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

2G or not 2G? The Thirst for Indian Spectrum

In telecom there is a general belief that wireless spectral efficiency will keep increasing, but nowadays it seems we are always on the verge of a train crash. In India, the average mobile operator in Mumbai runs on 1/7th the spectrum available to an operator in London. And coming to our metros soon will be a world of multi-device connectedness, with buildings, cars and air-conditioners requiring M2M connectivity to tracking devices, mobile phones and GPS systems. So, the question is, will 1/7th be enough?

As the much awaited spectrum auctions approach, the conundrum of “2G or not 2G” begs an answer. Look out for three groups of players who will participate: the “licences cancelled” group, the “needs more capacity in metros” players, and the “India telecom market entrants”.

Operators who had licences cancelled will have to weigh up which local service area to repurchase spectrum rights in. This will be principally a function of the subscriber base the operator has, and where it sees the growth opportunity. Decisions will be tempered by affordability of spectrum, itself a function of access to debt or shareholder funding.

Capacity shortages will practically only apply to metros and therefore the question for this group will specifically be about their needs in Mumbai, Kolkata, Chennai or Delhi NCR. Granted, operators run their city networks on a relatively very economic use of 2G spectrum, but the real question is how much growth might they expect in voice and data traffic? Voice penetration has arguably close to peaked, with average metro mobile subscriber penetration well over 100% already in India. On the other hand, alot of the future growth expected in metros is in data, where the volumes could rise very quickly. Decisions will be made on the basis of how much 1800 MHz spectrum can do to solve the shortage: if the demand growth is in data, then 3G or LTE will be more useful in future, not 1800 MHz which has traditionally been more efficient for carrying voice.

Perhaps the most interesting question is whether new entrants will make a mark on the auctions. This is interesting because it will serve as a litmus test for India’s sustained appeal as an investment destination into an industry that has promised value to investors over the last decade. Capturing new value appears to be more challenging now than before, but on the other hand, opportunities in many other markets appear inferior. So even though India may be less attractive than it was a few years ago, new players may still be evaluating the opportunity to come in. Therefore expect any activity to come from players who are well established in their home markets but seek new growth, and are experienced enough to take on the challenge of building a business in a market full of surprises. And don’t discount the possibility of spectrum acquisition blended with M&A activity also.

Welcome to No Wires Attached: informed and pointed opinion on the world of telecom, plus the odd digression into other subjects, from time to time.

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"Decisions will be made on the basis of how much 1800 MHz spectrum can do to solve the shortage: if the demand growth is in data, then 3G or LTE will be more useful in future, not 1800 MHz which has traditionally been more efficient for carrying voice." Do you mean LTE at 1800 MHz will not serve any purpose or the Bandwidth offered in the auction is not sufficient. I think you intend to say that a lower band 700Mhz should be used for LTE!!
hi Satish - the issue is that the spectrum being offered at 1800 MHz may not be enough once data trafffic really takes off - Indian operators remain spectrum starved with an average of less than 10 MHz each in India, compared to well over 50 MHz in most countries! thanks for your comment.
Yes, you are right in the 1800MHz band the government will offer only 5MHz (as of now) and that will definitely not fuel data growth.
 
 
Mohammad Chowdhury
Mohammad Chowdhury is a Telecom, Media and Technology Industry Partner at PwC India and a member of the global executive team. He moved to India in 2011 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 74 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 married with two sons. Mohammad will move from Mumbai to take up a new role in the PwC global network in 2015.
 
 
 
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October 18, 2012 14:30 pm by Satish P
Yes, you are right in the 1800MHz band the government will offer only 5MHz (as of now) and that will definitely not fuel data growth.
October 17, 2012 16:56 pm by Mohammad
hi Satish - the issue is that the spectrum being offered at 1800 MHz may not be enough once data trafffic really takes off - Indian operators remain spectrum starved with an average of less than 10 MHz each in India, compared to well over 50 MHz in most countries! thanks for your comment.
October 17, 2012 16:33 pm by Satish P
"Decisions will be made on the basis of how much 1800 MHz spectrum can do to solve the shortage: if the demand growth is in data, then 3G or LTE will be more useful in future, not 1800 MHz which has traditionally been more efficient for carrying voice." Do you mean LTE at 1800 MHz will not serve ...