July 2009: 14.38M Mobile Connections Added In India; Landlines Sink; Broadband At 6.8M

From http://www.medianama.com/2009/08/223-july-2009-1438m-mobile-connections-added-in-india-landlines-sink-broadband-at-68m/ on August 24, 2009

By Preethi J

News of the reviving economy is reflected in the telecom sector in the month of July, which saw an addition of 14.38 million wireless connections compared to the 12.03 million in June, 2009. The total number of telephone connections in the country was 479.07 million at the end of July 2009.

• Teledensity rose from 39.86% in June to 41.08%.
• Wireless teledensity is up from 36.64% to 37.87%
• Total wireless connections rose 3.6% to 441.66 million
• Broadband connections swelled from 6.62 million in June 2009 to 6.8 million.

BSNL Loses 0.16M Landline Users; Bharti Adds 33,940

This segment continues to see churn with BSNL’s customers choosing the wireless route and disconnecting their landlines – the two oldest landline providers BSNL and MTNL lost a total of 0.17 million subscribers in July after losing 0.19 million in June 2009. MTNL lost 8181 to reach 3.54 million connections. BSNL lost 166,519 landline connections and now has 28.62 million; it accounts for 76.5% of the country’s landline userbase and will continue to be hit by negative growth even as private service providers such as Bharti Airtel and RCOM add users by bundling the landlines with other necessary services such as broadband and IPTV.

• Total landline connections in India – 37.41 million
• Wireline teledensity has reduced marginally to 3.21%

Downloads: TRAI Data (PDF)

Other operators offering landlines and their user base:

• Bharti Airtel – 2.86 million
• Reliance Communications – 1.13 million
• Tata Teleservices (Indicom) – 967,554
• HFCL Infotel – 163,399
• Sistema Shyam (MTS) – 111,069

Telcos dial Africa for new pastures

Manoj Gairola, Hindustan Times on June 7, 2009

After tasting success in domestic markets, it’s ‘Dial Africa’ for Indian telecommunication companies. And it’s not the high-profile, twice-rejected MTN alone that’s attracting Indian firms.

While the government-owned Mahanagar Telephone Nigam Ltd (MTNL) is in advanced discussions for telecom licences in four countries, Bharat Sanchar Nigam Ltd (BSNL) is formulating its strategy to enter the continent.

Adding their bit are the Essar group, Tata Communications and Reliance Communications, all of which have licences for telecom services in African countries and are looking to expand their operations.

Bharti Airtel is negotiating with South Africa-based MTN for a “two way deal” that would allow it to own 49 per cent equity in South African giant MTN.

“We are evaluating a proposal to acquire a company that has licences in four to five countries,” said R.S.P. Sinha, chairman and managing director (CMD), MTNL. “Africa is a lucrative market and we would like to acquire a licence through auction if there is an opportunity.” However, in most countries, licences have been auctioned.

“Funding is not an issue for our Africa expansions,” Sinha said. “We have done all the ground work.” MTNL is presently a service provider in partnership with Tata Communications (formerly VSNL) and Telecommunications Consultants India Ltd (TCIL). “We will enter into Africa on our own,” said Sinha.

MTNL not the only government-owned company eyeing the African market. “We are looking at an expansion in Africa,” said Kuldeep Goyal, CMD, BSNL. “Whenever we find right opportunity we will grab it.”

Essar group has acquired a telecom licence in Uganda. “Africa is an important market for Essar’s telecom business and we are working towards building a strong brand in this market,” said Srinivas iyengar, CEO, Essar Telecom Kenya. “We would be looking at opportunities to establish a pan Africa footprint in future.”

The company plans to offer services in a joint venture with a local company, Kenya Telecom Uganda Ltd. It already has a licence in Kenya and plans to expand in other countries.

“We find African markets promising and have recently hiked our stake in Neotel (of South Africa) to 56 per cent from 26 per cent,” a senior Tata Communications official said. “We view this as a beach head to the rest of the African markets as and when right opportunities arise.”

Why Africa?

“African countries have just started moving on the development path,” said RK Upadhyay, CMD, TCIL. The company has been executing telecom infrastructure projects in Africa for past 20 years and is present in 30 countries. “There is expected to be enormous growth in telecommunications in next five years. Whenever, development takes place in a developing economy, the need for telecom services increases,” Upadhyay said.

“Africa has a low teledensity and high average revenue per user,” said Goyal. This explains why Indian providers want to go to. India has a teledensity (number of telephones for a population of 100) of about 40 per cent. In many African countries the teledensity is below 20 per cent (See table).

Besides, the continent’s average revenue per user is high. Against Rs 250 per month in India, the number in some African countries including is about three times as much.

Reliance has a licence in Uganda for offering mobile, fixed line, Internet, national and international long distance services, in addition to WiMax and Wifi services. It plans to acquire licences in other countries, a senior official said.

Interview — CDMA is better than GSM: Sistema Shyam

From http://www.ciol.com on 01 June 2009

BANGALORE, INDIA: Indian telecom sphere is all set to witness a tug of war with six new international telecom players set to enter the scenario.

Sistema Shyam Teleservices, a joint venture between Russia’s Sistema and India’s Shyam group, the only CDMA (code division multiple access) player of the lot, recently launched its services in West Bengal.

During an interview given to CIOL, Vsevolod Rozanov, president and CEO, Sistema Shyam TeleServices, said that CDMA is a better technology than GSM because it enables better utilisation of the frequencies available, and thus helps in bringing down the costs. Excerpts:

CIOL: The Indian metros and urban areas have attained saturation in terms of telecom density. So where do you see the demand coming from and for what?

Vsevolod Rozanov: If we have to grow fast, apart from expanding our footprint in new circles and getting new customers (first-time users), we have to wean away customers from the incumbents.

We believe there is a huge market for us to grow. While there are players who have the first mover’s advantage, there is still a vast chunk of existing individual users who will find higher value for money in our tariff and billing plans.

CIOL: What are your investment plans for India? What will be the focus?

VR: We plan to invest $5.5 billion in India over a period of five years. We will utilize most of this projected investment over the next two years for setting up infrastructure that will enable accessibility and better connectivity for mobile phone users.

We have already invested more than $1 billion in setting up our network. We have launched the brand in Rajasthan, Tamil Nadu, Chennai, Kerala and Kolkata. We are planning to launch services in Delhi by Q3 this year, and looking to foray into one circle every month.

We will eventually cover UP, Haryana and Maharashtra circles by the end of this calendar year. Thus, in the next nine months, the MTS brand will be seen in half of the 22 telecom circles across the country, achieving a pan-India footprint by mid-2010.

CIOL: Do you see a possibility of M&A going forward to meet the increased challenge? What is your take on infrastructure sharing among service providers to combat frequent network disruptions owing to issues like natural disasters?

VR: We are not aware of any significant player in the CDMA segment in India who is planning to hive off its telecom business.

We will have a combination of self-owned and shared infrastructure to ensure that we provide the best connectivity across the country. We already have tie-ups and agreements with various infrastructure companies across the country to ensure superior quality of service.

CIOL: How different will be your ‘go-to-market’ strategy?

VR: In Rajasthan, the key message of our campaign is to create a churn in the market through the slogan, “Badlo life ka plan” (change your life’s plan).

Today over 50 per cent of our subscribers in Rajasthan are not new customers, but those who have switched over from other mobile service operators. They are doing so because they are frustrated with the quality of the old incumbent networks, and are willing to try our non-congested network.

We do not see much difference between GSM (global system for mobile communications) and CDMA. Customers using CDMA technology are approximately one quarter of all. Given the size of the Indian market, this is not small at all.

We have been looking at whether we should wait until we are fully ready with CDMA data offerings or we should start building our customer base and deliver our data offers a bit later. We decided to go in for the second option. We will be coming out with the data offering soon.

CIOL: With several service providers in the frame, will the cost of service be brought down further?

VR: India is a highly price sensitive market. Our pan-Indian strategy will focus on simplicity in all our marketing strategy. We will offer simple, very clear and understandable tariff plans for our customers. Our tariffs will be the lowest, with no hidden charges.

We have dropped the price of entry-level colour phones to Rs 999, and they come with six months of free calls and lifetime validity. The subsidy that we incur on every phone is going down as the price of phones is going down faster than the fall in new offers.

We will offer SMS at 50 paise unlike most other operators who charge one rupee. The tariffs can fall further, if the regulator makes the termination charge cost-based, which would be less than 10 paise a minute from the current 30 paise, the same can be passed on to customers.

CIOL: How do you see advanced mobile technologies – such as 3G, CDMA – gaining currency in rural areas as well, especially when India has very less wireless penetration?

VR: The advanced mobile technologies such as 3G have the potential to meet the digital divide between rural and urban India by penetrating into far-fetched areas, where fixed-line connectivity is sparse due to high deployment cost of infrastructure. 3G will not only alleviate the existing level of voice-based services, but also make Internet broadband access a reality for larger population.

3G will also fit well into the urban user’s plan. It will enable quality voice and address the pent-up demand for high-bandwidth data exchange on mobile phones and support high-speed Internet access on other portable devices.

The government has recognized 3G as the cornerstone for growth of the telecom sector and is expected to allocate the third generation on priority.

CIOL: What is being done to take the brand into the market?

VR: MTS is the eighth-largest telecom company in the world with over 100 million customers. In India, we are the sixth or seventh operator. We are using faces of models talking on the mobile phone to relate to the consumers and give our service the human touch. We have also decided to concentrate most of our advertising and marketing spend on local media, via regional language instead of English.

We have also recently rebranded our existing operations in Rajasthan, under the ‘Rainbow’ brand, to MTS. Rainbow was a regional brand limited to Rajasthan and what we needed was a pan-India brand name. Accordingly we painted the Pink City Jaipur to red – the colour of our brand.

The most important factor is the time-to-market – how quickly we could launch the brand across India in the next nine months. With MTS, the brand material, logo and specifications are all readymade and already available

CIOL: How do you look at the slowdown?

VR: Global economic slowdown is a business challenge for enterprises across the globe. However, Sistema is one of the largest public diversified corporations in Russia. We have sufficient funds to expand our operations, and launch our services on a pan-India basis.

India is one of the fastest growing markets for telecom, and has been relatively un-impacted by recession. As of now, the situation is under control, because the financial meltdown has not impacted Indian banks in a major way.

However, if the situation worsens, then we could be in a spot as we are not allowed to bring in foreign funds in the form of debt. We are allowed to bring money in the form of equity, but our promoters would like to have the flexibility to decide on what form they would like to pump in money into the company.

The Indian Government should consider relaxing the foreign investment norms, which will allow international players to bring in funds in the form of loan.

CIOL: What would be the newer trends in the Indian mobility sector?

VR: The year 2009 is expected to be an exciting year for the Indian mobile telephony market. With the Congress-led UPA (United Progressive Alliance) voted back to power, the sector can look forward to speedy auction of the long-awaited 3G spectrum.

A significant portion of the rural population will witness phased growth in first-time Internet access and welfare programs covering telemedicine, e-governance and distance learning – propelled by 3G mobile broadband and WiMax.

While the 3G network would infuse better services for subscribers and enhance revenues from VAS (value-added services) for operators, the introduction of MNP will offer users the convenience of retaining their mobile phone number even after switching between networks and operators.

Mobile payment and commerce for micro-transactions is also expected to attract greater user-orientation.

Interview — ‘Number portability will benefit Idea in new markets’

By Ashok Kumar in Financial Express on 02 June 2009

New Delhi: Speaking on the sidelines of a press conference to promote the upcoming IIFA awards, Pradeep Shrivastava, Chief Marketing Officer, Idea Cellular in a short conversation with IndianExpress.com tells, how Mobile number portability (MNP) on mobile phones will be both a challenge as well an opportunity for the service providers including Idea.

Talking about the impact of Number Portability on Idea Cellular, Shrivastava said, like any other company, the new regulatory provision of ‘number portability’ will be a challenge in the existing markets for all the service providers including Idea.

But, Shrivastava sounded positive about the impact of the measure on the new markets as he asserted, “In the new markets Idea will benefit from the number portability.”

Talking about the growth prospects for the company, in the already saturated telecom market, Shrivastava stated that the penetration in the rural markets is way behind the national penetration which stands in the range of 35 percent. “In the rural markets, the penetration of the mobile phones, industry wise, is still in single digits, which leaves us with enough scope for an impressive growth in future,” Shrivastava opined.

“Even in markets like Chennai where we (cellular operators) have a hundred percent penetration, the introduction of value added services spreads an impressive canvass for our company to grow,” Shrivastava clarifies.

Terming the Network and the pricing competitiveness as the hallmarks of Idea Cellular, Shrivastava feels it is the emotional connection of the brand with its millions of customers which separates it from the rest of the service providers.

Mobile subscriber base crosses 400 million

2 Jun 2009, 1419 hrs IST, AGENCIES on http://www.economictimes.com

NEW DELHI: The number of mobile subscribers in India crossed the 400 million mark in April, official data showed Tuesday, putting the country on track to reach it’s goal of 500 million customer by next year.

Some 11.90 million subscribers were added in April compared with 15.64 million during the previous month, figures posted on the Telecom Regulatory of India (TRAI) website said. The rise took India’s total wireless subscriber base to 403.66 million, TRAI said.

The slowdown in subscriber growth came after cellular operators withdrew special deals on offer during the final months of the fiscal year to March when the firms sought to boost revenues to help their annual accounts.

But India remains the world’s fastest-growing mobile market and analysts say the government’s target of 500 million mobile phone users could be reached ahead of schedule.

The total telecom subscriber base made up of wireless and landline customers stood at 441.47 million at the end of April compared with 429.72 million in March, TRAI added.

Total penetration stands at close to 38 telephones for every 100 people, TRAI said. India has nearly 1.2 billion people.

India has said it will stage its much delayed auction of third-generation (3G) wireless spectrum by year end.

Third-generation wireless service allows voice, data and video to be sent at high speeds to mobile devices and is viewed as the next major booster driving growth in India’s telecoms market.

The Congress-led government had forecast the auction could raise 400 billion rupees (8.5 billion dollars).

But since its re-election last month, it has backed off that forecast, saying the global financial crisis could reduce the windfall.

India’s newly reappointed telecoms minister A. Raja has also said he will seek to push cheap local mobile call rates even lower to spur cellular growth. Local mobile calls now cost as little as one cent a minute while long-distance rates vary from two cents to four cents a minute.

Raja says he wants to cut the local rate to less than half a cent a minute and long-distance rates to about a cent a minute.

Story in Financial Express on 1 June 2009

New Delhi: The country’s wireless subscriber base has crossed the 400-million mark in April this year with an addition of 11.9 million new users.

About 11.90 million wireless (GSM, CDMA and WLL(F)) subscribers were added in April 2009 as against an addition of 15.64 million during the previous month, taking the total subscriber base to 403.66 million, Telecom Regulatory Authority of India (TRAI) said in a statement on Monday.

The total telecom (wireless and wireline) subscriber base stood at 441.47 million at the end of April 2009 as against 429.72 million in March 2009, it added.

It now looks like the target of 500 million phones by 2010 (set by Department of Telecom) is very much achievable, even before the target period.

Total additions (wireless and wireline) in April stood at 11.75 million as compared to 15.87 million new connections in the previous month.

The wireline segment saw a slight decrease of 0.15 million in subscriber base to 37.81 million in April against 37.96 million wireline subscribers in March 2009, TRAI said.

TRAI added that the overall tele-density has reached 37.94 at the end of April as against 36.98 in March 2009.

Tele-density means the number of people having phones per a population of 100.

Number of new telecom subscribers dips in April

1 Jun 2009, 1321 hrs IST, PTI on http://www.economictimes.com

NEW DELHI: The Indian telecom industry saw a dip in the number of new subscribers in April – 11.75 million telephone connections were added, compared to 15.87 million in March, an official statement said here Monday.

The number of telephone connections reached 441.47 million in April from 429.72 million a month before, Telecom Regulatory Authority of India (TRAI) said in a statement.

Overall tele-density reached 37.94 from 36.98.

The total wireless subscribers (GSM, CDMA and wireless local loop-fixed) base stood at 403.66 million with addition of 11.90 million subscribers in April, the statement said.

Additions to the number of wireless subscribers also dipped after reporting a record 15.64 million new connections in March.

In the wireline segment, the subscriber base decreased 0.15 million to 37.81 million in April from 37.96 million.

However, the number of broadband subscribers grew from 6.22 million to 6.28 million.

Additional story in The Hindu Business Line on 02 June 2009

Telephone subscriber growth rate dips in April

New Delhi, June 1 Telecom operators reported a dip in telephone subscriber growth rate with 11.75 million new users in April compared with 15.87 million in March.

According to the Telecom Regulatory Authority of India, the total number of telephone connections reached 441.47 million at the end of April compared with 429.72 million in March. With this growth, the overall tele-density has reached 37.94 per cent.

The dip in subscriber growth rate was primarily due to a slow down in the uptake of cellular usage. The total wireless subscribers — GSM, CDMA & WLL-F — base stood at 403.66 million. A total of 11.90 million wireless subscribers have been added during April against 15.64 million added during March.

In the wireline segment, the subscriber base has decreased to 37.81 million in April against 37.96 million in March, registering a slight decrease of 0.15 million.

According to market watchers, the dip in subscriber base may be because operators clean up their list of subscribers who may have given up their connection but they continue to show as a user. This usually happens in the months of March-April.

The total broadband subscriber base reached 6.28 million by April-end compared with 6.22 million in March.

India To Have 492 Million Mobile Phone User By End-2009 – Indus Body

From http://www.nasdaq.com on 29 May 2009

NEW DELHI -(Dow Jones)- A cellular industry body Wednesday said it expects India to have some 492 million mobile phone users by the year-end, compared with 392 million at the end of March.

The Cellular Operators Association of India – which represents more than a dozen telecommunications companies offering GSM services – expects the industry’s mobile subscriber base to reach close to 900 million by 2012.

GSM is short for global system for mobile communications technology, and three of four of India’s 391.76 million users are on this platform.

“Even with the subscriber base of 900 million, the teledensity would be just 72.4%,” COAI said.

Bharti Airtel Ltd., India’s largest telecommunication service provider by number of subscribers, had some 96.73 million users at the end of April.

Govt to step up rural wireless connectivity

29 May 2009, 0050 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: The communications ministry has drawn up detailed plans to spend part of the Rs 25,000 crore in the Universal Service Obligation Fund (USOF).

The plans include setting up over 5,500 telecom towers in far flung areas, providing wireline broadband connectivity to all rural kiosks, rolling out WiMAX services in rural India, augmenting the optic fibre cable connectivity of the country and funding technology innovations.

From 2002, all telecom operators have been paying 5% of their annual revenues towards this fund, and so far, the unutilised amount in the USOF has crossed the Rs 25,000 crore.

Every consumer, who makes a phone call (mobile and landline) contributes towards the USOF. It has been a long pending demand of the industry to reduce or do away with the levy especially since studies by sector regulator Trai has shown that it would not cost more than Rs 12,000 crore to connect the whole of rural India.

The department of telecom (DoT) will soon invite bids from companies who run long distance networks where the government will fund up to 40% of the optic fibre expansion plans of successful bidders.

All telcos have long distance arms that carry STD traffic on optic fibre. An STD call on the mobile is first carried to the nearest telecoms tower and transferred along the optic fibre to the tower that is closest to the person who receives the call. But, telcos who receive support from the USOF for setting up towers and laying fibre must compulsorily share their infrastructure with other operators.

The DoT has also decided to fund the commercial rollout of products linked to improving quality of services or making telecom operations more economical. It has shortlised about 10 companies who have been asked to demonstrate their products on a pilot basis in rural India, following which it will fund the commercial rollout of successful pilots.

These companies include Telsima Communication for WiMAX services, Artheon Electronics, STM Softech, Radio Innovation Sweden, Vanu, Tulip IT services, Param Hasna System and software, Vedekon from Ukraine and Measurement & Controls India Ltd. Radio Innovation Sweden has been shortlised for its solutions that enable super economical coverage of GSM, Vanu for its multi-operator shared telecom towers concept, Vedekon for its WiMAX solutions.

The communications ministry is of the view that these new avenues to disburse this fund will help increase the country’s tele-density, especially in rural India. While the overall tele-density of the country is just under 40%, rural tele-density is still under the 10% mark.

Pointer to the future (Bharti-MTN deal)

On The Hindu Business Line on 29 May 2009

Thomas K. Thomas
The merger talks between Bharti Airtel and South African telecom company, MTN, is a pointer to an emerging trend in the Indian telecom growth story. Saturated urban markets, declining average revenue per user, tighter domestic acquisition laws and the desire to achieve global scale are driving Indian telecom operators to other emerging markets.

That the largest and most profitable mobile operator in the country is looking for markets elsewhere in the world is a clear indication that there is not much juice left in the Indian telecom market. This is similar to what Vodafone went through in the earlier part of this decade, when it decided to move out of its traditional, but saturated, European market to other emerging markets.

Growth rate
A recent report from the Department of Telecommunications leaves no ambiguity on what the policy-makers think about the future growth prospects of the Indian cellular market. The report states that though the mobile subscriber base is increasing at a scorching pace, the growth rate will taper off by the end of next year.

Using the S curve model of growth, the DoT has projected that the telecom sector will reach an inflexion point (the point at which maximum growth rate will occur) when the mobile density reaches 44 per cent. Considering that the current tele-density is close to 35 per cent, it is expected that the inflexion point will be reached by the end of 2010, after which growth rate of mobile subscription is expected to decline.

In addition, Indian operators have been struggling with falling monthly billings because the new additions are coming from semi-urban and rural areas where subscribers are not willing to spend more than Rs 100-Rs 200 a month on mobile usage. Therefore, even though the mobile user base is expected to increase from 400 million at present to 900 million by 2013, operators are not betting on a proportionate increase in revenue generation.

Mouth-watering proposition
In comparison, other emerging markets such as Africa, Latin America and West Asia offer a mouth-watering proposition. These markets are at the point where India was in 2003. The telephone penetration levels there are low which means huge potential in terms of higher subscriber addition. The African telecommunication market, for example, is estimated to grow at roughly 40 per cent and is expected to continue to show higher growth for much longer period after the Indian market stagnates.

Also, the average revenue per user is much higher at Rs 600 in these emerging markets compared to Rs 250 in India. By foraying into such territories, Indian companies can hope to cash in on higher margins.

The domestic merger and acquisition norms have also made it impossible for existing telecom companies such as Bharti and Reliance Communication to acquire other large operators within India. On the other hand, a deal with South Africa’s MTN will give Bharti access to nearly 100 million subscribers across 21 countries.

However, Indian companies also have to deal with challenges related to higher cost of acquisitions, different regulatory environments and competition from European and Chinese telecom majors which are also eyeing these emerging markets.

Mixed success
So far, Indian players have had mixed success in their attempts to go global. While Bharti Airtel, Tata Communications and Reliance Communications have had a fair share of success in the long-distance segment through acquisition of cable networks, including Tyco Global and FLAG, they have failed to acquire telecom licences in countries such as Qatar, Kenya and Saudi Arabia. The reason for the partial success has primarily been the pricing of the acquisitions. Most of the successes for Indian telecom players have come in cases where the deal came cheap.

For instance, both Tata Group and RCom acquired Tyco Global and FLAG respectively when the global undersea cable market was facing a bandwidth glut. In 2004, Tata paid just $130 million to acquire Tyco Global Network, which had 60,000 km of cable spread across three continents. Similarly, Bharti bagged licences for Seychelles in 1998 when mobile services were just beginning to reach consumers.

Competitive bidding
However, Indian telcos have lost out whenever competitive bidding has taken place. For example, Bharti and Reliance lost out in the race to acquire a licence in Saudi Arabia after Kuwait Mobile Telecom Company bid a whopping $6 billion. Indian operators also lost out to France Telecom when 51 per cent of Telkom Kenya was up for grabs. France Telecom coughed up nearly $400 million for 2.8 lakh fixed-line telephone subscribers.

Since Indian operators are already working on thin margins, given the low tariffs in the country, they cannot afford an expensive buy to maintain profitability. The other reason is that home-grown operators are still small in scale compared to global giants such as Vodafone, giving them a lesser chance of winning a competitive bid.

One advantage that Indian operators have is that they have mastered the game of working on high volumes, building economies of scale, and cost management through innovative outsourcing deals and infrastructure-sharing agreements.

Bharti’s talks with South African major MTN, if successful, will take the low-cost business strategy to a new level. Markets such as Africa are also similar to that of India — predominantly agriculture-based with a large rural population — which again works to the advantage of Indian operators. The Bharti-MTN deal, therefore, could show the way to other Indian players.

Companies such as Reliance Communications, MTNL and BSNL have been eyeing countries such as Tunisia, Egypt, CIS and the Gulf region to expand their footprint.

For a company such as MTNL, foreign markets offer an opportunity to go beyond Delhi and Mumbai. The PSUs profits have been dipping over the past few years and the company is, therefore, betting big on the foreign telecom forays.

Showing the way
But the window of opportunity is closing fast. Most of the emerging markets in the African continent, for instance, are already controlled by European players such as Vodafone and France Telecom. The Bharti-MTN deal would create a most formidable rival there. Other Indian operators looking for a similar deal still have options such as Kuwaiti-based Zain, which is in 24 markets across Africa and West Asia and may be a bid target. The Egypt-based Orascom, which has operations in 11 countries, could be another possible partner. Then there are regional players such as Telekom SA, which may be open to a possible alliance. Partnering with an Indian company will also give these foreign operators a foothold into the fastest growing market in the world.

Bharti Airtel’s $23-billion deal with MTN, if successful, may spark the consolidation of mobile phone markets across Africa and West Asia. But Indian operators may have to move fast if they want to continue the telecom growth story.

India set to have 1 bn mobile users by 2014

26 May 2009, 1209 hrs IST, Shalini Singh, TNN on http://www.economictimes.com/.

NEW DELHI: One of the most important reasons for Bharti to emerge as a frontrunner for equity stake in MTN is its leadership position in India projected to be the world’s ranking market in just a few years.

DoT, in a first ever forecast of mobile penetration across India for the next six years, has projected a billion mobile phones by 2014. This forecast is part of a spectrum committee report prepared by the DoT that is expected to be made public after the new telecom minister takes office.

It is well established that India has had one of the most remarkable growths in mobile phones since the sector was first opened to private investment in 1994. From two operators in each circle in 1995 the country now has 12 to 13 operators. Of these, about six to seven are fully functional, offering the Indian consumer unprecedented choice and low tariffs.

India has also been breaking all types of records on new subscriber additions in the last two years by adding up to 8 to 10 million phones a month, sometimes more. The latest report of the DoT put together by its committee shows that India will reach the half a billion mobile mark by 2010 and within four years reach 1 billion mobile subscribers.

In 2014, India’s population is expected to be 1.26 billion, with mobile penetration of 1.01 billion the mobile teledensity would be 80% above. It would mean 8 out of every 10 Indians will have access to a mobile device.

This probably reflects the world’s largest new growth opportunity over the next five years, surpassing China’s potential. China is already at nearly 700 million mobile phones as compared to India’s 400 million. The fact that India will add more than 600 million new subscribers must rate as the biggest subscriber adds for any country in the world.

Some of the imperatives to reach this figure would include redefining spectrum allocation and pricing policies, early 3G auctions, and reviewing the M&A norms. It is clear that no country in the world can sustain a fragmented telecom market of 12 to 13 players per circle. In the end, the market will have to consolidate to between three to four national players and two or three regional players with an average subscriber base of approximately 150 million each by 2014.

Merger move reflects telcos’ need to look beyond India

Adith Charlie on The Hindu Business Line on 26 May 2009

Mumbai, May 25 Indian telecom operators are venturing into emerging geographies such as Africa to arrest falling subscriber revenues and counter long-term fears of a slowdown in the home market.

This explains why Bharti Airtel is trying to woo over MTN all over again, exactly a year after the two fell short of a potential business arrangement, analysts and industry observers say.

Dip in ARPU
In India, telcos have been largely unable to arrest the dip in the average revenue per user (ARPU) which currently hovers around $4. Given the spate of new operators that have flooded the market, both average revenue per user and revenue per minute are expected to further decline. Nomura Securities analysts, Mr Sachin Gupta and Mr B. Roshan, expect the ARPU dip to continue on an average 6-8 per cent over the next three years for Bharti Airtel and Reliance Communications.

On the other hand, the ARPU in African countries (as a whole) and other emerging geographies is around $9-11, according to Mr Raman K., Practice Head (Telecom Media & Technology) at Tata Strategic Management Group.

“In regions such as Cyprus (Eurasia), the ARPU is close to $30 while in countries like Zambia, it is around $10,” he said. The overall tele-density in Africa could be around 30 per cent while it is around 36 per cent in India. Key markets such as Mali and Tanzania have a tele-density of less than 30 per cent, said Mr Raman.

Mr Madhusudan Gupta, senior research analyst with Gartner, believes that the telecom industry in India has passed the stage of hyper-growth and hence focusing on under-penetrated, yet profitable markets of Africa makes sense.

“The Indian telecom story is still very much intact. However, 4-5 years down the line, one expects the industry to still grow but at a slower pace,” said Mr Kunal Bajaj, Managing Director of advisory firm BDA Connect.

Greatest advantage
Achieving critical scale would be the greatest advantage for both Bharti Airtel and MTN if the deal were to go through.

“We are talking about creating a telecom entity which would be the sixth largest in the world. Moreover, it would have a footprint across 24 countries and hence be able to compete with the big boys of telecom world globally,” said Mr Mohd Saif, Deputy Director, Consulting, ICT Practice, Frost & Sullivan.

Different Telecom development parameters for February 2009

From http://www.dot.gov.in/

The major highlights for the various parameters during March 2008, January 2009, February 2008 and 2009 as well as percentage growth during current year, monthly and yearly basis is given in the following tables:

A Guide to India’s Telecom Market

April 19, 2009 Catherine Haslam on http://www.lightreading.com/

In March 2008, Light Reading published A Guide to India’s Telecom Operators. It proved to be one of the most popular articles on the site that year.

Now, little more than 12 months later, the Indian market has moved on considerably. Last year’s report noted that, at the end of 2007, the country’s mobile operators had a total of 233.6 million connections mong them. A year later, as 2008 ended, India’s mobile service providers boasted nearly 347 million connections, a year-on-year increase of nearly 50 percent. (See IndiaWatch: Mobile Nears 347M Subs.)

And there’s plenty of wireless growth still to come: In the first two months of 2009 alone, the mobile operators activated more than 28 million additional connections. (See India Adds 13M Subs in February and India Adds 15M Mobile Subs in January.) According to the Telecom Regulatory Authority of India (TRAI) , the total number of telecommunications services connections reached nearly 414 million at the end February 2009, of which more than 90 percent were wireless.

In stark contrast to the mind-boggling growth experienced in the mobile sector, fixed voice connections have suffered a gentle decline in recent years: At the end of February 2009, India, a country of nearly 1.2 billion inhabitants, had just 37.73 million fixed-line connections. India’s fixed-line sector is not dead, though: There’s potential growth in that market, too, as well as in the wireless world, though the big numbers and the immediate impact will continue to come in the mobile sector.

There are two obvious ways for the service providers to expand. The first is, quite simply, to connect more people. Teledensity is rising steadily but had only reached 35.65 percent at the end of February 2009, leaving significant potential for additional market expansion.

The majority of growth will now come from outside the metro circles and in the smaller cities, towns, and rural villages as teledensity in the major urban centers has reached 82 percent. It’s worth noting that 70 percent of the Indian population lives in rural areas, and, equally importantly, 64 percent of the nation’s expenditure and 56 percent of its income comes from these villages – yet India’s rural teledensity currently stands at less than 13 percent.

It’s the potential for rural area growth that drew five new players into the market in 2008, and it’s that same potential that prompted a number of international players, including Telenor ASA (Nasdaq: TELN) and Etisalat , to take major stakes in each of the five (see the Wireless Service Providers section for further details). This trend towards international ownership is now well embedded and is likely to become more prominent when India’s 3G spectrum auctions finally take place, which should be later this year.

The second growth driver is new services, such as broadband, IPTV, 3G mobile, and broadband wireless access (BWA), particularly using WiMax technology. Broadband connectivity is still very low, but state-owned operators Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) , along with private carriers such as Bharti Airtel Ltd. (Mumbai: BHARTIARTL), are slowly increasing their DSL customer bases in urban centers (See the Fixed-Line Service Providers section for more details). Cable companies, such as Hathway Cable & Datacom Pvt. Ltd. and Sify Ltd. (Nasdaq: SIFY), are also developing broadband businesses, while Reliance Communications Ltd. has concentrated on building out WiMax capabilities to complement its high-speed Ethernet access rollout.

IPTV has struggled to gain traction as a popular service since its initial hype, but is now building, albeit slowly, with a number of service providers still planning to launch their services. With the incredible amount of content created by the Bollywood movie industry, and other local content developers, the potential flexibility offered by IPTV services could work well in the Indian environment, according to Jai Maroo, an industry executive interviewed by Light Reading TV (see below).

It’s not all growth and success in the Indian telecom market, though. Plans to promote rural connectivity have fallen short after getting bogged down in bureaucracy, while the Department of Telecommunications ‘s inability to agree on terms for the 3G and BWA spectrum auctions with other government departments has delayed deployment of mobile broadband solutions, leaving operators frustrated. They are also limited by a lack of spectrum, which, despite the size of the market, is in short supply: Indian operators have received far less than the world average of around 25 MHz apiece.

With so many developments going on, and with so many other markets around the world relatively stagnant in terms of subscriber growth, there’s never been a more important time to understand the Indian telecom sector, its service provider players, and its structure. And that’s what this report provides.

As well as a visual guide to the country’s service areas, known as “circles,” this report provides a roll call of the fixed-line and mobile operators, an explanation of the licensing environment, an overview of the many companies involved in the provision of mobile tower sites as India embraces passive infrastructure sharing on a massive scale, and an overview of the country’s approach to increasing rural teledensity.

Wireless wonders

January 23, 2009
Even by the standards of the scorching pace set in the past five years, the next five years of India’s telecom history promise to be good, if a report just released by Ficci and BDA, a telecom consulting firm, is anything to go by. According to BDA-Ficci, 308 million wireless phone users were added in the last five years (starting from 28 million in 2003), and another 410 million will be added in the next five years.
The total number of broadband-speed Internet connections will rise from the current 5 million (all fixed line, and all installed in the last five years) to around 46 million through 3G modems, broadband wireless access and fixed lines; the share of value-added services (primarily SMS and ringtone downloads just now) will rise from 9 per cent of total telecom revenue today to around 23 per cent in five years (once broadband-speed 3G mobiles allow serious Internet downloads to happen).
So what, you might be tempted to ask — apart from what it means for various telcos and others in the eco-system like mobile handset manufacturers, sellers of Internet-ready devices like netbooks, application providers creating special software including games, media firms with mobile solutions, and so on.
Another report on telecom, coincidentally released the same day by the think tank Icrier in partnership with Vodafone, has some answers. According to analysis done by Icrier, the teledensity of a country/state plays a big role in determining its economic growth.
As is obvious, the relationship is two-way, but the researchers use accepted methods to isolate the impact of telephony on GDP growth; other methods are used to eliminate the impact of variables like length of roads and power supply on GDP growth. The relationship they come up with estimates that, beyond a certain threshold penetration level of 25 per cent, a 10 per cent hike in mobile phone penetration leads to a 1.2 percentage point hike in growth rates.
If that seems high, it is worth mentioning that other studies show an even greater impact of mobile phones on GDP growth in the rich, OECD countries. How wireless penetration translates into higher GDP growth is easy to figure — there is increased efficiency and a reduction in transaction costs.
The study cites several examples. Qualcomm’s work with the MS Swaminathan Research Foundation in Pondicherry has resulted in fishermen in the region getting, on their Tata Indicom mobile phones, data on wave heights, the best fishing zones for various types of fish, retail prices in various neighbouring markets, and so on — the fishermen, naturally, are more productive and can retail their catch at higher prices.
Doing banking transactions through mobile phones and using bio-metric information dramatically lowers the cost of bank operations in the rural areas. Few therefore can doubt the impact of mobile phones on growth.
What are the policy implications? The first has to be the need for stability in policy — if government policy on telecom keeps yo-yoing from one extreme to the other, or is biased, it will hit the growth of telecom and of the economy. And since the mobile phone is just an enabler, sub-sector policies have to be conducive too.

Will the rural-urban telecom divide widen?

Rajat Kathuria and Mahesh Uppal in New Delhi , March 09 New Delhi

The recent extraordinary growth in telecommunication connections in India, which topped 15 million per month in January 2009, has understandably grabbed the headlines. These huge numbers, however, disguise a disturbing reality which is the enormous variation within India. Many of the less developed states have state-wide average penetration rates of well below 20 per cent, including Bihar, Uttar Pradesh, Orissa, Madhya Pradesh and Assam.
More perilous, however, is the inequality between rural and urban India. Despite several policy initiatives to promote rural penetration, growth in teledensity continues to be skewed in favour of urban India. In fact, the rural population is much worse off than it was a few years ago compared to its urban counterpart.
In March 1998, the difference between urban and rural teledensity was 5.4. In September 2008, the corresponding number had grown to 56.6, which means the divide has worsened almost 12 times in the last 10 years. Since number of fixed phones is declining, the entire change can be attributed to mobile telephony.
A recent report by ICRIER on the impact of mobile phones shows there is a causal relationship between higher mobile teledensity in Indian states and higher economic growth. States with high mobile penetration can be expected to grow faster than those states with lower mobile penetration rates, and by 1.2 percentage points for every 10 per cent increase in the penetration rate.
This finding underlines the urgency of increasing teledensity across all states and especially in those numerous many areas that are yet to reach threshold levels. Indeed, the Telecom Regulatory Authority of India has also recently expressed concern over the growing disparity in two of its recent documents. One is specifically devoted to rural penetration issues and the other relates to the regulatory regime for charges that an operator needs to pay for the use of a competitor’s network, the so-called interconnect usage charge regime.
Regrettably, the line of attack in the latter might well worsen rather than reduce the digital divide. At a time when the world economic crisis threatens to shrink resources available for investment, Trai’s proposed interconnection regime will hurt the business cases of incumbent operators who having covered urban areas are now already deploying networks in rural areas. It will, instead, help new entrants, keen to exploit regulatory anomalies in India, to eat into the urban revenues rather than aid growth in rural areas.
Here is the argument.
Interconnection charges include payments for origination, carriage, transit and termination of calls on competing networks. Trai, which has complete jurisdiction in interconnection issues and need not involve the government in these deliberations, set the termination rate at Rs 0.30 per minute for all calls whether fixed or mobile. It leaves origination charges to operators and limits carriage and transit to Rs 0.65 and Rs 0.20 per minute.
Recent consultation held by the authority in Delhi and Hyderabad on the IUC regime, revealed an inclination to reduce the termination charges by about 50 per cent on the ground that the actual incremental costs of interconnection incurred by operators are now lower.
In this approach, an operator’s capital costs are excluded from calculations of interconnection charges and are to be recovered from charges levied on its own subscribers. Many regulatory authorities around the world subscribe to this scheme since it favours new competitors, especially when they seek to take on incumbent monopolies with almost ubiquitous networks, like in developed countries.
This is just not the scenario in India where large parts — especially rural areas — have no connectivity at all. With a termination charge of Rs 0.30 per minute, the IUC regime in India is already amongst the most favourable to operators seeking interconnection.
The current IUC can hardly be seen as a barrier to competition in the present state of network development. It seems implausible that India’s incumbent operators can recover capital costs as they did traditionally through rental charges or through call charges, already among the lowest in the world. It is worth recalling that prepaid users, that are around 80 per cent of India’s total subscriber base, do not pay a recurring monthly charge or significant connection fees.
Given this situation, a further reduction in termination rates, the so-called mobile termination charge, would seriously impact mobile operator plans to expand in rural areas. Rural subscribers typically receive more calls than they make and a reduction in MTC revenue to operators will further reduce their revenue realisation and consequently their incentive to expand in rural areas. More so, if the new MTC hurts urban revenues as well.
Currently, mobile operators realise a large component of their revenue in the form of MTC for low ARPU subscribers. A lower MTC would further reduce the incentive to acquire rural subscribers. The new measures would make sense if Trai had demonstrated that operators were reluctant to expand rural networks in spite of the surplus from interconnection charges. It has not.
It is also important to debunk another argument that reducing interconnection charges will facilitate competition and thereby benefit customers. This argument seems disingenuous given that on an average existing subscribers can access seven or eight mobile operators, which is unprecedented in any mobile market in the world.
It is increasingly argued that the fragmentation of Indian telecom market has already led to inefficient utilisation of scarce spectrum. That the new entrants in India’s crowded telecom market were attracted primarily by the chance of acquiring precious spectrum at bargain prices has been amply demonstrated by recent transactions in mobile licences.
If, in the name of increasing competition, Trai were to reduce the already low interconnection charges, we fear it will hurt rural users even before networks can be rolled out for them. It has been shown that access to telecommunications can help improve productivity and efficiency, and enable benefits of economic growth to be shared. The rural population, therefore, at least deserves a chance. If, say, in one year, the urban-rural disparity shows no signs of abating, Trai may well be justified in considering a tougher IUC regime to reduce the unearned profits of mobile operators.