Archive for November, 2009
Top 4 Factors for Consolidation in Wireless Industry
We believe the following four factors are the drivers of consolidation in the Indian Wireless / Telecom industry.
- Ongoing Tariff War – We expect tariff pressures to continue. While we believe the price floor may not erode beyond 10%, we expect average prices to decline c25%, as the gap between prices of incumbents and new players will likely narrow.
- Spectrum and Scale – The total available spectrum in India is not aligned to a market structure of 11-12 players. We expect spectrum constraints to drive consolidation. Moreover, all new players have spectrum in the 1800MHz band, which seriously impairs their viability [High CAPEX] and scale even in the long term.
- Mobile Number Portability – The fact that the regulator has kept to timelines for the rollout indicates more rapid progress than we had estimated. This is negative for GSM incumbents as new players will make an attempt to target the post-paid subscribers and as a result, Incumbents will therefore have to bring down the premium
- Telecom Regulations – On one hand, the government seems intent on maximising proceeds from 3G spectrum auctions. It is unlikely that the government will make any regulatory changes required to facilitate consolidation until after the 3G auctions.
Tariff War leads to Highest Ever Monthly Net Adds
The ongoing Tariff war in the Indian Wireless industry has led to Wireless operators adding 16.6m new connections in Oct-09 vs. 14.8m in Sep, the highest ever in the History of Indian Cellular Services. The total mobile subscriber base now stands at a whopping 483 mn.
Tata Tele Services Ltd [Indicom / DoCoMo] TTSL reported 3.9m subs in Oct. vs. 4.0m in Sep. Excluding 0.5m netadds from two new GSM circles (Haryana, Kolkata), TTSL’s net-adds actually declined by 15% mom, indicating that price retaliation by rivals is showing results.
Review of Price Matching in Tariff War:
TTSL net-adds in AP/MP circles dipped by >20% mom; Vodafone was first to launch per second billing in MP, which also explains the 4x mom jump in its net-adds in the circle. Similarly, the 5x increase in Idea Cellular’s net-adds in AP is likely due to its 50p plan.
Simple Reliance Fails to Excite Customers:
Reliance Communications net-adds rose marginally to 2.1m from 2.0m in Sep, indicating no real gains from tariff cuts, as rivals were quick to react to 50p plan.
Bharti Airtel Bows Down and Starts Dropping Tariff:
Bharti Airtel recorded slower growth compared to its GSM peers – Idea, Vodafone and Aircel. Thus, as soon as the numbers were available, Airtel decided to drop Roaming charges yesterday.
Airtel Turbo Plan – Roaming Rates Slashed
Bharti Airtel appears to be under severe pressure to compete the new operators as well as the Mighty Reliance Mobile which is now being offered to customers on both GSM and CDMA Platform.
Bharti Airtel has announced the launch of new plan called Airtel Turbo – Reduced Roaming Rates. Airtel had introduced per second billing with a Gimmick but had kept roaming rates unchanged. Unable to sustain the heavy competition and dropping Roaming traffic, Airtel decided to Slash Roaming Rates by upto 60%. Here is how the new rates look like,
- Incoming Calls while Roaming – Rs 0.60 / min
- Local and STD to Airtel Mobile – Rs 0.60 /min
- Local and STD to Other Mobiles / Landline – Rs 0.80 / min
Airtel plans are still confusing with multiple Tariffs and Rip Offs. Simple Reliance so far is the best plan – Rs 0.50 connect and talk to any phone in any corner of India.
Average Call Duation 58 Seconds
Reliance Wireless President, Mahesh Prasad has revealed the magic number sought after by all the Telecom Analysts in India – The Average Call Duration – 58 Seconds.
Now this means Pay Per Second Billing will not be suitable as customer ends up paying Rs 0.60 / call instead of Rs 0.50 or lower tariffs available in the Indian market. Thus the one paisa per second tariff proves to be expensive compared to Simple Reliance or Other Lower Tariffs.
Their are very few customers who talk less than 25 seconds to whom this 1 Paisa / Second Billing is suitable. However, you’ve got to admire the product manager at Tata DoCoMo who designed this as it became the platform for the entire Telecom industry within 3 months and has helped Tata DoCoMo gain small market share, mainly from rival Bharti Airtel.
Forget 3G – EVDO [BSNL, Reliance, Tata] is the Way to Go
Time and Again, we have heard your voice that BSNL 3G service is expensive and we agree that it needs to be made more affordable. Until then, users seeking mobility in broadband to work from School or Home or SOHO, can rely on BSNL EVDO or Reliance NetConnect Broadband+ or Tata Photon+.
We recommend Reliance NetConnect Broadband+ or Tata Photon+ for users of Mumbai and Delhi or anybody who frequently visit those cities since you can avail of roaming Boradband access [Kindly confirm the Billing while roaming].
BSNL EVDO: BSNL’s EVDO is a great Wireless broadband Plan for users seeking mobility. The deal is great, especially in South India – Having taken the connection in Bangalore, we enjoy South India roaming and the cost is just Rs 650 [Unlimited Access, Speed varies by Signal Strength. Never got the advertised 1 Mbps, but 384Kbps to 768 Kbps is not bad at all].
Access – Access methodology of EVDO based broadband is using a USB stick / antenna. If you wish to purchase the USB stick it costs Rs 4,000 + taxes or if you lease it, it costs Rs 200 / month. [We recommend to lease it] You can install it on any Operating System. BSNL EVDO Drivers for Windows 2K SP4, XP, Vista or even Linux are available.
BSNL is using CDMA 1X Technology for providing EVDO based broadband services and is continuously expanding its BTS’.
Uninor Scales Back Rollout – New Operator Weakness Evident
The first signs of Weakness in new Operators is now evident that Uninor [ a JV of Telenor and Unitech Ltd] has confirmed that it will have a focused rollout in majority of 22 circles, while meeting license obligations in all circles. Uninor also said that India capex plans have been scaled down from Rs155 billion earlier to Rs 120-125 billion.
Uninor has just 12,000 base stations installed, much lower than the base stations required for nationwide launch.
This development is an indication of new operators feeling the heat due to tariff wars in Indian
telecom industry. We wait for more such signs especially foreign players’ bids for 3G spectrum – we believe that a quick consolidation would be positive for incumbents.
Explaining 126.97 Wireless Internet Subscribers
TRAI publishes report about the number of internet subscribers on different platforms. We were very surprised about the 126.97 Million Wireless Internet Subscribers number in this report [PDF]. Here is how TRAI explains the number,
The Wireless data subscribers of 126.97 million are those who are capable of accessing data services including Internet using their GSM/CDMA handsets and are accessing data services offered by their service providers. (Example : R-world provided by Reliance). Subscribers of Internet/Broadband using USB data Cards/PCMCIA cards are counted as Internet broadband customers, and service providers report them as under wireless broadband subscribers category.
So EVDO / WiMax and all other subscribers fall in the Internet broadband Subscribers Category which is still very small – 7.4 mn [Oct-2009].
Tariff cuts spur subscriber adds + Multiple SIM ownership
GSM mobile subscribers net adds were 10.3Mn in Oct-09 vs. 8.6MM in Sep-09 (excluding RCOM, Tata DoCoMo), up 20% M/M. The net add numbers saw broad-based increase with ~50% increase in net adds for Vodafone and Aircel (except BSNL that declined ~50%).
- Vodafone India net adds increased 51% to 3Mn, a sharp rise after decreasing for seven months in a row
- Bharti Airtel’s net adds in Oct were up 7% M/M at 2.7Mn (vs. 2.5Mn Sep-09) with the total subscriber base reaching 113+Mn.
- Aircel net adds at 2.0Mn increased 54%M/M from 1.3MM in Sep-09. The company has informed us that it has set 50 Million Customer Target by 2010.
- BSNL net adds decreased 54% M/M, as the company added 0.6Mn in Oct- 09 vs. 1.3Mn/1.4Mn in Sep-09/Aug-09.
- Idea Cellular net adds increased to 1.9Mn up 36% M/M; from 1.4MM in Sep-09
We expect RCOM to gain share from October with its new plan and net-adds for RCOM to move up.