Follow
Mohammad Chowdhury
Mohammad Chowdhury
I offer unfettered insights into the world of Indian telecom

smar_phoneLast year I blogged about Asia’s final frontier in telecom. This week I had the privilege of visiting Yangon and meeting some of the movers and shakers of the telecom industry in Myanmar. Since last year, the ambitious and recently reformist ASEAN republic has licensed two international operators, Telenor of Norway and Ooredoo of Qatar, to build out mobile networks, as well as entered into agreements with other investors to put money and know-how into developing the industry.

Myanmar is the 73rd country I have worked in, and from what I saw this week, it promises to be one of the most illuminating. The country’s senior policymakers, as a group, are quietly shaping the emergence of an economy which was largely forgotten by the rest of the world until a decade ago, evidently with a sharp appreciation for what needs to be done to keep growth on track. What is Myanmar doing right in telecom, and what can we learn in India from this?

  • A unified vision for growth: There is unanimity in different quarters of Government in expressing what Myanmar’s telecom sector has to do to enable economic growth and social inclusion. In India, partly due to having the complexity of state versus union, the debate around what telecom’s role has not always been so straightforward. In particular, there has been a hot debate around whether the sector should be a source of growth, or a source of funds for the Government budget. This battle has never been resolved satisfactorily and until revenue takes a back seat, the industry will remain at crossroads as to whether it is a goose that lays golden eggs, or a golden rainbow that shows us a path to faster industrial growth.
  • A policy and regulatory framework that remains simple: I am impressed by how simply policy makers and strategists in Myanmar can articulate the policy framework. Granted, Myanmar is in the early days of liberalisation and the real policy challenges will only emerge in a few years’ time. By contrast in India, 20 years after liberalisation, the industry’s policies appear confused and inconsistent.  Anybody looking afresh at the current spectrum allocations in India would struggle to understand the rationale for why players have the present mix of 800MHz, 900 MHz, 1800 MHz and 2100 MHz spectrum, in different quantities by circle.Part of the complexity comes from having circle-circle allocations. The situation today is also the result of incremental steps to allocate spectrum over many years without the benefit of a long term spectrum plan. This incrementalism has in the past been driven by anecdotal and expedient interventions to balance out one unfair outcome with a corresponding compensation. In total this has resulted in a messy outcome. I saw the same in Egypt, another country where telecom regulation was intensely deal-based and lacked long-term strategy. In recent years the Indian regulatory authorities have tried to iron out some of these complexities, but it will take a generation of licensing to finish the job, and we still lack a long-term spectrum plan for India that shows how the industry will attain the spectrum it will need to meet demand.
  • A single market: India being such a vast sub-continent, it is never going to be a single market. By contrast, Myanmar is a market of 50+ million people, regulated as one with a single regulatory framework and single licensing nationally, with spectrum allocations which are in line with this. There is also, from a market point of view, a single language group across the population. Whilst India does not simulate this, there is merit in considering how certain sub-markets could be encouraged to be more national/sector-wide. The biggest opportunity lies in data services. Local developers in India struggle to find the market big enough to write apps for, and would see more potential if they could do business with the industry together rather than each operator one by one. And if there is more innovation to encourage multiple vernaculars to access common services (eg. through voice commands) then India’s many geographies might be more easily looked at as a whole market.
  • Reasonable pricing: So far, Myanmar has not seen a major price war for voice services. It is extremely early days, with only one of the newly licensed operators having launched so far, and therefore its not yet seeing the dynamics of a three-player market yet. 3-player markets are notoriously known for leading to much more drastic price changes than duopolies. But the signals suggest we will not see a mad cap price war in Myanmar in the near future, and this bodes well for ensuring a reasonable balance between protecting consumer choice, value and rights, as well as encouraging prosperity for an industry that will need to invest significant sums to build infrastructure. In India, the operators have been bankrupted through high spectrum charges and low operating margins (and a lack of spectrum), resulting in a slower build out than could be expected in rural areas, and worse quality of service in urban.

Of course there is perhaps more that Myanmar can learn from India’s experience, too.  For starters, India is the one emerging market in telecoms that has seen the most innovation when it comes to marketing – both pricing for services as well as analytics to drive better customer segmentation and targeting. No other country can boast a better handle of micro-segmenting customers and targeting them with offers. And India can claim to be the country that invented “sachet pricing” for telecom, borrowing shampoo pricing techniques to bring the option for consumers to buy their telecoms services in tiny chunks at a time.

Myanmar has probably more to observe in India than vice versa, but it would do no harm for our policy makers to see what’s happening over in Nay Pi Daw from time to time, to remind themselves of the days when life was simple and the plan was clear.

I have just flown around the world in 16 days: Delhi to Delhi via London, New York, Toronto, Montreal, LA, Brisbane and Singapore. While I had trouble keeping up with my time zones, I had little problem staying up to date with email or social media and that too, at no additional cost.

What I picked up from my extensive travel was the widespread availability of publicly accessible WiFi services, most of it funded through revenue models, which means you get some form of access for free. Most shopping malls in Singapore, almost every airport terminal in all the cities mentioned above, the Qantas flight from LA to Brisbane, and a number of coffee shops as well as department stores in Brisbane and London–all offer WiFi access for free.  Chinatown in Singapore is WiFi-enabled too, including the outdoor areas and streets in a square-kilometre block–in a model funded by the local businesses’ association.

In most of these cases, there are distinct business models which provide an opportunity for the WiFi provider to make money indirectly from the usage:

  • Paid for advertising onto the user’s tablet or handset
  • Prompts to the user’s handset which will trigger purchases (mainly in shopping malls and stores)
  • Collection of the user’s demographic and location information which will be sold later for direct marketing

Using most of these free services is easy as it takes less than a minute to log in and start surfing. For me, the key draw was that as an international roaming traveller, I could defray significant mobile data roaming costs by using these services. I was also saved from the hassle of buying a local SIM card everywhere I went to. Most importantly, my precious time was saved. I was also able to save on making some international voice calls by using internet-enabled services such as Google Hangouts to conduct video calls instead of making a public-switched voice call paying a roaming tariff.

It is time we see public WiFi scale in India.  Data usage is on the rise and smartphones are becoming far more prevalent. Yet, at the same time, the user experience on 3G is still patchy, especially in crowded spots.  Provided the WiFi revenue models are carefully worked out in each instance, nobody needs to lose money by providing the service for free. Where the free-to-air revenue model doesn’t work, the services can remain paid for. In coffee shops, for example.

Operators need not think they’ll lose out on data or roaming revenue:

  • A lot of WiFi-connected usage results in consumption (eg video calls, YouTube) which would not have happened on a mobile data service–so the substitution of mobile data usage is relatively modest
  • For roaming users. Mobile data is more than often switched off these days, and so again, there is arguably limited substitution of actual mobile data usage due to using WiFi

From a cost point of view, operators may of course benefit. During heavy data sessions, moving to WiFi will help reduce transmission cost compared to supporting such sessions over the mobile radio network.

I have one additional theory which is that mobile operators may actually benefit when roamers jump onto public WiFi services, which is that the possibility of saving on mobile data roaming will dissuade users out of the laziness from buying a local SIM card to make voice calls. This is exactly what happened to me in the past two weeks: In the US, Canada and Singapore, I didn’t bother with local SIM cards, and will probably end up with a significantly larger voice roaming bill as a result. This specific business case would be worthy of a case study for mobile operators.

My sense is that the time is right for public WiFi to scale up in India–and that this has the opportunity to be another building block to encouraging truly higher levels of data usage in public places, alongside 3G and if rapid, then before the onset of 4G.

smartphone

Image: Shutterstock

The mobile services industry in India is growing only in single-digit figures, but the market for smartphones grew by a whopping 300 percent last year. What’s more, it is set to double in 2014. However, even as the market grows at a fast rate, the price points are falling equally fast. This tension between rapid growth and quick commoditisation has created an aggressive battle for survival among India’s handset players. Established players are being shaken out, and some emerging ones too can expect to be taken out of the market in the years to come. In India, only the players who offer rich phone features at superior value for money are likely to survive with a chunky market share.

Here are five reasons why the Indian smartphone market offers heady growth, but only to those who are nimble enough to keep giving the consumers what they are looking for:

1. India is one of the world’s fastest-growing handset markets
While only 10 percent of India’s 700 million-plus mobile phone users were using smartphones at the start of 2013, the figure shot up exponentially to 29 percent by Q1 2014.  The number of such devices shipped in India rose from 16 million in 2012 to over 40 million in 2013. It is expected to cross 80 million this year. For a few years to come, Indians will provide one of the biggest opportunities for handset players to make a lot of money.

2. Indian price points are low, but rich phone features drive sales
Smartphones in India have become very affordable. Almost 80 percent of the units sold during early 2014 were priced at below Rs 12,000 (ie sub $200). However, it would be wrong to conclude that Indians are “cheap” smartphone buyers. In India, it is not ‘low price’ which helps a phone sell, but the features which are available on a limited budget.

Most buyers preferring a relatively cheaper smartphone are seeking specific features which include a flashlight to illuminate in the dark, puddle-infested alleys at night, a good speaker phone so that family or friends can listen to music together, and a good camera. Indians are constantly seeking functionality and are intrinsically value-driven, not price-driven.

3. Mobiles are the most aspirational consumer product in India
Mobiles are far more affordable than other desirable products such as cars or homes. Yet, mobile features are varied enough so that individuals can fashion a purchase according to their own preferences. More than half of Indians in SEC C (lower-middle class) are willing to spend more than Rs 10,000 on their next mobile phone. Micromax uses Wolverine star Hugh Jackman to publicise its latest models, while others employ actors Ranbir Kapoor or Priyanka Chopra. Mobile operators live in the hope that such aspirations will also result in higher usage of network – i.e. data-friendly features will result in greater adoption of mobile data services. A survey conducted by my team last year found that lower middle-class Indians without satellite TVs in areas such as Assam use mobiles to watch Bollywood clips and cricket highlights–a dream come true for mobile operators.

4. Traditional players are giving way to new ones
While the smartphone category peaks, the best known global players are struggling to capture a fair share of the growth. Nokia’s once dominant share of the Indian handset market a few years ago dwarfs its current smartphone share, mainly due to a pre-Microsoft strategy to focus on feature phones and basic handsets. Apple’s smartphone market share in India is also dropping, but this is because it offers a niche, high-end product whose relative weight in an emerging mass market is mathematically destined to shrink. Samsung has bucked this trend because of having a differentiated range of reasonably-priced smartphones, as well as offering dual-SIM models which are popular in India. Samsung’s market share in India increased from 26 percent in Q1 2013 to 35 percent in Q1 2014.

Players unheard of some years ago are now emerging.  Karbonn, a relatively new Indian player, is catching up with Micromax, and new Chinese players such as Xiaomi and Gionee which launched here recently are hoping to get a grip on segments where their sub Rs 5,000 smartphone devices may take off.

5. Indian players do assemble, but don’t innovate or manufacture components
Chinese handset manufacturers are likely to do better in the long-term than Indians because they have more control over the models they produce. More product development, component design and manufacturing takes place in China compared to India’s handset players, who principally concentrate on basic assembly only and are dependent on overseas suppliers for components.

Indian players have recently tried entering new markets (such as Russia), but one wonders how well they will fare in consumer segments beyond the most price-sensitive low-end buyers. If Indian handset players want to become more innovative, there is plenty of scope for home-grown innovation.  For example, energy use and battery life are key here, given the paucity of consistent network coverage (our phones spend a lot of the day searching for the optimal signal) and the lack of power supply in many rural areas. Also, as mobile commerce takes off in India, phones which make it easier to buy and sell products through less key strokes and which facilitate features such as money transfer are bound to do well in emerging markets such as in Africa or Asia.

Two shakeouts: one now, and the other that is threatening to come
Over the next few years, we can expect two waves of market shakeout as far as smartphones are concerned. The first is happening already: traditional handset players are being shaken out of market leadership by new players who cater better to the needs of value-seeking low-budget Indian consumers. The second shakeout is threatening to happen: The substitution of Indian handsets by more innovative and feature-savvy Chinese ones. This need not happen if Prime Minister Narendra Modi’s promise to support manufacturing and beef up Indian technology and innovation bears fruit anytime soon.

tele_spectrum

Image: Shutterstock

TRAI (Telecom Regulatory Authority of India) has announced the much-awaited spectrum sharing guidelines this week.

TRAI has said that two companies can share spectrum between themselves if both of them hold spectrum in one particular band in a particular service area, if the spectrum is acquired through auction or the companies have paid the market determined rate for the airwave.

“All access spectrum i.e. spectrum in the bands of 800/900/1800/2100/ 2300/2500 MHz will be sharable provided that both the licensees are having spectrum in the same band,” TRAI said in its recommendation on Guidelines on Spectrum Sharing.

Operators involved in spectrum sharing will need to pay a higher spectrum usage charge, elevated by an additional 0.5% of revenue.  Whether this means operators will gain overall in terms of their profitability depends on whether they can take around 0.25% out of their cost base as a result of spectrum sharing (assuming a 50% operating margin).  On the face of it, once the transition phase to sharing is over, it seems at a high level that this could be done.

DoT is now due to examine the TRAI guidelines before confirming the policy to be adopted.

Spectrum sharing is likely to:

  • Help operators with too little spectrum in a circle to satisfy demand
  • Enable less congestion and better quality of service
  • Reduce the need to buy more spectrum in existing circles
  • Provide an alternative to more capex in-circle from increasing site density

 

Spectrum sharing is not likely to:

  • Spectrum sharing does not:Mean that operators can avoid spectrum purchase to enter new circles
  • Favour smaller players with fragmented spectrum holdings as they may find it hard to find sharing partners
  • Help operators with limited spectrum and limited market share, who wish to partner with a more established operator in the same circle
  • Help with specific geographic black spots as the formula applies to the whole circle

 

Spectrum sharing should not be expected to result in huge reductions in industry debt which currently stands at around INR 250,000 Crore (USD 40bn).  This is because it doesn’t help avoid future spectrum purchase for renewals, or defray any of the cost of entering new service areas.

Rather, it provides the potential to reduce in-circle capital expenditure to improve network coverage through building more base stations.  Even for this, I would expect additional transition costs in the first few years as operators undertake network engineering to link theirs to others’.  This may or may not be offset by cost savings in the near term.

It is possible that the guidelines will favours operators of a similar size, where each party offers the other a similar benefit from sharing.  It is unlikely that an operator will share spectrum with one who has a significant spectrum disadvantage in the same circle.  Therefore, it may be the case that sharing will take off between operators with similar problems and spectrum endowments.

Some have said that the new guidelines on spectrum sharing will help consolidation, but so far I do not see an obvious reason why, although it might polarise smaller players further into a need to exit or be bought out.

India has one of the biggest healthcare burdens in the world, due to a limited endowment of doctors per capita, a high rural population which cannot easily access specialists, and a significant communicable disease burden. Addressing the demand for healthcare by building more and more public health facilities exposes the sector to a continued trail of major development projects, and with it a prolonged and bigger fiscal headache for the exchequer. As the new Union Minister of Health and Family Welfare settles in office, it would be worthwhile to note how much mobile health could help attain some of the goals set forth by the health ministry, in lieu of brick-and-mortar investment, and with it lighten the public finance burden on the finance minister. mHealth

As the chart shows, in contrast to many other developing countries, a large chunk of India’s urban population suffers from chronic diseases which compels people to regularly go for health check-ups and clinic visits. Diabetes is the most obvious example of this, with India being touted as the diabetes capital of the world.

As the new Union minister reviews India’s health policy, there are 3 themes that he can pay attention to, which render mHealth increasingly relevant for India:

  1. Convergence of mobile phones, traditional computers and tablets which are increasingly working together with back-end technology support to enhance healthcare delivery as well as lower operating costs and, huge potential savings to capital expenditure in building more and more hospitals and clinics. Smartphone uptake will surpass 200 million within a couple of years, and the general public’s usage of data on mobile devices is shooting up.
  2. mHealth is reducing readmission rates in chronic patients (eg those with Type II diabetes) through better monitoring and higher compliance rates for prescribed care. Regular check-ups can be easily industrialised through remote monitoring using mobile, interpreted by data analytics at the health clinic.
  3. mHealth provides the potential to generate invaluable societal data, provided there is a common and acceptable framework to host and share the data responsibly.  For public health policy development in India, the benefits of a programme to collect information more systematically through mobile are immeasurable.

However, the health minister’s trump card on mHealth could be how the public purse is set to benefit. A recent analysis PwC found that Brazil could save Rs 90,000 crore ($14 billion) of public healthcare expenditure in 2017 alone from the uptake of mHealth. It reckons that in India, savings from public health care spends would be similar. This is because mHealth in India could be used to substitute a portion of future physical infrastructure (of hospitals and clinics) through remote diagnosis, monitoring and care.

Because developing countries lack infrastructure, they are set to benefit more from mHealth than developed countries which have a legacy system and worker-base to deal with. Europe’s public health infrastructure is a source of huge employment, and mHealth is seen by many as a distraction or a threat. North America and Australia are somewhat different, as they are large territories with dispersed populations which can benefit from some degree of remote care, but in their cities the same obstacles that apply to Europe also exist. patients

For mHealth to scale up in India, the government needs to create an mHealth policy and create a strong public push for its adoption. Healthcare is too regulated a sector for mobile solutions to achieve scale just through successful private sector pilots and initiatives. The National Telecom Policy (NTP) 2011 refers to mHealth and the government has undertaken some projects already, but so far it has not shown any real seriousness about mHealth, and no service has scaled up in India.

Aside from policy adoption, what else needs to be done? First, healthcare practitioners need to be encouraged, trained and ultimately mandated to adopt mHealth as a part of their methods for diagnosis, and staying in touch with, patients. Second, a number of regulatory gaps need to be closed to enable mHealth to scale up faster. These include defining what can and cannot be prescribed by a medical practitioner via remote diagnosis, and where the liability lies for healthcare provisions when an ecosystem of health workers, doctors, telcos, data analysts, device manufacturers and IT service providers are involved in the cycle of service delivery.

We should be optimistic about India because patients in developing countries are ready to pay for better access to affordable healthcare. A recent survey found that 20 percent of developing country respondents are willing to pay $5 per annum for subscribing to a mobile healthcare service. The figure is only 10 percent in developed markets. The propensity to pay for mHealth in poorer countries is higher because the cost of standard healthcare relative to earnings is higher. To attend a specialist in a medium-sized town that is 200 km away from the village, a patient may have to spend Rs 500 on the appointment, but as much as another Rs 2,000 on travel, lodging for a night, food, and foregone income. Prohibitive economics such as this dissuade millions from seeking guidance at all, until it is a medical emergency.

In the Business Standard – Ipsos report on the most successful Indian product launches of 2013, the top three places went to mobile handsets, as did four of the top 10, and 12 of the top 30.  Samsung S4, Samsung Note 3 and iPhone5s/5c were the winners.   All of the top 10 places went to mobile devices and automobiles (see chart).

chart

Brand experts explain that mobile devices dominate the list due to superior segmentation.  Coming from richer customer information, experts claim this enables device manufacturers to split “traditional” segments and fill the gaps that exist between them with new offerings. This reasoning seems fine, but to claim that better segmentation is the reason why mobile devices dominate the list complicates the matter and misses the point.

Better customer data is available for all products and services, not just for mobile devices.  It is not just Samsung and Apple who are good at understanding customer needs–FMCG companies, banks and airlines are pretty good at that too. Finer segmentation explains why marketing today is so much more personalised and targeted, resulting in customer relationships, which are interactive and individualised. Thanks to new depths in customer insight, product offerings meet our needs more distinctly than ever before. The Volkswagen I bought recently came with my phone contacts synced into the car’s in-built phone system.

Segmentation and deeper customer insight is resulting in new product segments being created too. The best example of this in recent years has been the iPad. Written off by pundits when launched, the iPad created the tablet segment which within a decade has matured into a product which is distinct from a phone and a laptop.

So, if it’s not because of segmentation, then why are mobile devices dominating the brand launch list in India?  The reason is because in today’s fast-changing economy, these products represent the most popular and unified way in which all consumers in India can express their diversity as well as their progression. Functional and design-rich, these possessions mean a lot to the user–reliability, security, value and style.  Mobile devices span the customer base, priced from Rs 1,000 to Rs 1,00,000 and with brands that are meaningful and expressive.

It is no surprise that automobiles are the other top product in the launch list – cars too are an emblem of progress in India, and, like phones, one that crosses many income brackets. You can buy a car for Rs 3 lakh, or Rs 3 crore. Consumer durables, possibly the most well-researched products in the market, fare less well on the list because nobody gets as excited about buying a new brand of shampoo or toothpaste compared to a Samsung S4 or a Ford EcoSport.  Telecom peripherals remain among India’s most aspirational products and with digital convergence just beginning, they will remain so for some time to come.

telecom

Image: Shutterstock

The NDA winning the Indian parliamentary elections with an overall majority provides an opportunity to ring in a new tune for the telecom industry. Just five years ago, Indian telecom was the darling of foreign investors and the poster child of economic growth. But from the moment the 3G auctions concluded in 2010, bit by bit the industry has huffed, puffed and crawled to a slowdown to match the economy itself. Corruption scandals, cancelled licences, tax disputes, debt crises, tariff hikes and failed auctions: you name it, we’ve seen it.

But thanks to “duality” (i.e individuals having more than one SIM card) and to the sheer hunger of most Indians to own and use smart phones, a significant chunk of the Indian telecom opportunity remains unconquered. Rural telecom penetration remains low, data services are just taking off, and mobile-enabled services such as money transfer have barely impacted people most of whom remain unbanked. With so much potential across the populace, much can be achieved in telecom that will help the economic revival Narendra Modi has promised. Ringing in new tunes for Indian telecom should be a priority, and to get things started here is a list of topics for consideration in the first 100 days of office:

1. Voice to the masses: With rural penetration well below 50%, the new Government could take a fresh look at how to encourage the industry to put more money into rural network expansion. Finding ways to allocate the thousands of crores of universal service funds that lie unused would be helpful.

2. Let mobile-enabled services bloom: 25% of Kenya’s GDP passes through m-pesa. Yet in India, a country with a similar proportion of unbanked to Kenya mobile money is yet to take off. Part of this is due to the RBI’s prudent regulatory stance, but it may be time to push-start policies to drive mobile money, as well as mobile health and education. The latter will help achieve more access with less public investment in bricks and mortar into rural areas.

3. Encourage local apps development: Indian software applications developers are prolific in building apps for the iOS and Android markets worldwide, but relatively few venture into creating apps for the local market. The reason is lack of money – writing for a linguistic audience other than an English-speaking one often turns developers off, and the result is relatively few Indians using a lot of apps. Government could consider how to change apps providers’ incentives (eg favourable tax treatment for apps revenue generated from localised services)

4. Take the lead in innovation: Indian telecom companies have led in innovative ways to track and analyse voice usage (customer analytics in India is way ahead of other markets), in pricing (eg “sachet” pricing for pre-paid, where users can top up even Rs.10  at a time), and ingenuity in using scarce spectrum allocations to provide mass services in congested cities. But overall, India lacks verve and achievement when it comes to the innovation that could serve a nation so in need of better communications. More consideration to science and education policies to consider what needs to be done to make Indian telecom industry, and indeed technology and IT, more innovative.

5. Re-energise foreign investors: Once the darling of telecom in emerging markets, India has fallen from grace over recent years. Even committed investors such as Maxis, Vodafone, Telenor and Sistema have seen a rupee decline which dilutes whatever returns they can muster in the lean-profitability Indian market. Moreover, the market has continued to dog investors with uncertainty over issues such as tax treatment of foreign investment.  Greater economic stability and a revival of the rupee will help, but this is also an opportunity for a new government to show it is serious about anti-corruption and determined to treat overseas investors fairly and transparently.

6. Remove regulatory uncertainties: Much has been achieved in the past twelve months to demystify Indian telecom regulations, especially in the field of spectrum pricing and allocation and the provision of 3G services. More is to be done to clarify M&A norms, which will remove final hurdles to more deals happening to lead to a much-needed in market consolidation.

7. Improve service quality: Dropped calls and dial-up-speed internet remain a bug bear for most of us. Oddly for such a regulated country, India is one of the few which doesn’t have a call quality regulatory system which penalises poor quality and rewards better call quality. Brazil’s telecom regulator, Anatel, monitors call quality and data speeds across the nation, fining operators who do not meet minimum standards. There is an opportunity to do more in India. Aligned with this would be moves to make more spectrum available for operators to use. After all, who wouldn’t expect low call quality when Mumbai runs on only 1/7th the spectrum of London?

The GSMA’s info graphic on five different ways to measure Indian subscribers (see below) has sparked some interesting debates in the social media. Here are the five distinct measures put forward:

  1. Population covered by a mobile network, which according to Bharti Airtel’s reported network coverage, is 87%, or 1.1bn people.
  2. Addressable population, i.e the number of people in India who could use a mobile, which the GSMA (GSM Association) estimates as 819m by excluding all juveniles aged below 14
  3. Registered mobile connections, i.e the number of SIMs, not individual users, that are recorded on operators’ systems, and estimated to be 886m.
  4. Unique mobile subscribers, i.e how many individual people use a mobile, not total SIMs (since there may be multiple per person, and embedded SIMs in machines), which the GSMA believes is 405m
  5. Active mobile connections, which states the number of connections, estimated to be 762m, who have used their connection at least once in the past 30-90 days.

subscriber

I have a few thoughts on this:

  • It would be more valuable to show “active mobile subscribers” as opposed to active mobile connections.
  • The GSMA should also consider total mobile connections, including machine-embedded SIMs (ie not just SIMs in mobiles, tablets and PCs) as in future embedded SIMs will likely grow rapidly in India through M2M technologies.
  • Define “addressable population” as people who could use a mobile who are also covered by a network – so that the addressable total rises as network coverage does – the GSMA’s current definition only counts people above 14 as “addressable”, counting them as addressable even if they are not covered by any network
  • The GSMA’s unique mobile subscriber estimate of 405m looks low, though it is fiendishly difficult to estimate how many SIM cards an individual has. I would have thought the number be closer to 500-550m all-in-all, a thought-provoking graphic way to show how there are so many ways to measure the same thing – each measure being useful from a unique perspective.  Thanks to @benedictevans for hosting some interesting commentary.

Any thoughts?

I recently commented on how we should expect fewer takeovers as a result of the Government’s policy that any operator acquiring another must pay the difference between administrative prices paid in the past for spectrum and the latest auction-determined price.  Whilst this is likely to be the case, there is another way to look at it.

Let’s recap what the Government regulation in respect to spectrum valuation means. Any operator being taken over will already have a quantum of spectrum that has been allocated to it by the Government. Such spectrum could have been allocated in the era when spectrum was allocated through prices which were determined by the DoT, or through auction subsequently. The era of administratively allocated spectrum licences ended in 2008, the last year when spectrum was allocated through administratively determined prices.

The Government regulation now stipulates that post merger, the merged entity will be entitled to hold only one block of 4.4 MHz of spectrum in the GSM band or 2.5 MHz in the CDMA band for the entry fee the companies have paid prior to auction of spectrum in 2012 onwards.  For the remainder of any administratively allocated spectrum, the acquirer should pay the government the differential between the auctioned-determined spectrum price and administrative-allotted spectrum price, on a pro rata basis for the remaining period of validity of the license.

This regulation seeks to achieve a degree of fairness in spectrum allocation in the market, by ensuring that anybody acquiring spectrum today should do so at rates others have paid, and not benefit unduly from advantages carried over from a previous era when licence allocation had not been undertaken with market demand for spectrum moderating prices.  The Government cannot intervene directly to demand all carriers pay up the difference now, since their use of spectrum is already sanctioned through agreement, but in the case of M&A the opportunity arises to stipulate a condition for the transaction.

Given that the recent auctions resulted in an 84% premium paid for 900
MHz spectrum, and 29% premium for 1800 MHz, post M&A top-up payments could be substantial.  This regulation may indeed “dampen” interest in M&A as a result, introducing a higher payment burden on the part of the acquirer, and in turn greater valuation pressure and more funding requirements.

But, and this is my point today, that may not be an altogether bad thing.  Transactions may be fewer, but they should be higher quality deals which lead to more sustainable outcomes for the parties concerned, attracting more committed investors, who are ready to commit funds, people and expertise for longer-term return, driving more innovation and a more compelling and sustainable customer proposition.   Indian telecom has seen a few operators come and go in recent years, and whatever transactions take place in future should be encouraged to be more robust commercially.  Fundamentally, the regulation aims to introduce a greater degree of fairness and thus attempts to right past wrongs.  This is consistent with how the regulatory authorities have acted in the past few months in general.

(Follow me on Twitter @mtchowdhury for updates on what’s happening in telecoms…plus the odd gripe from my following England and Bangladesh at World T20; I support two teams but still expect to lose)

indian_on_phone

(Image: Shutterstock)

We are on the move again.

From late 2012 through much of 2013 the number of subscribers in Indian telecoms remained below levels that had reached earlier.  This was mainly due to a “subscriber clean up” stipulated by the regulatory authorities in late 2012, which obligated operators to disconnect all subscriptions which did not have sufficient “know your customer” details available (name, address, date of birth, etc).  As a result, tens of millions of connections were cut off, many of which were dormant accounts.

According to TRAI’s subscriber numbers released recently subscriber numbers stood at 893m in January 2014, representing a connections increase of 7m in the month from December 2013.  That is perhaps half the rate of additions three years ago, but it still means Indian telecom numbers are growing again, and the country has the highest connections growth rate (by number) in the world.  Four to five players are sharing the additions between them – these being Airtel, Vodafone, Idea, Aircel, Uninor and  Videocon.  A number are holding steady, and others are in decline.

There is one other interesting observation, which is that “active VLR” subscribers are as high as 773m, almost 90% of total reported subscribers.  These are subscribers who are registered on the network as active in the month, and therefore not dormant connections.  Before the regulatory clean up, this figure was well below 80%, indicating that the exercise has been successful.  Finally, we have subscriber numbers in India which are more consistently measured and not inflated compared to other countries.  Not only are we on top of the world, but the numbers are sans masala!

Follow me on Twitter for regular comment on what’s happening in the telecoms world @mtchowdhury.

 
 
Mohammad Chowdhury
Mohammad Chowdhury is PwC India's Telecom, Media and Technology Industry Leader and a member of the global executive team. He moved to India following senior roles in Vodafone, IBM and previously PwC where he started his career on the graduate scheme for economists. From London, Mohammad ran Vodafone Group strategy across emerging markets, and from Cairo served on Vodafone Egypt's executive team just before the Arab Spring. At IBM, he set up the corporation's first telecom solution centre in Bangalore, and at PwC directed the firm's account at the World Bank in Washington, D.C., and the firm's telecoms privatisation work in Eastern Europe, Middle East and Africa. Mohammad served as an adviser to telecom sector reform in Saudi Arabia, Zimbabwe, Ethiopia, Slovakia, Poland and Slovenia. He is quoted regularly by the Financial Times, Wall Street Journal, BBC, TV-18 and NDTV.

Mohammad has worked in 72 countries, lived in 7 and speaks 6 languages. He has a BA in Politics, Philosophy and Economics from Oxford University, an MPhil in Economics from Cambridge University, and strategy training from Harvard Business School. He was born in London, has family origins in Bangladesh, and is based in Mumbai. Mohammad is married with two sons.
 
 
 
Most Popular
Mohammad Chowdhury's Activity Feed
Vijay Ramnath Jayaraman
Vijay Ramnath Jayaraman
September 15, 2014 08:52 am by Vijay Ramnath Jayaraman
Interesting insight of Myanmmar's telecom industry.
September 05, 2014 11:15 am by Muppaprojects
The points which you have mentioned are true. Really India is growing fast in handset markets. We can observe many more changes in near future.
September 03, 2014 18:03 pm by Vivek Kumar
Fully agree with you Mohammad! We're trying to do just that at Qlicket (http://www.qlicket.com)! Would be great to discuss in further detail; please feel free to contact me at kumar@qlicket.com, hope to hear from you and many thanks.
September 03, 2014 17:42 pm by Mohammad
Thanks Sachin, look forward to seeing the services roll out!
September 03, 2014 17:41 pm by Mohammad
Indeed Vincent, wifi is a great way to manage as well as contain communications bills, and leave less open for "bill shock".