Archive for June, 2009
Mobile numbers with "8" as first digit
The Department of Telecommunications (DoT) is expected to permit mobile telecom operators to roll out new mobile numbers with ‘8’ as the first digit. The move has been necessitated following a huge spurt in the mobile subscriber base and having used up all mobile numbers beginning with ‘9’.
India’s cellular subscriber base has been growing substantially in the last two years, which led to the exhaustion of the existing sublevels of 9. According to the Telecom Regulatory Authority of India (TRAI), India had 415 million cellular subscribers at the end of May 2009, compared to 277 million a year ago.
With the huge surge, DoT had asked telecom players to vacate the 95 level from the landline space for use by mobile operators. This move is expected to make place for 10 crore new numbers, of which DoT will retain 50% as space capacity.
Revenue + ARPU + Penetration of Wireless Companies
We did an analysis on how Telcos will expand and serve in the near future. Out study suggests that South India has relatively low penetration and above average ARPUs, and represents the best opportunity for near-term growth for telcos in the near term. This helps explain why several new entrants [Tata DoCoMo, Aircel etc] have chosen to initially expand operations from the South.
Bharti Airtel relies heavily on the South, with three states accounting for 32% of company revenues. These circles will likely see the greatest incremental competition in the near term.
The following Graph [Click to Enlarge] shows the distribution of ARPUs Vs Penetration across all circles in India.
Despite new entrants, the top two operators in each circle in terms of revenue and market share have remained fairly constant over the past two years, with leaders widening the gap. We believe this is largely because initial entrants typically get the cream of the population in each circle. The implementation of mobile number portability could cause churn to increase in this high-value base, which is the biggest risk to the current market leaders.
3G Auction Bidding Hints ?
Based on revenue potential and ARPUs, we expect the metros and southern circles to see the highest interest from bidders in the upcoming 3G auction, followed by Punjab, Maharashtra and Gujarat.
DoT contemplates separating license + spectrum
The Department of telecommunications (DoT) is contemplating to separate the issue of spectrum from license, a move that can help develop a suitable long term policy for the 2G spectrum allocation. DoT came under heavy criticism last year after it issued 2G licenses to a number of new entrants at the same prices that were charged from the now established telecom companies years ago.
As a result, the telecom ministry has been looking for ways to develop a sustainable policy for 2G spectrum allocation. The proposal to separate spectrum from license is a step in this very direction. What it means is that the companies may first have to apply for a telecom licences and then bid for spectrum once they get the license.
Currently, DoT bundles 2G spectrum along with the telecom license, which for a pan-Indian India presence costs Rs 1,651 crore. While the GSM services licence comes bundled with 4.4 MHz of start-up spectrum, a CDMA operator would get 2.2 MHz of the spectrum. Additional spectrum is given to telcos once their subscriber base has reached a critical minimum level.
However, the government has been criticised of this kind of setup and has been advised to follow the international best practice of auctioning the spectrum to discover true price of the scarce resource. Once the government separates the license from the spectrum, it can award new licences and then hold an auction for spectrum. While it will ensure more transparency, revenue of the government will also increase. The DoT has written to the telecom regulatory of authority of India (TRAI) in this regard and sought the opinion of the regulator on separating the license and spectrum.
Reliance MobiTV service for GSM users
Telecom services major Reliance Communications (RCom) will launch 35 television channels for its GSM consumers in the near future. The company will introduce MobiTV service by using Mimobi – a technological platform developed by Apalya Technologies.
For playing video, Mimobi technology uses progressive download technique that initially downloads some part of video and later starts playing the same. RCom is in advanced talks with Apalya Technologies to increase its width of the usage.
Presently RCom offers 13 news and other TV channels to its CDMA users by using real-time streaming technology.
DoT postpones 2G spectrum allocation till 3G policy is finalised
In a development that is likely to hit telecommunications companies, the Department of Telecommunications (DoT) is understood to have decided to postpone any decision on grant of second generation (2G) spectrum or radio frequency till a final decision on the 3G spectrum allocation is arrived at.
A meeting between the communications minister A Raja and finance minister Pranab Mukherjee on Tuesday ended without a consensus being arrived at and the key issues in the auction of 3G spectrum like the base price and number of players to be accommodated in every circle remain unresolved.
The reason for postponing the 2G auction is that the spectrum panel that was constituted earlier to make suggestions on process of allocating 2G spectrum has recommended that in its report submitted last month that the spectrum should be allocated through internationally accepted auction system. Also, it recommended that the pricing of the spectrum should be market dictated and the base price can be linked with the 3G auction base price.
In this case, it becomes difficult for the DoT to go ahead with any spectrum allocation till the 3G policy is finalised. Also, the telecom ministry, after severe criticism of its 2G spectrum allocation in the previous term of the UPA government, is looking to avoid any further criticism and wants to be clear on the policy front first. However, the development may hit operations of the telcos as additional spectrum is necessary for players to continue providing good quality services to additional subscribers. Although more subscribers can be served with existing spectrum, it takes much more capital expenditure and latest technology to do so and despite that there would be some upper limit to which subscribers can be added with given amount of spectrum.
The move will not only hit existing large players which are waiting for additional spectrum, but also the smaller players and new entrants like Datacom, Unitech and Swan Telecom etc which are awaiting start-up spectrum in many circles.
GSM Subscriber Net Adds Decline in May
GSM operators reported 8.7m (est.) net-adds in May vs. 9.4m in April; our May estimate assumes RCOM added 0.4m subs (same as in April) in its existing GSM (RTL) circles. Decline in overall net-adds was driven by BSNL (net-adds down by 0.6m; 56% mom) and Vodafone (0.2m; 35%). Idea’s net-adds recovered to 1.30m from 1.15m in April (+13%), while Bharti and Aircel reported stable net-adds.
Bharti Airtel’s 2.81m net-adds in May were unchanged vs. Mar and Apr, despite the entry of Idea, Aircel and Sistema-Shyam in some of the circles. We note that higher net-adds could be a potential source of surprise, as Bharti’s monthly net-adds continue to be significantly higher than our FY10 forecast of 2.3m. At the current run rate of 2.8m per month, Bharti’s total sub base would exceed our end-FY10 forecast by 5%.
Idea Cellulars net adds in May improved to 1.3m, after a sharp fall in April to 1.15m (from 1.5m in March) on the back of recovery in two large circles -UP (East) and Bihar. Its net-adds in these circles were under pressure due to competition from new entrants -RCOM (GSM) and Vodafone, respectively. However, Idea’s subscriber base in Delhi declined for a second straight month by 31K (48K in Apr), likely because of entry of Aircel (The latter added ~100K subscribers in both the months). Idea entered the Tamilnadu circle in the last week of May
Vodafone India net-adds continue to slide after hitting a peak of 2.86m in March. Over the last 10 months, VOD has expanded its footprint to 23 circles (pan India) from 16.
3G Spectrum to Get Pricey + More Players
The tussle between the Department of Telecommunications (DoT) and the finance ministry on pricing of the third generation (3G) spectrum may result in both the ministries taking a middle path.
According to the 3G policy released by the DoT prior to the elections, the reserve price for pan-India 3G spectrum was set at Rs 2,020 crore and a maximum of five players were to be accommodated per circle. However, the finance ministry had objected to both the price of spectrum and number of players to be accommodated.
The finance ministry, at that time, wanted DoT to double the reserve price for 3G auction and accommodate 10 players in each circle. The proposals of finance ministry were aimed at raising the revenue from the auction. However, the issue could not be resolved then and the auction was postponed.
The DoT is now understood to be agreeing for a middle approach and is likely to convey to the Union Cabinet that it was ready to hike the reserve price of spectrum to Rs 3,540 crore and auction up to eight slots of 3G spectrum in each circle. This stance of DoT would be kind of a compromise position between its earlier stand and that of finance ministry and the Cabinet may therefore approve the same.
The finance ministry may not also push the issue further as some of the concerns raised by the finance ministry have been addressed by changing economic situation. The view of the finance ministry early in the year was that due to economic slowdown, enough number of players may not be available in the auction, resulting in poor pricing of the scarce spectrum. However, the economic recovery witnessed over last quarter or so and the robust performance of the telecom industry despite slowdown have to a large extent addressed concerns of finance ministry.
National Security – Rcom disables 36,000 connections in J&K
The Anil Ambani Group-led Reliance Communication has deactivated around 36,000 connections in Jammu and Kashmir (J&K) due to security threats. The company has started an internal probe into issuance of mobile connections on the basis of fake documents. In J&K , there are more than 20 lakh mobiles connections of BSNL, Airtel, Reliance, Aircel, Vodaphone and Tata Indicom.
The state crime branch has already raided premises of 11 major dealers of Reliance, Vodaphone and Aircel in Srinagar and seized records related to the mobile connections. Further, crime branch officials have also asked mobile companies to conduct internal probes into SIM records, in order to deactivate fake connections.
There over 500 to 600 SIM cards and mobiles connections have been recovered from slain militants and their supporters in the state during last three years according to the police officials. Following the dislcosure, the crime branch has communicated to mobile companies to strictly follow the security guidelines.