Emerging markets: Mobile market review – India 2008
India represents a land of opportunity for operators. However, the challenges of such a vast and varied market are daunting. Find next an interesting mobile market review of India made by Informa and some additional KPIs coming from us.
Best regards
CVA
India is growing at a staggering rate. It is the second most populous country in the world and is expected – if current growth trends continue – to overtake China before the middle of this century. And it is a youthful country; of the estimated 1.14 billion people living in India at present, some 40 per cent are under 15 years of age and 54 per cent are under 24. The median age is 25. The economy is diverse, though characterised at the moment by a booming services sector, boosted in no small part by the ranks of firms from ‘developed’ markets taking advantage of the cost savings associated with outsourcing and off-shoring certain of their operations to the subcontinent.
The economic strength of India and Indians is undoubtedly on an upward curve, although ARPU is low by Western standards, ranging from $4.60-$8.90 per month according to Informa Telecoms & Media’s World Cellular Information Service. Falling ARPU figures in India, are compensated by surging growth though. Penetration has more than doubled since June 2006 and stood at 21.67 per cent in March this year. With 242 million mobile phone subscribers nationwide there is plenty more scope for growth.
A licence is required to operate in each of the 19 Telecom Circle Service and four Metro Service Areas, known collectively as “circles” in India. This has resulted in a fragmented cellular landscape with carriers offering a mix of GSM and CDMA services. There are currently 13 mobile operators of varying sizes in India. Eleven are shown in table 1, the 12th and 13th are CDMA carriers called Rainbow (Shyam Telelink) which has 57,600 subscribers in the Rajasthan circle and Connect (HFCL Infotel) which has 204,300 subscribers in the Punjab circle – both have plans to roll out nationwide GSM networks.
Informa currently lists a further six planned or potential networks: Agrani Telecom; ByCell; Datacom; S Tel; Swan and Unitech. However, the new, smaller entrants are going to find it hard to compete with larger national players.
In order to avoid the existing players simply acquiring the new entrants, the Department of Telecommunications (DOT) has tightened the merger rules. “The DOT has brought in new M&A regulations, the most controversial of which lowers the market share of subscriptions and revenues that a merged entity can hold in a given circle, from 67 per cent to just 40 per cent,” says Tony Brown Informa Telecoms&Media editor AsiaCom. The DOT also announced that it will not allow new Unified Access Services Licence holders to merge with existing operators until they have been operating for three years.
Further complicating matters, the scenario for 3G licensing has yet to fully unfold. The issue of 3G has been on India’s drawing board since July 2004, and the debate continues concerning a licensing framework and the likely timing of licence awards. However, the 3G auction could take place by year-end, according to an Indian regulatory source. The DOT is believed to be planning to hold the first of two 3G spectrum auctions by year-end, with the second to be held in March. Reports say that, most likely, a maximum of three operators will be awarded spectrum in most circles, in the first round. Also, government-owned operators BSNL and MTNL will reportedly be awarded 3G spectrum without having to take part in the auction.
“The auction’s timing depends on whether the military returns the required 60MHz of spectrum at 2.1GHz to the DOT on time. The military may release some spectrum earlier which would allow a ‘partial’ auction of whatever spectrum is available with a second auction to follow once the military returns the balance of the spectrum. Though the military cannot return the 3G spectrum until the DOT finishes the fibre-optic network which the military will use instead. The DOT must also finalise its stance on whether foreign players can partake in an open 3G auction. In its draft 3G regulations, issued in March, the DOT ignored recommendations from the TRAI and proposed allowing domestic and foreign operators to bid for spectrum,” says Informa.
But the TRAI remains vehemently opposed to an open auction, saying that the involvement of international players would jeopardise investments made by existing mobile operators. “In our recommendations of 2006, TRAI said to the government to please ensure that existing licensees get 3G spectrum only,” the TRAI source said. “TRAI believes that eight, nine or even 10 operators per circle is enough competition.” In May, the TRAI demanded that the Finance Ministry drop its calls for the auction to be opened up to international bidders. The ministry was hoping the inclusion of international bidders would increase spectrum revenues.
“The DOT and TRAI are at loggerheads over whether new operators (especially foreign operators) should be allowed to bid for 3G spectrum,” says Brown. “This is a crucial question but looks like being settled in favour of the DOT quite soon although it might require the intervention of the Prime Minister’s Office.”
Mirroring developments in other, much more saturated markets, voice revenues are falling fast, which has caused operators to start to push data services at a relatively early point in the penetration growth curve. While the scenario for 3G licensing remains undecided, mobile data is likely to continue to be driven by non-3G applications such as ringtones ringback tones and SMS.
The content market in India has vast potential. However, there are issues that look likely to stifle the development of the premium value added services (VAS) segment of the market.
Mobile operators stand accused of being high-handed and offering little by way of support to content providers. This, say the content providers, is stifling the growth of the industry. For their part, the mobile operators in India have stated that although they want to support the VAS segment, they have to be sure about the quality of the content, as well as the revenue-generating potential.
There is further disquiet in the market linked to the revenue that operators are willing to share with third party content providers. Which, for those in the West, will make familiar reading. Of the total VAS industry – including operator revenue – consumer revenue and including ringback tones VAS providers receive not more than 12.5 per cent according to Informa Telecoms&Media.
The usual mobile entertainment suspects – music, gaming and TV – are slowly building a presence in India. Indeed, Indian consumers purchased more mobile than physical music in the first three months of 2007 and will buy almost nine times more mobile music than any other format by 2009, according to the International Federation of the Phonographic Industry and Internet and Mobile Association of India.
With internet penetration low there is a good chance that for many Indians their first taste of life on the web will be via a mobile phone. In markets such as this, mobile social networking has proved popular. However, the costs to the majority of consumers are prohibitive and until 3G networks and handsets are fully rolled out, the user experience is likely to be uninspiring. But with plenty of headroom for growth, operators still have more than enough to play for in what, one day, could well be the largest mobile market on the planet.
Interesting note regarding MOU increase in Bharti:
Indian operator Bharti Airtel increased its minutes of use (MOU) in the quarter ending March 2008 by 9.3% compared with the previous quarter. In 1Q08 Bharti’s average blended Minutes of Use was 507, up from 474 in 4Q07.
In November 2007 Bharti introduced a Super Lifetime Prepaid offer, which meant that a new user could have an outgoing tariff of INR1 (US$0.02) per minute for life by paying INR999 (US$23). This simple plan helped to declutter the multitude of different tariff options and encouraged users to speak more, raising MOU.
The cheap tariffs offered in India already mean the country has MOU levels approximately twice those in neighbouring Pakistan and Bangladesh, according to Informa Telecoms & Media’s WCIS.
Carlos Valdecantos
November 18, 2008 at 7:41 AM
[...] Canny play fro DoCoMo, which I believe will come off, purely as Reliance & Airtel are spending so much time competing, whilst also trying to stave off Vodafone Essar. Further information on the Indian mobile market can be read here at Consultant Value Added [...]
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December 14, 2008 at 7:28 PM
UPDATE 04/01/2009
Just seen an interesting report coming fron Cygnus. It complements this post with additional KPIs analyzing performance of Indian Telecom companies as well as some industry analysis.
To get the report, click on the following link: http://www.scribd.com/doc/4523220/India-Telecom-Report
Carlos Valdecantos
January 4, 2009 at 8:31 PM
UPDATE 25/01/2009
Interesting update comming from the indian operators in January 2009.
Top Indian telecom service providers are likely to report robust revenue growth in the third quarter ended Dec. 31, bolstered by strong subscriber additions.
Yet, lower usage by subscribers due to the economic downturn and falling average revenue per user, or ARPU, and call rates are likely to take some sheen off the sector’s growth.
Analysts say with increasing competition leading to a continued fall in tariffs, minutes of usage will become a key parameter to assess a company’s health rather than ARPU.
COMPANIES TO WATCH:
Bharti Airtel Ltd. – reporting 22 Jan
Market Expectations: India’s largest mobile phone company by number of users is likely to report a net profit of INR21.66 billion, up 26% from INR17.22 billion a year earlier, on revenue of INR96.16 billion, up 38% from INR69.46 billion, according to the average of estimates of 16 analysts polled by Dow Jones Newswires.
In the second quarter ended Sept. 30, it reported net profit of INR20.46 billion and revenue of INR90.20 billion.
Key Issues: ARPU is likely to fall to INR321, from INR331 in the previous quarter, brokerage Prabudas Lilladher said.
The earnings before interest, tax, depreciation and amortization margin is likely to expand by 50 basis points, helped by lower expenditure, despite advertising and subsidy costs on the newly launched direct-to-home business.
Reliance Communications Ltd. – reporting 23 Jan
Market Expectations: India’s second-largest mobile phone service provider by subscribers is likely to post a net profit of INR13.96 billion, up 1.7% from INR13.73 billion a year earlier, according to the average of estimates of 16 analysts polled by Dow Jones Newswires. Revenue is likely to rise 22% to INR59.56 billion from INR48.74 billion.
The Anil Dhirubai Ambani Group company posted net profit of INR15.31 billion on revenue of INR56.35 billion in the previous quarter.
Key Issues: Brokerage Motilal Oswal expects profit to fall sequentially due to interest costs of INR1.65 billion, compared with a marginal interest income in the second quarter.
The ebitda margin is expected to contract by 290 basis points from a year earlier, and 40 basis points sequentially, dragged by the launch of mobile services under the global system for mobile communications technology, says brokerage Motilal Oswal.
The brokerage expects the company’s ARPU to drop about 3% to INR263 from the second quarter.
Idea Cellular Ltd. – reporting 22 Jan
Market Expectations: The average of estimates of 14 analysts polled by Dow Jones Newswires is for net profit to fall 23% to INR1.82 billion from INR2.37 billion a year earlier. Revenue is likely to rise 52% to INR25.98 billion from INR17.10 billion a year earlier.
The company reported net profit of INR1.44 billion and revenue of INR23.04 billion in the previous quarter.
Key Issues: The October-December period will be the first quarter when Idea will consolidate Spice Communications Ltd.’s numbers with itself, leading to a sharp rise in revenue.
In June last year, Idea said it will buy a 40.8% stake in smaller rival Spice for about INR21.76 billion and then merge Spice with itself via a share swap.
Losses in the recently launched Mumbai and Bihar circles will hurt the company’s profitability, a Bank of America Merrill Lynch note said.
The company’s aggressive rollouts will weigh on the operating margin, with Motilal Oswal forecasting a margin decline of 730 basis points from a year earlier, and 30 basis points from the previous quarter to 25.9%. It expects ARPU to fall 2% sequentially.
Carlos Valdecantos
January 25, 2009 at 11:51 AM
Indian Mobile operators and Handset market :
By and large the operators are happy because they have end user stick to them all time,but at the same time now the market is changing drastically into application oriented user in mobile technology as a result it is no more the operator dominating market if operator will not change their mentality and if not working on user’s parameter. I mean user at this point of time is more or less techno savy and feel good to work in own controlled and easy way to do the things taking all safety and security measure in top priority.The top most issue is the customer education and further critical is the acceptance level of end user.That’s the reason that retail is going to be stronger for long term Plan.
Retail Issues:
A physical distribution strategy -it is the basic need in any product or service in Indian market. We can not ignore the fact that the display and penetration to market with maximum reach is the golden rule to up any product or service.That’s the reason any service operator is pushing hard to minds of customer takes time to click.for any Vas service distribution using bluetooth, USB drives or memory cards would end up being more expensive (because of logistic etc), and more difficult to manage in terms of having a customize pattern.Further Indian market is purely in Prepaid module means they spend it when they need it.further any service has its own limitation inters of user and uses means a person has many desired work at different time frame and different location and also the needs are some how in different pattern in different geographic region. A beauty is that India is as diversified in user’s pattern as its culture.
Point-of-purchase issues:
End user often have inadequate point-of-purchase to get desired service which is also need to take in consideration in both way i mean to have good education to dealers and fare knowledge to customer about product/service.Now the handset market has got the idea of what is the meaning of Value in the context of end user to compel them to buy new handset.India is a country which has now got maturity in terms of customer’s buying behavior they are no more facinated to buy any new product/service unless untill it is primarily required.It means retail point is to be intelligent enough to handle the situation.
Retailer Margins:
Days are gone when retailers were happy to get good margin in their sale with number of product/service sale. Now it seems that you have to work hard to get business in all front and has to be all time busy to get business from all front means product/sevice.further as it is the service oriented market with prepaid module customer will come to you like they use to go to ATM machine to Money as and when required.Further the most of the end user is intelligent to work out the monthly budget and among them high numbers are hate to invest again and again in some work which is not all time required or without that they can survive.People prolonged the matter till it is not badly required.It is the real challenge for any service to come to that level to get real test in Indian market.typical example is the lifetime pre-paid segment they buy coupon to call as and when required with lowest denomination are for the Rs. 10/5 recharge card. Interestingly, the retailer makes a margin of only Rs. 0.05.but this is the hard fact which retailer has to understand and has to work on it with looking high volume churn out in a day.Now further retail has to have multi product Shop related to their customer base of that locality, say for example retailer may have to keep other items like consumer electronics,digital items,garmets etc.
Vas Content sale Issues:
Purchase of content in a sachet format will allow the consumers the freedom to buy content,and retailer will have high volume and good number of footfall in a day as it has hampered.
Broadly, it needs to change mentality of entire Telecom domain company to work together to surve the end user for their cause not for the object of the company.That is why it is said the it the buyer’s market not the seller’s.Thanks, Aune Ahmad Asad
auneasad
January 31, 2009 at 12:37 PM
VAS Market and it’s future:
As telecom density is growing exponentially in global platform.The country which has got maturity in Voice such as Japan, Korea etc has the good platform for Vas application especially in Data uses.
Vas market can be divided into three segment.
Matured Market:This is the market which has the 100% mobile connectivity and the Telecom infrastructure in such country is at par with user more receptive in new technology.The market has huge potential for any new technology which has real time value for end user.
Immatured market:This is the market which accelerating at very high speed in terms of new user and further it has two categories of user 1.Mobile as Voice call 2. Mobile as a voice and data.All developing country are more or less in this phase.Interesting is that this market has very good potential for Vas as it is of very big size and the people are bit techno savy.
Nascent Market:This is the market where Voice is predominant,but interesting thing is that here is also there is good scope for any vas to service a premium service as Rich people are very rich and can easily afford it.
Assuming these all it seems the company which has full bucket of Vas service will have bright future for longer run.Thanks,
Aune Ahmad Asad
auneasad
February 4, 2009 at 3:06 PM
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March 10, 2009 at 6:09 AM
‘With Workforce Mobility There Is Greater Need For IAM(Individual activity management)’
Background:
The world is moving fast into business scope globally. We have limited reaction time for any opportunity.Information sharing has become revolutionary in all aspect irrespective where you are and what you are doing.
Technology:Broadband has made revolution into information sharing in P.C world.As time changes mobile internet has become the most convenient medium to do the information sharing,it is the only reason that Blackberry e-mail is so popular, but it is not enough as this give you limited exposure if I’ll talk in terms of file sharing while you are in move.Mobiflexi E-mail solution gives you a complete environment to do all activity over phone like you do in p.c irrespective of where you are across the globe as it gives you interface with you p.c.
Security:
The most worried part is the security of information part which is also considered as it has secured environment as per the windows credentials.
Scope: This is the high time for such application for any enterprises as we know business hours are limited in global platform and time management is the bigger challenge for any enterprise,It is the flexibility and on move solution that will help organisation to resolve such concern.
Future:
Mobile is the only tool that will be always with you for all activity to be meet in due course of time.The Mobile Internet is going to be killing solution for all individual globally.
Thanks, ASAD
auneasad
April 2, 2009 at 12:52 PM
Update 12th June 2009:
India ends May with 306.5 mln mobile subscribers
India ended May with 306.45 million mobile subscribers, up from 298.153 million in April, according to figures from from the industry association COAI. Bharti Airtel remained market leader with a market share of 32.48 percent and 99.55 subscribers, up from 96.735 million in April. Vodafone Essar saw its subscriber base rise to 74.08 million, versus 71.542 million a month earlier, and its market share was 24.17 percent. BSNL ended May with 48.18 million customers, up from 47.724 million, and its market share was 15.72 percent. Idea was in fourth place with 45.48 million subscribers and a market share of 14.84 percent, while Aircel ended the month with 20.69 million customers and a market share of 6.75 percent. Reliance Telecom had 11.97 million customers, up from 11.965 million, and a market share of 3.90 percent, and MTNL grew its subscriber base to 4.26 million from 4.222 million in April. Loop Mobile, which operates only in Mumbai, saw its subscriber base reach 2.26 million, up from 2.20 million in April.
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