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India - busier and busier 3G or not

The telecoms market seems rather quiet at present - with the exception of India. This review by Michael Schwartz looks at recent developments in this massive market and tries to identify some of the major current trends. 

Developing Telecoms has recently looked at the slow (some would say almost non-existent) arrival of 3G in major Indian centres such as New Delhi and Mumbai as well as the attempts by MTNL to inject overseas capital into making 3G worthwhile in India. 

If the lack of success in New Delhi and Mumbai is surprising, then what is even more surprising is 3G’s success in a much more remote area of India: Rajasthan and Uttar Pradesh are hosts to the largest 3G user base in North India.  

BSNL launched 3G in 12 Indian locations, believing that Rajasthan would boast the largest number of subscribers: Uttar Pradesh has emerged as India’s largest 3G market. To date, approximately 13,000 subscribers have signed up for 3G with BSNL nationally. In  northern India the figures are: Uttar Pradesh 2,181 subscribers, Rajasthan 1,675, Punjab 1,154 - and Jammu & Kashmir 14.   

The company’s local marketing manager, Anupam Srivastava, is himself surprised that Uttar Pradesh has overtaken Rajasthan which, in his opinion, enjoyed a distinct advantage over other 3G markets: services which were meant primarily for the upwardly mobile urban classes have been adopted by more remote areas. The business model of capital cities first, other major cities second and if you get anything from the other areas, well, that’s a bonus, has been well and truly challenged.   

Of course, India has yet to embrace 3G fully, whichever part of the country or whichever supplier. Marketing is not infallible. If the services on offer spark no desire to purchase them, then the exercise is futile, even if senior executives try to pretend otherwise.

Over-Reliance in the Indian market?

3G’s lack of success is perhaps uncharacteristic in the context of modern Indian telecommunications since, for the most part, the Indian trend is one of achievement. Telecoms is punching well above its weight - and is being respected and appreciated for it. Indeed, this year’s Brand Equity survey conducted by the Economic Times proclaimed Reliance Mobile “India’s most trusted service brand.”  

Reliance, despite the climate of recession, posted an 8% rise in year-on-year profit for the quarter to end-June 2009. The bottom line profit read US$345 million over US$318 million for 2008. EBITDA stood at US$517 million, up 9.0%. Revenue as a whole rose 15% (US$1.29 billion over US$1.12 billion).  

As well as the purely profitable activities of Reliance, the company entered long-term partnerships with Etisalat. This will mean US$2.1 billion of enhanced revenue by sharing end-to-end tower and transmission infrastructure. Fifteen “circles” will be covered by the partnership, ie, 85% of India’s population and over 90% of her revenue and subscribers.  

Etisalat will benefit from faster roll-out and a less intensive demand on its assets: much of the capex can be converted to opex. Both enterprises may benefit in the near future from other sharing agreements.  

On a more basic note, Reliance (and its rivals) have to operate in areas of poverty and remoteness. A pioneering JV called KRIBHCO Reliance Kisan, will use some 25,000 co-operative and 6,300 member co-operatives to reach 72% of India’s population. The JV will be extended to promote non-telecom products and services. In all, there will be access to GSM, CDMA, DTH, and Reliance Capital and Entertainment. 

JVs are not new to Reliance. Last year an Reliance and Alcatel Lucent JV commenced operations. The last year has since witnessed a deal worth US$75 million, while reducing operational costs by 20-25%. Scope of the JV (GSM & CDMA) is 22 circles, 20,000 towns, 500,000 villages and over 80 million customers. It is believed to be first for multi-technology managed services in India. 

Gartner believes fixed-line market will blossom

Unpopular or not in modern terms, fixed-line is set to grow in India by 22% over the next four years. This optimistic forecast has been issued by IT researcher Gartner. In all, it will be a sector worth US$5 billion driven by broadband and Internet success. In terms of Compound Annual Growth Rate (CAGR) the growth will be 2.6%.

Again according to Gartner, the consumer fixed line subscriber base will remain at 37 million connections by 2013, while the broadband subscriber base is expected to increase by a CAGR of 26% to reach 16 million subscribers during the same period. India’s voice market will contract through 2013 (from 91% last year to 77% in 2013) as the number of consumer fixed lines will continue to fall slightly, mostly because pressure from mobile substitution will persist.

In turn, revenue from broadband services will contribute dominantly  to the overall growth of fixed line services in India, with a CAGR of 25% from 2008 to 2013. What Gartner believes will happen is that fixed broadband will be a centre of focus for operators after 2013; broadband will overtake dial-up as primary access technology by end-2012.  

India heads DTH subscribers in Asia-Pacific

Other areas of activity in India have their own successes to report. Tata Sky’s Direct-To-The-Home pay-TV subscriptions are the highest in Asia-Pacific, remarkable for a service which has been in service for less than three years. So far four million subscriptions have been registered with Tata Sky. In a development which has led to one in three of the subscriptions joining up in the last seven months, Tata Sky says it has “revolutionised” TV viewing for Indian audiences. 

Platform for Tata Sky is NDS, itself the largest supplier of solutions to DTH platforms in the region. The platform is protected and powered by an end-to-end NDS solutions suite including VideoGuard Conditional Access System (CAS), MediaHighway middleware, and an advanced electronic programme guide (EPG), as well as XTV technology for Digital Video Recorder (DVR) which allows subscribers to pause, record, play back, rewind and fast forward their TV programmes. 

In addition, the range of multi-level interactive games provided by NDS has proven popular with subscribers, who are making independent choices. The NDS portfolio enables Tata Sky to deliver advanced applications including Active Sports, Cooking, Darshan, Wizkids, Learning, Stories, Games and movies on demand, and is the basis for a viewing experience “unsurpassed” in the rapidly expanding Indian pay-TV market. NDS commercial and development facilities in New Delhi, Mumbai and Bangalore all play a role in supporting Tata Sky.

Provide relevant choice - and this is a combination of a large range of products as well as the products themselves - and your income rises... 

And if you are still undecided...

If you do have a spare US$411 you can purchase the India Telecom Directory 2009 from Research and Markets. Correct to the end of June this year, the directory sums up India’s progress to date: a telecoms database second only to China and ahead of the USA, 14-15 million telephone connections every month, 430 million connections to end-March 2009, and enough telecom companies (over 500) to fill the three volumes of Research and Markets’ directory. 

As might be expected, the authors believe they are helping “anybody looking out for vital information about the players in the telecom industry...and to serve as a one-stop solution...:” Whatever the views of the authors, their statistical findings confirm the sheer volume at present of Indian telecoms and the even greater volume to come.

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