One of the major concerns of operators with TRAI recommendations on 3G spectrum allocations is the Rs 1,400-crore base price that has been set for a PAN India license.

GSM players pointed out that recommendations were near identical to Tata group chairman Ratan Tata’s offer of a Rs 1,500-crore national licence fee for 3G spectrum.

The suggestion had got him into a war of words with Mittal, who did not want any upfront fee for 3G so that services could be affordable. Other major telecom players had also dissociated themselves from Tata’s opinion.

Sunil Mittal of Bharti-Airtel expressed disappointment.

“The Rs 1,400-crore base price is slightly above the Rs 300-400 crore we were expecting. For those interested in countrywide 3G licences, the reserve price is a serious disincentive. Especially, when it comes to rural penetration. We appeal to the DoT to review and seriously lower the threshold recommended,” Mittal said.

Vikram Mehmi of Idea Cellular said that India is not ready for relatively more expensive 3G type applications.

Tata Teleservices CEO Daryl Green welcomed the final draft paper.

“The recommendation on pricing and auction of spectrum clearly establishes that spectrum is recognised as a scarce resource and must be utilised efficiently.”

TRAI chairman Nripendra Misra allayed fears that players would bid exorbitantly and that this would derail the whole process as it did when the government had first invited bids 10 years back from private players for basic and cellular licences. Misra said telecom operators had matured from their experiences and global developments, and would bid sincerely.

Shubham Majumder, Telecom Analyst at Macquarie Securities says that the PAN India license fee is not being seen in context.

Q: Any concerns on the price that has been set, particularly for the PAN India license?

A: One good thing is that circle wise bidding and circle wise allocation of spectrum is allowed, contrary to some perceptions earlier that it will be a nationwide spectrum allocation. So that is good.

What one can essentially do now is bid for circles where they feel there is an uptake of 3G services. So essentially one will bid only for commercially viable circles. So one may end-up not bidding for a PAN India 3G spectrum at all.

Financial Express states that the CDMA operators will have an 8-9 month head start over GSM players and a significant price and technology advantage in rolling out 3G services from the day of acquiring frequency.

This is largely because CDMA players have been given the option to bid for 3G services on the 800 Mhz spectrum that they already use for their current services. GSM players, on the other hand, have been allocated only 2,100 Mhz spectrum for 3G, which requires them to install fresh equipment and new software.

Existing CDMA2000 base stations can be upgraded to support EvDO (evolution data optimised), or 3G, via a simple channel card upgrade. EvDO requires only moderate upgrade of the core network, according to a report by Signals Research Group, a third party research provider.

CDMA will need fewer towers for operations vis-a-vis the 2100 Mhz, as the propagation characteristics of the 800 Mhz band are more

TRAI recommendations also mean that the price of the 800 Mhz spectrum be one-fourth of the second highest bid for the 2100 Mhz band.

“Worldwide, 3G is deployed in the 800 MHz and 1900 MHz bands. Therefore, the economies of scale in equipment purchase are also in favour of CDMA players. This is not in 2100 Mhz,” said BV Raman, country head, CDMA Development Group.

Excerpt from CNBC-TV18’s interview with Shubham Majumder, Telecom Analyst at Macquarie Securities on the implications of the TRAI recomendations.

Q: Do you see these recommendations at all leaning towards the CDMA space on a timeline basis if anything else?

A: Not in terms of timeline. But possibly the fact that CDMA operators can choose between 450, 800 and 2100 megahertz bands, and can also have a much better control on cost of equipment and planning in terms of handsets and compatibility will basically be favourable for them.

So to that extent, it’s mildly more positive for existing CDMA operators than GSM operators. This is not to say that this is negative for the GSM operators. But given that there was a bit of negative overhang for CDMA operators with regard to the 3G migrations plans, that overhang really goes away with these recommendations.

The Cellular Operators’ Association of India (COAI) slammed the TRAI recommendations, saying they are rather slanted in favour of CDMA.

GSM body COAI says that TRAI’s recommendations on allocation of 3G spectrum were completely in favour of CDMA mobile operators and also criticised high base price of frequency.

“On the whole, the TRAI recommendations are rather slanted in favour of CDMA and disadvantageous to GSM,” COAI Director General T V Ramchandran said in a statement.

COAI believes that the route of auction and high reserve price would be very harmful for reaching the benefits of 3G in an affordable manner, and that the Government should seek to enhance its revenues for 3G through usage and not by imposing high initial fees. The association also expressed concern over TRAI considering 3G as a standalone service and not treating it as an extension of existing 2G services.

However, COAI welcomed TRAI’s views on efficient management of spectrum and endorsed the idea of formation of National Frequency Management Board (NFMB) to coordinate the availability of spectrum.

Source: ET

Telecom regulator TRAI has submitted its recommendations on “allocation and pricing of spectrum for 3G services and broadband wireless access”. TRAI has recommended an auction system with a reserve price for allotting 3G spectrum to telecom operators. In order to make the process transparent, it favours the open bidding process.

The reserve price has been fixed at:

• Rs 80 crore for category “A” circles - Mumbai and Delhi
• Rs 40 crore for category “B” circles - Chennai and Kolkata
• Rs 15 crore for category “C” circles

The operators will also be required to pay 1% of adjusted gross revenue (AGR) per annum as spectrum fee for 5 MHz of spectrum.

An operator seeking 3G Spectrum on all-India basis will have to pay about Rs 1,400 crore. There are up to six operators in most of the category “A” circles.

If we assume that only four players go for 3G Spectrum in a circle, then the government will collect a minimum of Rs 5,400 crore. If we assume five operators in a circle, then the amount collected through reserve price comes out to be Rs 6,800 crore. Government-owned BSNL and MTNL will also get spectrum through bidding process.

About 32.5 MHz of spectrum will be available within next six to nine months.

• The 450 MHz, 800 MHz and 2.1 GHz bands have been identified for 3G services
• Each operator will be offered 5 MHz of spectrum in 2.1 GHz
• CDMA operators will have an option of taking 1.25 MHz in 800 MHz for EVDO services and one block of 5 MHz in the 450 MHz band

Roll out obligations and penalties:

For operators in 2.1 GHz band, roll out obligations of covering 90% of area in metros and in circles 50% of the district headquarters or in cities in the circle out of which 15% should be rural, at the end of 5 years. At the end of 3 years, 30% of the district headquarters should be covered.

If operators do not achieve their roll out obligations, they should be given one year within which to fulfil their roll out obligations. After one year, the operators should be fined a spectrum hoarding cess of 2.5% of their winning auction bid (their spectrum acquisition price) per quarter in the next year. If the operators do not complete their roll out obligations within this one year, their spectrum assignments should be cancelled and the spectrum be re-allocated to a new operator.

Telecom minister Maran has said that DoT will come out with a formula for allotting 3G services in three months.

Source: ET

Rediff has an article on Dhirubhaism, which provides illustrative anecdotes on the management and business style of one of the most successful Indian business tycoon. Dhirubhai Ambani was father of Mukesh and Anil Ambani - the erstwhile and present heads of Reliance Communications respectively.

Reliance Infocomm, as it was known earlier, indeed proved to be a catalyst in the Indian mobile market. It was instrumental in making mobile accessible and affordable to the masses of India.

The Dhirubhai theory of Supply creating Demand

In India’s mobile telephony timeline there will always be a very clear ‘before Infocomm and after Infocomm’ segmentation. The numbers say it all.

In Jan 2003, the mobile subscriber base was 13 million, about 16 months later, shortly after the launch, it had reached 30 million.

In March 2006, it has touched 90 million !

So would this be considered as the landmark in Indian Telecom Samvat (calendar/era) when India’s telecom history is written?

Qualcomm has announced the granting of a 3G license to HFCL for the development, manufacture and sale of CDMA2000 handsets and modem cards.

HFCL will manufacture CDMA handsets in its factories in Chennai and Himachal Pradesh. The indigenously manufactured handsets will hit the market by January 2007.

The size of the CDMA handset market is expected to be to the tune of Rs 5,000 crore in India during the current financial year. LG and Samsung are the largest suppliers of CDMA handsets in the country today.

Mahendra Nahata, Chairman, HFCL Group:

“There are currently more than 36 million CDMA subscribers in India and the Indian wireless market has grown ten-fold in less than five years…

“We will manufacture close to 4m handsets during ’07-08 and this will have an impact to the tune of Rs 600 crore to Rs 800 crore on our revenues.”

New Delhi based HFCL is one of the largest private sector telecom companies and equipment manufacturer. Its subsidiary HFCL Infotel offers mobile and basic telephony in Punjab using CDMA technology.

Indigenous manufacturing of CDMA handsets is expected to bring down their costs. Reliance Communications has threatened to adopt GSM, citing high handset and network equipment costs in CDMA.

CDMA2000 is a family of third-generation (3G) mobile telecommunications standards for CDMA.

Also Read: Its the costs stupid: Reliance Comm

Following a TDSAT directive, the Telecom Regulatory Authority of India (TRAI) has come out with recommendations on activities to be taken into account for calculation of an operators’ Adjusted Gross Revenue (AGR).

What is AGR?

Telecom operators calculate their revenue and pay revenue share to the government on the basis of AGR.

Activities of an operator included in AGR:

• Sale of handsets or telecom equipment if bundled with telecom service
• Interest calculated on refundable deposit from subscribers
• Vendor’s credit
• Revenue from rent of towers and dark fibers
• Payment received on behalf of third parties
• Receipt on account of Acess Deficit Charge
• Discounts and rebates given to customers

Activities of an operator excluded from AGR:

• Revenue from discernible and standalone sale of handsets or telecom equipment not bundled with telecom service
• Income from dividend
• Capital gains unless receipts have come from telecom activities
• Gains from foreign exchange fluctuations and reversal of provisions

The industry has been given six weeks’ time to seek clarification on the issue.

Sources say the industry may seek clarification on areas like vendor’s credit and discounts given to customers, which were earlier waived from the calculation of AGR.

Wipro is undertaking a major part of the software development for a 3G handset that Nokia is planning to launch next year. The company had entered into an agreement with Nokia to provide smartphone development and integration services.

Under the recent agreement signed between Nokia and Wipro Technologies, a team of senior software engineers from Wipro has already joined the Nokia project in Germany.

The main feature of the Series 60 based 3G handset will be video conferencing. The advent of 3G networks and its faster data transfer speeds is expected to improve the quality of this service, making it one of the key attractions for 3G.

Video-conferencing via mobiles has been in use in Japan, based on camera-equipped FOMA terminals and making use of the 3G-324M protocol for transmission over circuit-switched media. The data transfer rate under this protocol will be 64 kbps.

According to industry reports, the conferencing market is growing at a rapid rate of 37 per cent per year and is expected to reach $5.6 billion by 2007.

Source: Business Standard

Surajeet Das Gupta writes in Business Standard that Reliance Communications has cited cheaper equipment and handset prices as the key reason for shifting of its focus to GSM.

Raising concerns about Qualcomm’s policies (as it is a key reason for the high CDMA costs), the company, including Ambani, in its discussions with analysts has pointed out that the CDMA handset ecosystem has many challenges and the Qualcomm approach in no way helps them to bring down the affordability index for millions of customers.

Reliance recently made an application to the DoT for GSM spectrum across the country. In the seven circles in India where Reliance Communications currently operates GSM and CDMA, subscribers are equally divided between the two. The company has 2 million subscribers each in GSM and CDMA networks in these circles.

It has also hinted that of the incremental $900 million capital expenditure in wireless telecom services, which the company will make next year, a large chunk could go towards building GSM networks…

The challenges they face with Qualcomm include issues of royalty, chipsets and whether they can deliver value and low-cost solutions.

Reliance has also pointed out at that the spectrum situation is not as dismal as it seems and is limited only to the top 20 cities. And even here the government will be releasing a big chunk.

Bharti Global, the offshore investment arm of Bharti, has has won the second telecom licence to operate 3G and 2G mobile services in Guernsey, an Island located in the English Channel in Europe.

This is the third international telecom venture of Bharti, and the second in Europe.

In May 2006, Bharti bagged the license to operate full-fledged telecom services, including international long distance, in the southern most state of the British Isles - Jersey.

Telecom Seychelles, a subsidiary of Bharti Global, has been offering mobile and basic telephone services in Seychelles since 1998 under the Airtel brand.

But the award of license to Bharti has created a row, with telecom major Cable & Wireless threating legal action against the regulator OUR.

C&W said that the move could threaten the £30 million communications infrastructure it was developing in the island.

Commercial director Mark Briers said that one of the core components of its business plan had been put at risk and claimed that the OUR had damaged the potential for future investment in telecommunications.

Even as Indiagames is tapping the private equity market to raise about $25m for expansion, there are reports that its majority stake holder, China’s TOM Online, is looking to exit the company.

TOM had invested $18-20 million for a majority stake in the company in 2004. Soon after it diluted its stake to 62%, with Adobe and Cisco infusing fresh funds.

According to ET, Yahoo, Google and Amazon could line up for a controlling interest in the gaming company.

Vishal Gondal, CEO of Indiagames, said he was unaware of TOM Online’s exit plans.

“We are looking for a large round of growth capital since we are focusing on the domestic mobile and online gaming market.”

TOM is looking at an enterprise valuation of around $70m for the company.

Indiagames has a dominant position in the domestic gaming market, which is experiencing explosive growth in online gaming and mobile gaming. Given that Private Equity money in India is not in short supply, it should not be too difficult for Indiagames to justify a valuation of $70 million and find a strategic investor.

Reliance Communications is in talks with Bharti Airtel, Hutchison-Essar and Idea Cellular for an alliance to share infrastructure across the country.

Industry experts say that about 25% to 35% of all cell sites in India can be shared at least by two operators. Its argued that the cost savings both in terms of capex as well as operating costs can be substantial in the next one to two years.

• There are over 70,000 cell sites all across the country
• Bharti Airtel has over 25,000 cell sites
• Reliance Communications has over 20,000 cell sites
• Setting up of a cell site costs around Rs 30 lakh
• Operating costs varies between Rs 10,000 to Rs 50,000 per site, depending on the rents in cities

The experiment, started with 60 sites in Delhi, is now being extended to Mumbai and other key cities in India.

Source: Business Standard

ET reports that MTNL’s operating profit for the year ’05-06 (Rs 166 crore) has become a fifth of the operating profit in ’04-05 (Rs 760 crore). The PSU had registered a net profit of Rs 580 crore for FY05-06, as compared with Rs 938 crore in the previous fiscal.

• The profits of MTNL are being sustained only through other income. Other income went up to Rs 530 crore due to interest on refund of income tax deposited in the previous years, as against Rs 491 crore in ’04-05.
• However, it more than doubled the cellular subscribers. Revenues from GSM services went up from Rs 287 crore to Rs 561 crore.
• Income from core telecom services fell by Rs 22 crore to Rs 5,560 crore in ’05-06.
• The growth in respect to braodband subscribers is still sluggish. Broadband subscribers increased to 211,935 during FY05-06.
• Fixed line subscriber base fell to 3,821,252, as against 4,015,173 during ‘04-05. This resulted in its income from landline services decreasing to Rs 5,249 from Rs 5,592 crore during FY ‘04-05.

MTNL’s director finance Anita Soni said:

“The board is aware that profits dipped as no provisions had been made for the one-time settlement of nearly Rs 500 crore with BSNL over many issues, some of which are over five years old. Besides, we had another extraordinary expenditure of Rs 150-200 crore on account of the voluntary retirement scheme.”

Mobile payments enabler PayMate has brought in Akshay Sharma as AVP - Marketing, PR & Brand Development.

Akshay was Marketing Manager at MTV, where he was instrumental in executing projects such as the Lycra MTV Style Awards, MTV Youth Icon of the Year, Kitni Mast Hai Zindagi (MTV’s first ever TV serial). Prior to MTV, Akshay had stints with Radio Mirchi, ITC and Lokhandwala Hotels.

PayMate has currently partnered with Citibank to offer its customers the PayMate option. A Citibank customer can use PayMate to make payments at storefronts of these merchants as of now.

Rediff, Naukri, Jeevan Saathi, 99 acres, Cleartrip.com, Travel Mart, Big Tree (Movie ticket bookings) and Telebrands (Teleshopping)

I believe PayMate has to work on the following three fronts to activate the ecosystem.

• Banks: Get more banks in its fold to increase number of potential userbase
• Merchants: Having large number of merchants who accept payment through PayMate increases its attractiveness
• Customers: This is obvious. After all money is ingested into the ecosystem by the customers

Akshay rightly points out that consumer adoption of the new technology and payment method will be the biggest challenge.

“Our biggest challenge is going to be consumer adoption. While VAS has taken off in a big way, people in India are not yet exposed to the thought of being able to transact through their mobile phones. I guess it’s also hard to believe that wireless transactions can be so convenient, easy and secure, and that’s exactly what we aim to address through our marketing initiatives in the times to come.”, says Akshay

Also Read:
PayMate launches mobile payment solution with Citibank

Second Annual Mobile Gaming Conference 2006

When:
12th & 13th of October 2006

Where:
ITC Grand Maratha Sheraton & Towers, Mumbai

Fees:
Rs 24,500 + Taxes

Click here for more details.

The focus areas of this Conference are:

• Multiplayer & 3D Gaming for India
• Handset Manufacturer’s perspective
• VC Funding for Mobile Technology
• Advergaming: The next BIG stint for promotions?
• Debate on Revenue Sharing
• Benchmark on International Experience

Bangalore-based Sasken Communication Technologies is all set to announce an acquisition in the next 45 days.

President and COO Srikanth Kannankote, declined details but said that the company needs to establish a base in North America. The acquisition is likely to be in the area of handset technology or infrastructure services.

Sasken has charted an expansion plan, both organic and inorganic, to leverage the global delivery model across geographies.

The company is planning to set up a small development centre in China soon.

“We have to be in China if we want to be a tier I player. The Chinese market is huge with a lot of telecom players.
Our idea is to open a small centre there and grow with our anchor customers, similar to what we are doing in Mexico,” said Mr Kannankote.

Sasken has a development centre in Mexico, whose headcount is expected to touch 100 soon.

It recently acquired Finland based wireless R&D and testing services company Botnia Hightech Oy for Euro 35.5 million. Botnia brings 260 people based in Finland, Germany and Copenhagen (Denmark).

In April this year, the company had acquired Chennai-based Integrated SoftTech Solutions for about Rs 6.5 crore ($1.45 million), in an all-cash transaction.

Sasken employs over 3,000 people in India and is planning to add 700-750 people across its locations in the country by fiscal ’06-07.

According to the COO, “the company sees a huge opportunity in going towards the service provider market. This is worth about $40bn market.” He added that the firm also intends to focus more on R&D services and how to use its domain knowledge to take the content and experience to users.

About the company: (From Google Finance)

Sasken is involved in developing embedded communication software for companies, such as network equipment manufacturers, semiconductor vendors, terminal device vendors and operators. Its three product lines include wireless modem solutions, application solutions and integrated solutions. Sasken operates in three segments: software services, software products and network engineering services.

Sasken’s BSE closing price on Monday was Rs 359 .

BSNL is in talks with Taiwanese and Chinese handset manufacturers to launch a sub-Rs 1000 handset for the rural market.

According to ET, BSNL has begun preliminary talks with Taiwan’s Compal and China’s TCL Communication Technology (TCT) for a single chip GSM handset.

“The mobiles will be based on single-chip technology. The SIM card will be non-removable and the mobile will remain on the BSNL network only,” the official said.

US-based Texas Instruments has developed a single-chip solution that targets the mass-market voice-centric markets. The solution integrates the bulk of handset electronics onto a single chip. This reduces cost, power requirements, board area and silicon area, all of which are critical in designing entry-level mobiles. TCT is already working with this single chip solution.

The telco will sell the mobiles as ‘BSNL phones’. It is concentrating on the lower-end of the market and plans to add 20 million subscribers every year.

“We don’t believe that the low-end market is not profitable. We expect a reasonable return of 12-14%,” he added. Currently, the cheapest handset in India is monophonic and monochromic (black and white). It is on the GSM platform and is priced at Rs 1700. It offers only basic features. The cheapest CDMA handset is available for Rs 1,999.

Related: Mobiles for less than Rs. 1,000

My latest post on Technology Walla is about the proliferation of India-centric podcast content and services.

Any technology innovation generally starts with content and services in the technology category, moving outwards to entertainment, spreading to politics / current affairs and then becoming mainstream.

I think mobile will be the device of choice for podcasting in India.

If podcasting has to become mainstream in India, mobile has to be the dominant device of creation and consumption. There aren’t that many PCs, iPods or portable MP3 players in India. But there is a slew of mobiles with memory cards, GPRS and MP3 players.

• July Systems patents personalization tool for mobile phones
  July’s Application Intermediation Gateway (AIG) is part of its mobile service delivery platform, which enables real-time personalization of mobile content services based on subscriber’s history, preferences etc.
• Subex Azure secures $6.5m in new orders
  The merged entity targets product revenue of $53 million in this fiscal.
• Airtel ties up with Microsoft to offer MS Office on mobile
  Windows Mobile 5.0 will be available from Airtel for its business customers on HP I-Paq and I-Mate handsets.
• Venturi Wireless to power Reliance’s new broadband service
  Venturi optimizes the IP operation over the wireless link, offering mobile data users accelerated access speeds and fewer dropped sessions.
• Reliance Comm ties up with Nokia for sub-Rs 2,000 CDMA handset
  Nokia 1255 is a B&W handset having speakerphone, voice recorder and a calendar with an alarm clock.
• Reliance Communications launches cricket subscription pack
  Subscribers would recieve SMS alerts after every 10 overs, every wicket and after every landmark moment for the ongoing tri series.
• Airtel launches Cricket Subscription Pack in Delhi
  Subscribers would get SMS scores alerts, ball commentary, silly point, cricket predictor on a toll free Voice number.
• Channel [V] launches animated Simpoo on mobiles
  Games, wallpapers, animations, themes and soon to come video downloads on wap.star7827.com
• Indiagames develops mobile game for NBC’s sitcom ‘The Office’
  The games have shorter play times and are simple to play - perfect for a break, after a stressful meeting or on an awkward phone call.
• Paradox Studios signs up Bollywood stars Bappi Lahiri and Madhavan
  Will develop game titles based on them. Paradox already has Baichung Bhutia and Van Damme in their fold.

Bharti and MTNL will bid for the second national telecom operator (SNO) licence in Africa’s third largest economy Kenya.

Other qualified bidders include France Telecom, Telkom of South Africa and Emirates Telecommunications Corp.

The successful bidder will be offered one licence for all services - cellular, internet backbone, international voice gateway, commercial VSAT and national and international long-distance services.

There is increasing activity of Indian telcos in Africa. I think Indian telcos are well suited for third world countries because of their experience in running large profitable operations on one of the lowest tariff regimes in the world.

VSNL has a 26% stake in InfraCo, an upcoming telecom infrastructure company in South Africa. VSNL is also the largest shareholder in NeoTel, South Africa’s second SNO which kicked off operations last month.

MTNL already holds a licence to offer fixed line services in Kenya in a joint venture with Telecom Consultants of India and a local partner. The company also has investments in Nepal and Mauritius.

Related:
Bharti considering exapanding in Africa
Tatas to invest in South African telco InfraCo

Source: ET