3G auctions slated on April 9

DoT to issue NIA for prospective bidders on Thrusday

Bhaskar

New Delhi: The government has announced to hold the 3G spectrum auctions on April 9. The Notice Inviting Applications from prospective bidders will be issued tomorrow. The last date for receiving applications from bidders is on March 19. The government will hold mock auctions on April 5 and 6. Two days after the 3G auctions are held, the government will start the auction for Broadband Wireless Access (BWA) or WiMax spectrum.

© Time

Telecom babus have no official mail IDs

WPC employees do more paper work as they do not have official email IDs

Bhaskar Hazarika

New Delhi: India might move to the faster wireless broadband once the government decides to auction the WiMax and 3G spectrum, but the employees of Wirless Planning and Coordination (WPC), wing under the ministry of Communications and IT responsible for spectrum management, are yet to be connected with an official email address.

An official in the ministry of communications and IT told Financial Chronicle that apart from the Wireless advisor and five to six deputy wireless advisors, the majority workforce of 500 people does not own an official email address. “When the country is moving to the next generation technology and we are talking about broadband wireless access spectrum and high speed data on 3G, the authority responsible for frequency management does not have access to email. The employee grade above only the deputy wireless advisor has access to an official email,” he said.The government is planning to conduct the auctions for the 3G and WiMax spectrum by the end of this year.

WPC is the national radio regulatory authority responsible for frequency spectrum management, including licensing and caters to the needs of all wireless users in the country. The government before allocation of spectrum consults WPC on spectrum issues. On the recommendations of WPC, spectrum is allotted to operators depending upon the availability. The Department of Telecom has also allotted official email addresses to officials only above the rank of assistant advisor and assistant director. With India moving ahead to implement next generation technologies, the authority is yet to implement it in their respective departments. “For the government employees email is treated as a perk and not a facility. You are allotted email addresses after an official is promoted to a certain level,” said the communications ministry official.

But other government ministries such as finance and petroleum have allotted official email addresses to employees. An official in the finance ministry said, “Employees are allotted official email addresses but most of them prefer to use their personal emails. We have access to official email.”

© Financial Chronicle

Zain deal could generate free cash flow of $11 billion for Bharti

Analysts suggest Zain deal high priced

Sanjeev Sharma & Bhaskar Hazarika

New Delhi: Telecom major Bharti Airtel’s $10.7 billion proposed transaction to buyout Kuwait-based telecom company Zain’s African assets could generate free cash flow of $11 billion in five years. Morgan Stanley report states, “The consolidated entity would address 1.5 billion population with over 164 million subscribers, with Ebitda 26 per cent higher than Bharti standalone, growing at 11 per cent per year (financial year 2010-2012E).

Analysts say that Bharti would be able to de-leverage itself in a couple of years. The report says the consolidated entity’s cash flows would be $13 billion in five years.

Bharti in an official statement said, “The total agreed enterprise valuation of $10.7 billion is likely to result in a total payout of around $9.00 billion (which includes any loans payable by the operating companies to Zain Group) based on the estimated net debt of approximately $1.7 billion as on December 31, 2009. It has been agreed that a sum of $ 700 million out of the total payable amount would be paid after one year from closing.”

Just after Bharti and Zain announced payment milestones, Econet Wireless, which holds 5 per cent stake in Zain’s Celtel Nigeria BV unit, has clearly opposed the deal, citing first right of refusal over the Nigeria operations. Official statement from Econet said, “It is currently pursuing arbitration proceedings against Celtel (now Zain) and others to challenge the transaction. Under the terms of the original VNL shareholders agreement, Econet had a right of first refusal over the stake, a right, which was denied in 2006. Econet made an application for interim measures to prohibit Celtel (now Zain), from selling, transferring, disposing of, dealing with or otherwise encumbering the disputed stake until such time as the Arbitral Tribunal has published its final award.”

According to Macquarie report, “The valuations look very expensive, in our view, even assuming no debt is being acquired by Bharti. This is a loss-making business at the PAT level, even while it makes an Ebitda margin of 31.4 per cent with average blended ARPU of $6.2. Bharti may be banking on significant improvements in capital expenditure efficiencies and better financing terms for this business, but quick comparisons with MTN suggest that this business is significantly inferior in terms of profitability, operating metrics and growth outlook.”

Bharti stock has fallen almost 14 per cent in the last two days.

Talking about regulatory hurdles Morgan Stanley states, “We suspect some licenses in Africa will face change of control reviews, but we do not see this as a major stumbling block for a potential deal. We are waiting on clarity on the Kuwait Investment Authority – a 24 per cent shareholder – position on the deal though in the past it has been supportive of such a transaction.”


© Financial Chronicle

Telcos EBITDA margins to fall further by 5 to 10 per cent: Analyst

Outlook grim as tariff war rages, 3G delayed

Bhaskar Hazarika


Competitive pricing is likely to result in muted top line growth for telecom operators over the next four to six quarters. With per-second billing being launched by telcos, analysts foresee a further decline in average revenue per minute (ARPM), which has been a constant challenge for the industry. Analysts estimate that the revenues of telcos are likely to be stagnant and the earnings before income tax depreciation and amortisation (Ebitda) margins would fall further by 5 to 10 per cent.

According to a Fitch Ratings report, incumbent operators with stronger balance sheets and comfortable liquidity profiles would be stable, while the outlook for new entrants and public sector telecom operators is negative. “The revision in the outlook from 2009 is primarily due to stiff competition and a faster-than-expected decline in tariffs, which has had an impact on revenue and profitability. However, the credit profiles of all operators are subject to the event risk of 3G and broadband wireless access (BWA) auctions,” the report says.

3G auctions and the implementation of mobile number portability (MNP) will be key themes in 2010.

Entry of new players in the telecom space saw the introduction of aggressive tariff plans from September 2009, forcing incumbents to introduce per-second billing plan. Analysts expect competitive pressure to continue in 2010, impacting revenue growth and putting pressure on Ebitda margins.

Director of telecom of KPMG Romal Shetty said 2010 would be one of the more difficult years for telecom operators and a positive year for customers. He said that there would be further correction in tariffs that are likely to come down further.

“Ebitda margins will go down by 5 to 10 per cent. Revenues for operators may remain stagnant. In the short term, it will be a difficult market but there is huge growth potential in the long term. Tariffs of high-end services such as international roaming, value- added services and data services are likely to come down further,” he said.

He said this year, some consolidation in this sector is likely. However, the mergers and acquisitions would be purely based on spectrum acquisition. “Due to the delay in the auction of 3G spectrum, some consolidation is likely to happen. We could see telecom biggies looking at smaller players for mergers. Thirteen telecom operators is a large number. Ideally, it should be six to eight operators,” Shetty said.

The increase in voice minutes is not proportionate to the decline in tariffs, putting margins under pressure. Shetty said that to combat falling Ebitda margins, operators would soon look at a change in the revenue contribution from voice and data segments. He said that once data revenues increase to 20 to 25 per cent, the revenues would start showing positive overall growth.

Principal analyst of Gartner Kamlesh Bhatia said, “Hyper competition on tariffs would have a pressure on both top line, as well as bottom line for operators. We see this is a difficult year for the telcos because tariffs have already reached the bottom, but there could be some corrections. Declining tariffs are eroding the margins of telcos and operators are going to have a competitive year ahead.”

Executive vice-president of Telenor group and head of Asia region Sigve Brekke said that going forward, if low tariffs are to continue, margins for operators would be under pressure. “It has always been a challenge for operators as the average revenue per user (ARPU) have been witnessing a steady decline. Operators offer low tariffs and are successful in increasing the minutes of usage, as such the pressure on margins could be rectified. However, the industry is likely to see such fluctuations in the future before the sector witnesses any consolidation,” Brekke said.

Price-led competition intensified in the third quarter 2009-10, with major operators cutting tariffs aggressively during the quarter (switching to per- second billing from the previous per-minute system). Consequently, ARPM declined at a faster pace of 5 per cent 6 per cent quarter-on-quarter in 2009. Voice ARPM declined from Rs 0.75-0.85 in the first quarter of financial year 2008 to Rs 0.45-0.55 in second quarter of financial year 2010. Fitch expects ARPM to continue to decline in 2010 due to the addition of mainly lower-end incremental subscribers and expected further pricing pressures due to the entry of new greenfield operators. However, the rate of decline will be lower than in 2009 due to growing data revenues.

Fitch states that capital expenditure, as a percentage of revenue remained high in financial year 2009-10 for private telcos (an average of 55 per cent), on the back of increased network coverage in smaller cities.

Capital expenditure for financial year 2010 is expected to be lower, however for financial year 2011, it will be higher for the 3G licence auction winners, assuming the 3G licence fees and its subsequent rollout in financial year 2011 is implemented. The free cash flow (FCF) of major private telcos has remained negative since inception due to higher capital expenditure and financing costs, and this trend is likely to continue, except for Bharti Airtel, which is expected to generate mildly positive FCF in financial year 2010 and financial year 2011, excluding the 3G licensing outlays.

According to a Macquarie report, the ongoing tariff war is likely to cap any meaningful re-rating of Indian telecom stocks in the next six to nine months. “Recent tariff actions are likely to result in muted top line growth for next four to six quarters for the Indian wireless operators. In addition to the slowdown in top line, intense competition leaves little cost cushion — hurting the margins of these players,” the report said.

However, mobile number portability is considered only a modest risk, and revenue from 3G services is not likely to be significant in 2010.

This is due to the fact that the Indian wireless market is already predominantly pre-paid and has a high annual churn rate of 40 to 48 per cent. Increased retention costs would mainly relate to the post-paid segment, which only accounts for around 5 per cent of overall subscribers in India.


© Financial Chronicle

Quick Preview: Tariff war scars to show in top lines of telecom firms Q3

Strong traffic growth may help companies post moderate growth

Bhaskar Hazarika & Sanjeev Sharma

Incumbent telecom companies are likely to witness moderate growth in revenues supported by strong traffic in the third quarter. Analysts have forecast a trend reversal in minutes of usage for incumbent operators while a slight appreciation in rupee will support their performance at the PAT (profit after tax) level.

The Citigroup report said, "Bharti and Rcom should benefit from a slightly appreciating rupee. In Rcom's case, depreciation charges will be higher quarter-onquarter as GSM capex gets capitalised and the second quarter had the adjustment of depreciation change."

With the entry of new players into the telecom space, the industry saw fragmentation in minutes of usage of incumbent operators. More telecom players in each circle and introduction of one-paise per-second billing have resulted in stiff competition, putting lot of pressure on margins.

"We forecast wireless revenues for GSM incumbents (Bharti and Idea) to grow 1 per cent to 3 per cent quarter-on-quarter aided by strong traffic growth. The encouraging traffic trend is also likely to limit EBITDA margin pressures, which will mean the overall EBITDA will remain flat," said the report. The report forecasts a drop in estimated revenue per minute for pure GSM operators. "The decline for Idea could be more compared with Bharti given aggressive tariff cuts, especially in new circles.

Rcom's revenue per minute decline is also likely to get impacted due to tariff cuts announced at the beginning of the quarter," the report stated. KPMG executive director Jaydeep Ghosh said the payper-use tariff is likely to have an impact on the top line for incumbent operators in the third quarter. He said competitive packages offered by the telcos are a matter of concern. "We see a healthy trend in the minutes of usage. However, for new operators we see a challenge in the uptake of subscribers.

For incumbents, there will be a challenge in maintaining the revenue and top line," Ghosh said.

An Angel Securities report says, "Bharti Airtel, Rcom and Idea Cellular are likely report subdued top line growth to the tune of 3 per cent year-on-year and 1.4 per cent quarter-onquarter during the third quarter. We expect Bharti Airtel to report 3.4 per cent YoY in net revenues. Rcom is expected to clock 0.5 per cent YoY de-growth in net revenues.

© Financial Chronicle

NY Special: What if India leapfrogs to 4G?

Bhaskar Hazarika

New Delhi: India has already missed the bus to launch third-generation (3G) mobile services in the country. But this could be a blessing in disguise for the mobile operators if India leapfrogs to fourth-generation (4G). According to industry experts, Indian operators can move forward to 4G without rolling out 3G services. This could be another instance when India’s neighbour Pakistan is planning to leapfrog to 4G services.

Globally number of countries is testing 4G on the network after implementing 3G on the network. However, for India we are yet to log on to the third-generation services. Leapfrogging to 4G would prove to be a technology advantage for operators, since the 4G technology is 10 times spectral efficient compared to 3G. The 3G frequency bands identified by the ministry of communications and IT are compatible to roll out 4G services.

Joint secretary, department of telecom (DoT), JS Deepak said, “4G frequency bands or Long Term Evolution (LTE) is under consideration with DoT and Wireless Planning and Coordination (WPC). The ministry is carrying out a study on the 700 MHz frequency band if it could be used for WiMax or fourth generation (4G) services.” It should be noted that the government has taken a ‘technology neutral stand’ on the spectrum to be allocated for 3G services. This could be the first initiative from the government to open a window towards the 4G space.

Long Term Evolution (LTE) version 10, which is considered to be 4G, is being designed and will be available by the end of 2010. The present day LTE under implementation is considered as 3.9G. Since the spectrum for 3G will be available for private telecom operators by August 2010, it would be the right move for India to go for 4G, as the equipments for 4G will be available by the end of 2010. Union minister for communications and IT, Andimuthu Raja clearly stated, “Allotment of spectrum to maintain level playing field will be allotted to the successful bidders by August 2010.”

According to telecom expert and former advisor of Telecom Regulatory Authority of India (TRAI), Satyen N Gupta India should leapfrog to 4G and skip 3G, as there has been delay in the auction of spectrum. Gupta said that time is ripe for India to directly move to 4G. “Government and the regulator should be technologically agnostic while allocating spectrum. There should be no mandate that the proposed 3G spectrum should be used only to roll out 3G services. The operators should be given freedom to offer either 3G or 4G services,” Gupta said.

He said that the existing 3G frequency bands, which the government is planning to auction is compatible to offer 4G services. All the 3G frequency bands, which are under International Mobile Telecommunications (IMT), can be used for 4G. The Indian government has identified frequency bands in the 1.9 GHz to 2.1 GHz for auction.

Chief corporate affairs officer, Idea Cellular, Rajat Mukarji said that moving to 4G is a desirable direction… Yes, 3G can be leapfrogged. “We have been talking about 3G for more than 3 years and may be it has lost its meaning. Moving to 4G is a logical direction. We talk about mobile broadband but we should know that it is critical for the country. From the existing 2.5G to 4G is a quantum jump, but on thing that should be noted that it will be expensive to roll out 3G services at this point,” he added.

According to ABI research, the total number of 4G subscribers worldwide, including both LTE and WiMAX, is expected to exceed 90 million in 2013.

What is 4G?

4G technology is sometimes referred as ‘MAGIC,’ --- Mobile multimedia, Anytime-anywhere, Global mobility support, Integrated wireless and Customized personal service.

4G has three major characteristics: The download speed is 100 megabytes per second; It is based on internet protocol technology; Ubiquity as it is interoperable with the lower generation technologies. The distinctive quality of 4G networks is likely to use a combination of WiMAX and WiFi. The International Telecommunications Union (ITU) and The Institute of Electrical and Electronics Engineers (IEEE) have identified that 4G will have data download speed of 100-mega bit per second and it is completely based on IP technology.

© Financial Chronicle

Unbranded Chinese handset may be wiped out

30 new handset makers beeline in to India

New Delhi, Dec 27 2009

Bhaskar Hazarika

Unbranded Chinese handset likely to face death with the Indian mobile market flooded with more than 30 new handset makers. With 506 million subscribers in the country, the market is attracting entry of new players in the segment. In the present financial year, the market saw the entry of 25 new players.

The Indian handset industry shipped around 130 million units in 2009 and the numbers are likely to escalate to 150 million in 2010. According to industry estimates, the mobile handset market is pegged at Rs 35,000 crore in 2010.

Unlike the dominant handset makers such as Nokia, Samsung, Sony Ericsson and LG, the segment is witnessing entry of new handset brands, which are available at much cheaper costs with added features.

President of Indian Cellular Association, Pankaj Mohindroo said the growth in the mobile subscriber base has attracted the entry of new players in to the market. “There is a lot of space for entry of new players, which will ensure fair competition in it. Compared with the past couple of years the prices of handsets have come down reasonably. The average price of a handset has come down to Rs 2,300 from Rs 5,500 before,” he said.

Mohindroo said that the entry of affordable handsets in the market will hurt the grey market, which is flooded with unbranded Chinese brands. He said that availability of legal IMEI number on these brands is likely to have an impact on the unbranded handsets.

The new entrants into this space include Micromax, Lava Mobiles, Karbonn, Mobell, Videocon, Movil and also some known brands such as Usha, Salora, Onida and Orpat. According to market estimates, the new players have managed to attain 15 per cent market share.

Shashin Devsare, executive director of Jaina Group of Karbonn Mobiles, said, “We are competing in the GSM space, which is 8.5 to 10 million units per month. Affordable multimedia solution and features for subscribers is our business model. We are primarily targeting the tier II and III towns, where we see the next phase of growth.”

TV maker Salora has tied up with a Singapore-based mobile phone manufacturer, Mobell, to market its handsets in the country. Vice chairman and managing director of Salora, Gopal Jiwarajka, is of the view that the handset market will be robust for the next five to 10 years. “We are positioning our product for entry level and the replacement market, targeting the new subscriber base, who is a first time user. Usually the lifecycle of a handset is estimated to be around 18 months and there is a huge percentage of subscribers in the handset replacement category,” he added.

Managing director of LG Electronics, Moon B Shin, said there is space for new layers in the handset space. “The market is not saturated in this space. We have 6 per cent market share and are targeting 10 per cent next year. The market will witness entry of players and the ones that meet customer requirements will stand the competition,” he said.

© Financial Chronicle

Stay on 10-digit mobile number, 'ENUM' the solution

E-numbering can help avoid 11-digit regime

Bhaskar Hazarika

New Delhi, December 23: India can adopt telephone number mapping to avoid migrating from 10-digit mobile number to an 11-digit number. The ever-increasing number of fresh subscribers every month has exhausted the allotment of new serial mobile numbers available with the department of telecom (DoT), forcing the industry to seek migration to the 11-digit solution.

The national numbering plan 2003 was formulated to meet the growing mobile subscriber base in the country. The 10-digit numbering pattern was projected to meet the industry growth figures for the next 50 years. However, the 10-digit number series has already got exhausted in six years.

The ENUM or electronic numbering is a technology adopted by some of the mobile-rich countries to meet the growing requirement of the mobile industry. The ENUM technology is being adopted by Malaysia and the UK to meet the increasing number of telecom subscribers.

Telephone number mapping is the process through which the telephone network (public-switched telephone network) is unified with the Internet address using the Internet protocol (IP). This technology will be similar to the model available in Internet connectivity whereby each Internet connection has a unique IP address.

According to telecom expert Satyen N Gupta, “The problem of a single universal personal identifier for multiple communication services can be resolved using this technology. Once adopted, the numbering pattern will not require migrating from 10 to 11 digit or more despite surge in the mobile subscriber base.”

A senior DoT official told Financial Chronicle, “So-me countries where there is unprecedented growth in mobile (subscribers) are adopting new technology to meet the number crunch. We are aware of ENUM or telephone number mapping, but have not taken up the project.”At present, technology companies such as Telcordia Technologies and Neustar Inc are offering the number mapping.

When contacted, secretary general of Association of Unified Service Providers of India (Auspi), S C Khanna said, “There are technologies that could be adopted to meet the growing demand but migration to 11 digit is an easier route. With more than 8 to 9 operators in a single circle and a couple of new operators likely to launch services, we need to meet the crunch.”

© Financial Chronicle

Multiple SIM usage to impact top line margin for telcos

Bhaskar Hazarika & Sanjeev Sharma

New Delhi, December 20: The increasing usage of multiple SIMs will have an adverse impact on the revenue of operators in the long-term. With dual and three SIM phenomenon there will be a fragmentation in the minutes of usage on the operators.

According to a Macquarie report, “Subscribers take-up activity is becoming increasingly irrelevant, with dual and three SIM phenomenon increasingly visible. Minutes of usage fragmentation across multiple SIMs from different operators will pressure telcos top line.”

According to data from the Cellular Operators Association of India, GSM operators (excluding GSM SIMs for the two large CDMA operators Reliance Communications and Tata DoCoMo) added 11.1 million SIMs in November. In October the GSM operators added 10.3 million SIMs, 8.6 million in September, 9.3 million in August.

President of Indian Cellular Association, Pankaj Mohindroo said that there has been significant increase in the number of multiple SIM usage among the subscribers. “According to industry estimates the dual SIM card handset users in the market is around 25 million. If you take in to account the Delhi circle there are 25 million subscribers compared to the total population of 17 million. This clearly states that the number of SIM cards has surpassed the total population,” he said.

Chief corporate affair officer of Idea Cellular, Rajat Mukherji told Financial Chronicle that multiple SIM usage is witnessed predominantly in the circles where the tele-density is relatively higher. “The premium markets are witnessing the growth of multiple SIMs. However, there is a clear distinction between the voice and the non-voice segment. When an individual uses two SIM cards, he makes clear distinction in his usage pattern --- one for voice usage and the other for data, vas services,” he said.

Mukherji added that a lot of BlackBerry subscribers have their second phone, which is used primarily for calling. “Since the tariffs are already low for almost all the operators, we do not see any tariff arbitrage in this case. This is an industry wide phenomenon, which all the operators are likely to face,” he added.

Emails sent across to Vodafone, Bharti Airtel and Aircel did not elicit any response.

With cloud of uncertainty hovering over the mobile number portability (MNP), the consumer is left with no other option than to get an additional SIM card for his use. It may be noted that the existing SIM card continues to be under usage, only to retain the number. Mobile number portability was earlier slated to be launched on December 31, but has been deferred by three months. The operators have expressed their inability to launch the service stating that the implementation of the service is not complete.

© Financial Chronicle

Foreign telcos ask Trai to fix bandwidth price

New Delhi, Dec 18 2009

Bhaskar Hazarika

Global long-distance carriers BT, AT&T and Cable & Wireless have sought the intervention of Telecom Regulatory Authority of India (Trai) to create a wholesale bandwidth-pricing regime to regulate “the higher bandwidth prices in the country.”

These global operators petitioned the telecom regulator, arguing that a wholesale pricing regime would cut down bandwidth cost for the end-consumer. Apart from these global long distance carriers, Indian operators like Sify, Spectranet, and RailTel, too are in the bandwidth retail business.

There are nine submarine cable networks that offer the bandwidth to long distance carriers here. Tata Communications (formerly know as Videsh Sanchar Nigam) owns five submarine cables, Bharti has two, Reliance Communications one and the consortium of Bharti and Reliance owns another network. Long distance carriers like BT, AT&T buy bulk of bandwidth from these wholesale vendors and further retail it to end-consumers.

A senior Trai official, who did not wish to be identified, told Financial Chronicle that the global carriers had written to the regulator to set up a wholesale pricing regime. “At present, we have a retail pricing on bandwidth but there is no regulation on the wholesale pricing. The regulator is looking at the recommendations made by the carriers on the wholesale pricing,” he added. He said the “bandwidth prices in India today was $5-9 million per 10 gigabytes compared to $1.5-1.7 million in other countries in Asia.”

An email sent to Tata Communications went unanswered.Commenting on the need for a wholesale pricing regime, former Trai advisor, S N Gupta, said, “Once the regulation on the wholesale pricing is done, service-based competition will increase leading to a cut in prices. Asked if the entry of new vendors would ease the pricing, he said entry of new players would not bring competition in this space but would only increase the capacity.

Asia’s privately-owned submarine cable network, Pacnet, is another player, which is setting up a submarine cable network in India under the West Asia Crossing (WAC) project. With the entry of the new player, there will be 10 cable networks in the country.

© Financial Chronicle

Bangla Regulator sees no issues with Bharti bid

New Delhi, Dec 18 2009

Bhaskar Hazarika

The Bangladesh Telecommunication Regulatory Commission sees no legal barrier to Bharti Airtel picking up 70 per cent in Warid Telecom.

The commission secretary, Mahboob Ahmed, in an email communication to Financial Chronicle said, “According to the provisions of the Bangladesh Telecommunication Act, there is no legal bar on transferring shares of the company with the prior permission from the commission.”

Bharti has reportedly made a $300 million bid for a 70 per cent stake in Bangladesh’s Warid Telecom. This is the Indian company’s second bid to buy up a foreign telecom operator, after a failed attempt for a merger deal with South Africa’s MTN. Over four months of ‘exclusive talks’ and two extensions, the proposed $24 billion Bharti-MTN deal foundered on regulatory hurdles.

The Bangladesh regulator has sought details from Warid on the proposed stake sale to Bharti. The regulator is also likely to meet Bharti and Warid officials.

“We have asked for some information and documents relating to the sale. The commission will examine these will take a decision. The commission is expecting a meeting with Warid and Bharti officials as early as possible,” Ahmed said.

The commission’s move comes after the Dhabi group, which fully owns Warid, sought approval for going ahead with the deal.

A Bharti spokesperson said on Wednesday, “We have nothing more to comment on it.”

In 2008 Japan’s NTT DoCoMo paid $350 million to pick up 30 per cent in another Bangladesh operator, AKTEL, majority owned by Axiata of Malaysia.

Warid is the fourth largest among Bangladesh’s six telecom operators with 2.79 million subscribers at the end of October, when the total mobile subscriber base in the country was 51.4 million. The largest operator is the Grameen Phone with 22.30 million subscribers, followed by Orascom Telecom (12.27 million) and Axiata (10.99 million). The other two operators are PBTL and Teletalk.

© Financial Chronicle

Mobile customers shying away from post-paid

Only 3 per cent of the subscriber base is in post-paid

Bhaskar Hazarika

New Delhi, Dec 16 2009

India is set to cross 500-million mobile phone users by the end of the year. But just about 3 per cent are still logged onto the post-paid story. This means a mere 15 million consumers actually pay regularly on a monthly basis for their connection. The rest, a staggering 485 million, are literally free birds who charge their phones with denominations they deem fit.

This explains the steep fall during the past five years in postpaid connections. The prepaid subscriber base has grown from 84 per cent five years ago to more than 97 per cent today. Majority of the 15 million existing postpaid connections fall in a particular socio-economic category that pre-supposes a mid to high-income level segment.

The 15 million figure is an interesting pointer to the actual size of the Indian middle income groups, especially viewed in context of the fact that India as of today has close to 35 million income tax payers (as on March 31, 2009), 10.2 million Demat account holders and 12 million registered passenger vehicles.

The shift from post-paid to prepaid has an explanation. T R Dua, director general of Cellular Operators Association of India, in an email communication, told Financial Chronicle, “There has been an increase in prepaid subscriber base as the service providers are increasingly expanding to the rural areas and are acquiring more and more subscribers from the bottom of the pyramid.”

He predicted the migration trend to continue arguing, “Prepaid would continue to be the preferred choice, as it is economical and enables the rural subscribers to control their costs. Prepaid also enables service providers to reduce their bad debts.” Easy availability and accessibility of prepaid mobile cards was also encouraging migration from the postpaid model to prepaid.

An analysis of the latest subscriber data suggests that the decline in the postpaid subscriber base is also evident from the fact that more and more new subscriber additions are in the prepaid segment.

Telecom operator Bharti Airtel has a prepaid customer base of 95.2 per cent as on quarter ended September 2009. The prepaid subscriber base for the company increased from 92.9 per cent in September 2008. At Reliance Communications, for the quarter ended September 2009 the prepaid subscriber base stood at 94.4 per cent. For that quarter the net subscriber additions in the prepaid was 99.2 per cent.

“In the past five years, the telecom subscriber pattern has witnessed a paradigm shift from postpaid to prepaid regime due to the competitive tariffs and innovative offers by operators, making universal rates for prepaid and postpaid,” director (telecom) of KPMG, Romal Shetty said. He added that the Indian telecom market, which started with a dominant postpaid subscriber base, is eventually witnessing the phenomenal growth of the prepaid category.

“Earlier prepaid call rates were higher compared with postpaid. However, as the market is maturing, the call rates have gone cheaper making it equivalent to post paid. There are three major reasons why the prepaid model is picking up in India-- quick availability, easy documentation and fast activation of service. At present, only a small per cent of the corporate employees are on the postpaid platform,” Shetty said.

©Financial Chronicle

Telecom Success: Dummy handset market a promising story

New Delhi, Dec 14 2009

Bhaskar Hazarika

Nothing succeeds like success! Even dummies! With India set to cross over 500 million mobile phones by the end of the year, there is a growing market here for dummy hand set manufacturers. OSM Global, a global dummy handset major, has already logged onto the telecom success story in India.

Industry estimates say that for each mobile handset model launched in the market, dummy handset makers manufacture anything from 20,000 to 1.5 lakh units per model depending upon the popularity of the model. At present, all dummy handset models are imported into the country.

India’s top three-handset manufacturers — Nokia, Samsung and LG — each launch close to 50 new models every year. The dummy handset market is currently dominated by OSM Global, which set up shop in India a couple of years ago. The company has patents for its dummy handset models. Headquartered in Sweden, the company has its R&D centre in Europe and a manufacturing base in China.

A senior executive from OSM Global, who did not wish to be identified, told Financial Chronicle that the company manufactures dummy for most of the major handset brands in the country. He said with the growth of handsets in the country, dummy handset was a “substantial business”. “We work hand-in-hand with many of the handset makers globally to give the dummy a real touch and feel experience for customers,” he said.

There are three types of dummy phones available in the market today. The hollow dummy with the casing and a fixed screen shot; the touch and feel and the latest one is the interactive dummy. The interactive dummy is similar to the handset with music, LCD panel and audio-video features. The cost of each dummy handset ranges from $5 to $15 per model.

“With more and more feature-rich phones launched, the interactive dummies are prevalent. Depending upon the type and target of customers, we manufacture the dummy. On an average each mobile retail store has five units of dummy per model,” he said.

Essar’s Mobile Store has around 1,300 outlets, Spice group’s Hotspot has 600 stores while Nokia has a presence in 1.9 lakh stores.

© Financial Chronicle

GlobalLogic to restructure biz, plans IPO in 2011

Dec 10 2009, New Delhi

Bhaskar Hazarika

Global offshore product development company, Gl obalLogic India, is re-working its India business plan. It has decided to reorganise its addressable eight business segments into two clear business segments. The company is also planning to go for an IPO in the next 18 months to drive its expansion in the country.

Shashank Samant, president of GlobalLogic, said, “In order to boost our business, we have reorganised the business, making distinct business segments. We see that the focus will strongly reflect in our business performance. The company has reorganised telecom, mobile and embedded into one category and consumer enterprise in the other.”

“The reogranisation wo uld help us strongly focus on the verticals. At present, 55-60 per cent of our business contribution comes from telecom, mobile and embedded category and 40-45 per cent from consumer and enterprise category. The cellphone space is witnessing a massive growth in the country and we are looking at creating applications for Indian consumers,” Samant said.

During the financial year 2008-09, the turnover of the company stood at $90 million. Samant said the market for product development is growing at compounded annual growth revenue (CAGR) of 40-45 per cent.

Samant said the company is also eyeing acquisitions in the product development space given the low valuations. “We will be looking at companies where there are synergies in the domain and technology verticals,” Sam ant added. The company is also looking at expanding markets in eastern Europe and Latin America.

He said in the next five years the revenue distribution globally is likely to change. “At present, the US contributes around 80 per cent which is likely to become 65-70 per cent in five years. Contribution from India is likely to grow as India is growing to be a market in itself,” he added. Israel and India together contributes around 12 per cent now.

© Financial Chronicle

Vices of Apple iPhone 3G

9 other reasons not to buy iPhone

Bhaskar Hazarika

New Delhi, Aug 21 2008

Forget the hype over iPhone. On a reality check, here are nine other reasons why it may not be worth buying.

1) Some who have used the contraband iPhone say it is too delicate and not user friendly.

2) Has only a two-megapixel camera without flash or zoom. Cheaper options have better cameras

3) SIM card is locked with Airtel or Vodafone for life. You are stuck with it even if their services are unsatisfactory.

4) India is still on 2G, and the handset sold is 3G. So data download on internet will be at a dead pace.

5) Touch-screen can be problematic if you are a messaging maniac. Mind you, there is only a virtual keyboard which is difficult to use.

6) Doesn’t allow “bluejacking”. So no downloading of songs “bluetoothed” from other handsets. Bluetooth links work only with other iPhones.

7) Apple forgot to include the cut- and- paste application. Wonder how it skipped this feature.

8) For all MMS practitioners, iPhone is a no go. It will not allow you to have this pleasure.

9) Battery replacement is a pain. You have to send it over to an Apple service centre for to get it replaced.

© Financial Chronicle

No signal for fake IMEI mobiles

New Delhi, Nov 30 2009

Bhaskar Hazarika

As you read this, it is probably a good idea to check if your cellphone is working if it is a handset without the international mobile equipment identity (IMEI) number.

If it is not – and the chances are high – you can draw comfort from over 17 million other cellphone users in India whose handsets do not have the number, unique to each instrument.

A last-minute effort by mobile operators to get a November 30 midnight deadline extended failed, with the government directing them to de-activate all handsets without the number.

A department of telecommunications official told Financial Chronicle late on Monday night that the government was sticking to its decision and all such handsets must be disconnected by midnight.

The IMEI is a 15-digit unique code embedded in each handset by its manufacturer. It identifies each instrument when a call is made with or received by it.

Most of the cheap Chinese handsets sold in the grey market do not have the IMEI number. Many even have a fake number in which all the 15 digits are ‘0’.

T R Dua, director- general of the Cellular Operators’ Association of India (COAI) said earlier in the evening, “We have sought an extension but not received any communication from DoT. We need more time to get our subscribers with handsets that did not have the number to get it.”

An executive at one operator, who did not want to be named, said his company had already told its customers about the disconnection.

Telecom companies have identified such customers and been sending out SMSs and/or making calls to calls to them. They have been advised to visit designated outlets to get the IMEI number embedded on their phones. It costs just Rs 199 to get the number embedded in a handset. A connection can be restored only after a handset receives the number.

In partnership with its members, COAI, a GSM operators’ lobby, is operating 1,600 outlets across India for the purpose. “The drive is on. About 20 subscribers are turning up everyday to embed the number,” Dua said, describing the response as positive.

But the fact is the operators’ response was too little, too late. Their main effort was to push the deadline as far as they could. Dot had first directed them to bar these handsets by June 30 but came under pressure and extended the deadline till November 30. In September, DoT sent a reminder.

At 20 IMEI hansets embedded a day, it is anybody’s guess when all the over 17 million handsets will get the unique number.

© Financial Chronicle