI comes out with mechanisms to ensure implementation of 3 stage redressal mechanism for Indian telcos

The Telecom Regulatory Authority of India, which last week had directed all landline, mobile and internet service providers to set up to set up a three-stage redressal mechanism and improve transparency in billing with immediate effect, will carry out surprise checks, if necessary, to ensure compliance.

Trai has directed all operators to maintain complete and accurate records of redressal of grievances by its call centres, nodal officers and appellate authorities. Trai, if necessary, will direct any of its officers or employees or through an independent agency appointed by it to inspect the records maintained by the call centres, offices of the nodal officers and the secretariat of the appellate authority.

Trai had asked all operators to three-stage redressal mechanism -
1) Call centres will be the first level of customer redressal and must address all customer grievances within a maximum period of seven days.
2) At the next level, service providers must appoint a nodal officer, whom the customer can contact if he is not satisfied with the redressal at the call centre level.
3) The third level involves a provision by which the customer can appeal to the appellate authority (within the service provider) for redressal where the authority should issue its judgement on the issue within three months.

The regulator had also directed all operators to improve the quality of their billing after its survey revealed that nearly 80% subscribers found it difficult to understand their telephone bills. Accordingly, Trai has mandated that information such as applicable tariff plan, credit limit, security deposit, methodology for calculations of various pulse rates and charges, procedures regarding payments of bills, setting up of public grievance mechanism and display of customer information box with certain information be printed in easily readable font size and be included in the telephone bills issued to consumers.


Source - Economic times

TRAI's new directive to Indian telcos on setting up three-tier consumer grievance redressal system

The Telecom Regulatory Authority of India (Trai) has issued rules mandating all telecommunications companies - landline voice, cellular and broadband - set up a three- tier system to address consumer grievances.
The regulator pointedly specified that the rules apply to the two large government-owned phone companies as well as to all others.
Indian communications companies, in theory, are supposed to have been addressing grievances via their call centers. However, earlier this year in a series of hearings leading to the new regulations, Trai learned that Indian consumers have been frustrated and, in some cases, have been unable to even find out who to go to with their complaints.

Under the new rules, carriers have just one month to appoint so-called "nodal officers," two months to set up call centers to receive consumer complaints, and three months to appoint "appellate" authorities who will serve as the final arbiters of complaints. The rules also set strict new requirements regarding the kinds of information consumers must receive on their bills. "Recent survey on Quality of Service sponsored by the Authority revealed that about 80 percent (of) subscribers have difficulty in understanding their telephone bills," Trai explained.
In addition to demanding that operators set up the three-tier system, Trai set strict time limits regarding how quickly phone companies must respond to consumers. Telcos will have just 72 hours to respond to complaints involving fault repair, service disruption and disconnection of service. For other complaints, answers must be provided within a week. If consumers still are not happy, they can go to the "nodal officers," who get a similar three days to deal with such complaints as service disruption. The final consumer appeal is to the so-called "appellate authority," which gets three months to answer.

Reports indicate consumer groups already are objecting to the Trai plan because it is the phone companies that will set up and run the complaint system. Trai, for its part, noted in its order that the Indian law setting up the regulator does not give it the authority to deal with individual consumers' problems. It also called its new rules "soft-touch regulation focusing primarily on self-regulation by service providers for the redressal of grievances of telecom consumers."
Trai also pointed out that while its new rules don't prevent consumers from taking any complaints they have to the appropriate courts, it hopes the new complaint system "would reduce the litigations in the courts constituted under the law to adjudicate complaints of consumers."

Doordarshan will be available on Nokia handsets in India

Public broadcaster in India Prasar Bharti and world's largest mobile phone maker Nokia are all set to start a mobile TV pilot project in Indian metro cities, which will enable cellular phone users watch Doordarshan channels on their handsets. Nokia India has entered into a pilot tender with DD to launch the service, which would make DD channels available on select high-end Nokia handset models. During the pilot phase, Doordarshan will test the reception quality of the broadcast coverage. Attendant things like a revenue structure or advertising opportunities will come later.

Nokia's N92 series of handsets are capable of catching television signals. Nokia officials said it is for Doordarshan, which has put up a mobile television platform to set a time frame about commercial launch of their TV on Mobile. The company has N92- the first DVBH (digital video broadcast handheld) device. Adoption of mobile TV will ultimately give way to a more personal and private TV experience than that of traditional broadcast TV, with big implications for users, content providers and advertisers.

CAOI demands 50% cut in ADC

Cellular operators have urged the Telecom Regulatory Authority of India to reduce Access Deficit Charge by 50% to Rs 1,600 crore for 2007-08 . In their communication to Trai, COAI, the body representing all GSM operators, has demanded that the incidence of ADC should be completely removed from the domestic consumers, and for 2007-08 , this levy be recovered only from incoming international calls.

Currently ADC (the levy paid by all telecom operators to state-owned BSNL to sustain its rural operations) is charged on all STD, ISD and also on incoming international calls. Operators pay 1.5% of the annual aggregate gross revenues (AGR), Rs 1.60 per minute for all incoming international calls to India and Rs 0.80 per minute for every outgoing ISD call, towards ADC.

Justifying the demand, COAI has represented that as per Trai’s estimates, India will receive 11,376 million minutes of incoming international calls 2006-07 which was a growth of 47% over the previous year. If the same growth rate was maintained, incoming ILD traffic for 2007-08 will be at least around 16,745 million minutes. On this basis, CAOI has projected that an ADC of Rs 1 per minute on incoming ILD calls will be sufficient to meet the ADC requirements for 2007-08 .

Reliance & InterCall enters into tie-up to provide conferencing services

Reliance Communications has entered into an exclusive partnership with Chicago-based InterCall, the world's largest conferencing services provider.
As a part of this strategic tie-up, Reliance Communications has rolled out an unique pan-India integrated audio conferencing service both to and from India to its customers.
Reliance InterCall conferencing transforms a phone connection into a virtual conference room, an online auditorium, an electronic brainstorming session and an audit summit depending upon the requirements, the company said in a statement here on Tuesday.
Presently, over 30,000 organisations and 2,00,000 individual conference leaders around the world make use of InterCall's state-of-the-art conferencing facilities and these will now be available in India both for 'anytime meeting' and for reservation-based' services.

BSNL challenges TRAI's decision to cut port charges

BSNL on 8th march challenged the telecom regulator TRAI's decision to cut port charges in the tribunal TDSAT, saying the reduction in fees will lead to a loss of about Rs 100 crore every year to the company. Telecom Disputes Settlement and Appellate Tribunal accepted the petition and issued a notice to TRAI, directing it to file a reply in two weeks.

The Telecom Regulatory Authority of India by its Telecommunication Interconnection (Port Charges) Amendment Regulation on February 2, 2007 that reduced port connectivity charges by 23-29 per cent.

BSNL's major argument in its petition is - "The TRAI vide its impugned regulation is attempting to modify and substitute its regulation over the interconnect agreements entered into between BSNL and private operators so as to effect an impermissible gain for private operators and loss to BSNL." BSNL also contended that while deciding the port charges, TRAI has not taken into consideration the cost of main equipments installed by it to provide interconnection.

Tata Teleservice plans to invest Rs 3500 Cr in 2007-08

Tata Teleservices (TTSL) is planning to invest Rs 3,500 crore in the next fiscal for expanding services across the country. TTSL has applied for licences in Jammu and Kashmir, Assam and the rest of the North East. Elaborating on the telco’s expansion plans, CEO Mr Darryl Green has said, “We will add more cell cites and reach out to another 1,000 towns and if we get the spectrum, we will roll out 3G services as well.”
The company has been adding over half a million users every month. Along with subsidiary Tata Teleservices Maharashtra, TTSL has nearly 16 million users in India.

BSNL added over 10 lakh GSM subscribers in Feb 2007

In a statement released by Cellular Operators Association of India (COAI), the GSM-based cellular industry has added about 50 lakh subscribers in February. With this, the all-India GSM subscriber base has touched 11.53 crore at the end of February 2007 compared to 11.05 crore as on end of January 2007 with Bharti Airtel .

The Indian GSM industry is a key contributor in the 200 million milestone reached by the telecom sector in India as a whole in February.
In February, the cellular subscriber base of Bharti touched 3.54 crore with additions of over 17 lakh users, capturing 30.74 per cent of the market share. BSNL at 2.54 crore with a marketshare of 22.07 per cent and additions of over 10 lakh subscribers.
Hutch-Essar added 9.28 lakh subscribers and now has 2.53 crore subscribers, taking its market share to 21.98 per cent.
Idea added 5.6 lakh mobile users with a market share of 11.83 per cent has 1.36 crore subscribers in February.
MTNL's GSM subscriber base in Delhi and Mumbai touched 25.78 lakh, while Spice Telecom has also over 25 lakh subscribers.
Aircel's user base in February stood at 50.94 lakh, followed by Reliance Telecom's 41.1 lakh subscribers.

Indian Telcos planning to spin off mobile tower business into seperate units

Tata Teleservices is said to be in talks with several firms about spining off its mobile phone towers into a separate unit, part or all of which could then be sold. As per media guesses (reported by Economic Times), Singapore state investor Temasek Holdings and wireless tower operator Crown Castle International are in talks to buy close to 15 per cent in the mobile phone towers business of Tata Teleservices Ltd.
The industry analysts valued the tower business at up to $1 billion. Tata Teleservices has more than 5,000 mobile phone towers. Tata Teleservices, along with subsidiary Tata Teleservices (Maharashtra) Ltd, has more than 15.5 million subscribers in India.

Reliance Communications Ltd had also said it would spin off its towers business into a separate unit, and leading mobile services provider Bharti Airtel Ltd has said it would do the same. Newspapers have indicated American Tower Corp, as well as private equity firms including Blackstone, Carlyle and Temasek were interested in Reliance Communications' towers unit.

The 'Idea' of investing $2bn

Idea Celluar, the Aditya Birla Group owned telecom company, currently operates in 11 circles out of 13 for which it has been issued license. It has applied for license in nine new circles. In the past six months the company has launched operations in Himachal Pradesh, Rajasthan and Eastern Uttar Pradesh. It will launch operations in Mumbai and Bihar this year.

As per a press release, Idea is planning tol invest $2 billion in the next two years to compete in the booming Indian telecom market. Aditya Birla Group and Idea Cellular Chairman Kumar Mangalam Birla meanwhile ruled out any tie-up to compete with rivals like Vodafone.

After Hutch, FIPB eyeing at Aircel ?

As per a latest news in Economic Times, after Hutch the shareholding structure of Aircel Cellular can also come under the lens of the Foreign Investment Promotion Board (FIPB). Like Hutch, Maxis Communications too consolidates nearly 100% of its stake in Aircel in its overseas accounts though its equity stake in the Chennai-based operator stands at just 74%. As per the filing by the company to the Malaysian stock exchange Bursa Malaysia in March 2006 - "With equity interest of 74% in Aircel (comprised 65% direct interest and 9% indirect interest) and 100% subscription of cumulative redeemable non-convertible preference shares in Deccan Digital, this effectively gives the group 99.3% economic returns from the investment in Aircel,” . Maxis had teamed up with the Pratap Reddy family and incorporated a joint venture company, Digital Networks Private Ltd, in India to buy Aircel in 2005-06. Maxis subscribed to the non-convertible preference shares in this company, giving the group nearly 100% economic interest in Aircel. Indian investment rules stipulate that foreign investors can own only up to 74% in an Indian company and that domestic investors should own the remaining. However, in some cases such as Hutch-Essar, the foreign company is also enjoying the economic benefits of the entire 100% raising questions as to whether this violates the investment guidelines. On February 28, the Foreign Investment Promotion Board (FIPB) wrote a letter to Hutchison Essar asking them to name the beneficial owners of the entities controlled by Indians.
Aircel provides cellular services in nine circles and has over 5 million subscribers.

Use of telecom in South Asia by Bottom of Pyramid - research report

A study of teleuse at the bottom of the pyramid were officially released in Singapore at a media workshop on 28 February 2007. The research findings were presented to and then discussed with the journalists by Dr. Harsha de Silva and Ayesha Zainudeen of LIRNEasia and Dr. Lorraine Carlos Salazar of ISEAS, Singapore. followed by discussion with the journalists.

The presentations can be downloaded below-

Research Methodology and Key Findings Harsha de Silva

Cost Cutting Strategies at the Bottom of the Pyramid: The SMS Story, Missed Calls, and others Lorraine Carlos Salazar

The next billion customers Ayesha Zainudeen

USO bid for setting rural telecom towers

The Department of Telecom has received bids from 22 stand-alone infrastructure providers and all telecom operators for the setting up 8,000 telecom towers in rural India at an estimated cost of over Rs 3,000 crore. The government will provide the capital to set up these towers from the Universal Service Obligation Fund (USOF) through a bidding process. All Telecom companies pay 5% of their adjusted gross revenues towards the USOF, which is used for funding telecom infrastructure in rural India. Last year, the government had allocated Rs 1,500 crore towards the USOF in the budget. As per the Economic Survey released on Tuesday, off the Rs 10,787 crore collected towards USO fund till March 2006, only Rs 4,232 crore has been disbursed so far.

Fixed-mobile convergence - The new kid on the street

One of the latest phenomemn in telecom sector is fixed-mobile convergence.
ABI Research has found that, by 2011, some 250 million users will be making and receiving phone calls over converged fixed-mobile networks and access points, and the firm expects capital expenditure in fixed-mobile convergence infrastructure to exceed $450 million by 2011. That equates to around 10 percent of households and 8 percent of enterprises using some form of fixed-mobile convergence access point on the premises. This will include UMA and SIP-based solutions, both supporting voice call continuity.

There are several competing technologies for fixed-mobile convergence including use of UMA to aggregate traffic from femtocells and Wi-Fi access points in the home, and picocells in the office. In the longer term, IMS-based solutions will be deployed using SIP to offer rich voice sessions over converged devices.

325 Million subscribers use CDMA2000?

According to the CDMA Development Group, there were 100 million new CDMA2000 subscriber adds in 2006. Today, there are more than 325 million CDMA2000 subscribers, including 55 million CDMA2000 1xEV-DO broadband subscribers, representing a 125-percent increase in EV-DO subscribers from the previous year. Including cdmaOne, there are now more than 370 million CDMA subscribers worldwide, with most of the growth coming from the Asia Pacific region, followed by North America, Latin America and the Caribbean, Europe, Africa and the Middle East.

The group also reports more than 100 operators have deployed CDMA2000 in the past three years, including 47 CDMA2000 1xEV-DO networks. As many as 40 of these operators had been GSM carriers.

VoIP - Giants battling for patents

Vonage is facing Verizon in the U.S. District Court in - with Verizon claiming patent rights to key technology used by Vonage and possibly many others in the industry. Verizon is charging Vonage with violation of seven of its patents. The patents cover a broad swath of VoIP technology, including the completion of calls between VoIP users and the public network, authentication of VoIP callers, validating VoIP callers' accounts, monitoring VoIP usage, fraud protection, enhanced features, and the use of Wi-Fi.

At the same time reports have started spreading through the industry that Vonage is launching an annual pre-paid VoIP plan in a move some theorize is designed to generate some fast cash, and that the VoIP house is also about to become a mobile virtual network operator (MVNO).

Verizon filed its suit in June. In July 2006, Vonage said it had acquired three VoIP-related patents from Digital Packet Licensing that address compression techniques related to the public network, a move seen as an attempt to find technology work-arounds to the Verizon patents if they are upheld.
In the extreme, should Verizon win, then Vonage could theoretically be forced to shut down its VoIP service. Such an outcome, though, could typically take years of litigation, and few industry observers expect that to happen. The most likely outcome is thought to be a license payment from Vonage if it loses, or is losing, the case. Estimates are also that, if it knocks off Vonage, Verizon will then go out after as many other VoIP industry players as it can get its hands on.

Vonage is expected to become a mobile virtual network operator (MVNO).

Vodafone in India - The rough road ahead

Background

Vodafone, already the world's largest cellular carrier, is getting control of India's fourth-largest operator with about 24 million customers and 16.4 percent of the market. Vodafone says its target now is to garner between 20-percent and 25-percent market share by 2012. Assuming all needed regulatory approvals, the deal is expected to close in the second quarter. Hutch-Essar becomes Vodafone's third largest unit, following its German operations and its 45-percent minority stake in Verizon Wireless in the United States. However, the German and U.S. markets are mostly saturated - 80 percent in Germany and 76 percent in the United States - while the Indian market is only 15-percent penetrated, and it's the world's fastest-growing cellular market right now, with a reported 6.5 million new subscribers per month.

The immediate issues

Vodafone's acquisition of Hutchison's share of Hutch-Essar also comes with certain complications that vodafone has to deal with. The first is the Indian law that prohibits foreign entities from holding more than 74 percent of an Indian telecom company. In terms of the foreign-ownership limits, Vodafone reportedly has deals set up to cover that issue as well. Hutchison Telecom had local partners that, between them, hold a 15-percent interest in Hutch-Essar. Those partners have agreed to retain their holdings, Vodafone says, leaving Vodafone's interest at 52 percent after the deal is completed, just enough for it to have full operational control over the operator plus leaving enough leeway for it to buy the 33-percent Essar stake. Vodafone offered to buy out Essar's stake, paying the same price it paid Hutchison. According to Vodafone, if Essar accepts its buyout offer, it already has local minority partners lined up and willing to buy as much as 26 percent of the company.

The second is its 10-percent stake in rival celco Bharti Airtel, an ownership position that came with a noncompete agreement when it bought that stake for $1.5 billion in 2005. Vodafone said Bharti has agreed buy the 5.6 percent of that stake that represents direct control, with Vodafone keeping a 4.4-percent indirect stake as an investment but having no management or operations position in the carrier. It appears Vodafone comes out smelling like a rose in the deal - Bharti is going to pay it $1.6 billion, so Vodafone both shows a little profit on its original investment and has the 4.4-percent stake almost as a free gift. Vodafone seems to have granted deferred payment terms for the 5.6% stake over the next 18 months. This leaves Voda with an indirect stake of 4.4% worth around US$1.3bn based upon an initial investment of US$0.8bn for the whole of the 10% stake. In addition, Vodafone announced an agreement with Bharti to share network infrastructure in India to cut costs. As part of this transaction, Voda has immediately allayed fear about the capital costs of roll-out of rural GSM in India. It seems that the #3 (Hutch Essar) and #1 (Bharti) will share infrastructure and which will make the investment look at lot more attractive than rolling out infrastructure solo. This potentially gives this partnership a huge advantage over the #1 CDMA operator, Reliance, and the state owned #2, BSNL and MTNL, in the GSM market.

Vodafone's immediate strategy will focus on -

improving the market performance at Hutch Essar: the Vodafone targets a market share (presumably by revenue) of 25% by FY2012

Rolling out the Voda brand and services

Rolling out the network to the 6 circles where there is currently no service.

In the medium to long term, Vodafone will strategise to look at acquiring some of the smaller Indian GSM players to gain market share. Ultimately, the aim must be to be #1 in the market.

Vodafone Group will invest $2 billion in India in the next few years. "I think there will be consolidation in the India market in the near term," Vodafone CEO Mr. Sarin said. "India will be the biggest country for Vodafone in terms of number of subscribers," he said, adding the company will reach a subscriber base of 100 million in the country in the next few years. Sarin didn't specify when he would hit the 100 million target, but said he will achieve faster subscriber growth and a higher subscriber base as a result of roll out in newer circles, or service areas. The companies strategy will be to roll out new services so that the ARPUs increase over next few years (though this remains a very challenging task). The ARPU boost can come from introduction of new services, such as mobile banking in India. On Monday Vodafone announced it would work with Citigroup to develop M-PESA, a mobile phone money transfer application across the world. Sarin pointed out that in many emerging markets - such as India and Africa - mobile phones provide the only way to transact with a bank.

Idea IPO oversubscires 42 times!

Investors worldwide literally have stampeded to buy into the initial public offering (IPO) of India's Idea Cellular. The initial reports indicated that the issue is 42 times oversubscribed. That means that the shares will go to market at the high end of the offering bracket, or rs 75 per share. The company planed to mop up funds aggregating Rs 2,125 crore, excluding a green shoe option of Rs 318.75 crore from this IPO.

The oversubscribtion has given rise to possibilities that the shares immediately will surge by 20 percent or more when they start trading. That's in part based on so-called "grey market" trading in the shares even before the IPO closed, a common practice in Indian share market.

Idea, which has about 12 million subscribers, submitted a "draft red herring prospectus" (DRHP) with the Securities and Exchange Board of India (SEBI) two months ago What everyone is watching now is how the Aditya Birla group, which retains a controlling 65.2-percent equity share in Idea, performs in its plans to build up the carrier. Aditya has said it will use the IPO proceeds to fund expansion plans, including construction of a long-distance network.
Idea first rolled out its network in 1995 in the Indian states of Maharashtra and Gujarat. Since then, it has grown both by bidding for licenses and through buying smaller competitors Escorts and Escotel. Its footprint currently covers nearly 60 percent of India's potential subscriber base, geographically encompassing a vast area with 1,353 towns and cities. That's scheduled to grow to 70 percent within six-to-nine months as the company enters the Bihar and Mumbai markets.