Home India 2007 India’s ‘Televolution’

India’s ‘Televolution’

by david.nunes
George Huang Issue: India 2007
Article no.: 7
Topic: India’s ‘Televolution’
Author: George Huang
Title: COO
Organisation: Huawei Technologies India
PDF size: 296KB

About author

George Huang is the COO of Huawei Technologies India Pvt. Ltd., Huawei’s largest overseas R&D centre focused on developing telecom core platforms and end-to-end telecom solutions. Prior to his appointment, Mr Huang held the position of COO of Huawei’s Nanjing Research Institute, another important Huawei R&D centre. George Huang has held several senior positions in different divisions at Huawei, including as head of the Product Development Team for Value Added Product, which won many awards from the company and the government. Mr Huang also headed the Human Resources department at R&D Headquarters. Mr Huang holds a Bachelor’s degree in Engineering, in Computer Science, from Huazhong University of Science and Technology in China, specializing in the area of Artificial Intelligence.

Article abstract

Private sector operators have grown to control 64 per cent of India’s telecom market since its deregulation. India now has 143 million mobile subscribers and should have 250 million by yearend 2007, and 620 million by yearend 2012. According to ITU studies, a one per cent increase in tele-density will improve per capita GDP by US$240. 3G or 4G (WiMAX) are the only cost effective means to deploy broadband in India, to provide high speed Internet access, entertainment, e-governance, m-Commerce, telemedicine and e-learning.

Full Article

The telecom industry is one of the most vibrant sectors in India, with a growth rate of 50 per cent in the past year. As a result of the Indian government’s successful deregulation of the telecom market, mainstream private sector operators like Bharti, Reliance, Hutch-Essar and Idea have overtaken public sector operators with a combined market share of over 64 per cent. Coupled with a continuous monthly increase of six to seven million subscribers over the past few months, the Indian telecom market has become one of the fastest growing telecom markets in the world, and the booming market has become the cynosure of all eyes. With over 143 million mobile subscribers (GSM and CDMA) at the end of November 2006, India has joined an elite league of nations including China, the US, Japan and Russia, which have exceeded the 100 million mark in the mobile subscriber segment. Mobile services have been the major catalyst for the increase of telecom penetration, from about 11 per cent in 2005 to 16.3 per cent in 2006. The market is well positioned to achieve its target of 250 million subscribers by the end of 2007 from the current 183 million subscriber base (mobile and fixed-line). Low cost handsets and a low tariff are the key drivers for this mobile revolution. In 2007, mobile users can expect prices of less than 2,000 rupees (about US$45) for colour handsets and half that price for monochrome handsets, as well as a possible 3G rollout towards year end, and the launch of multimedia value-added services. In the longer term, the Indian government has set a target of 620 million telecom subscribers by end of 2012, at the end of the 11th five-year plan. Although it looks a little ambitious, it is possible given the current state of affairs. Presently, it appears to be relatively smooth sailing for the telecom sector with a good regulatory environment, supportive government initiatives, rapid growth, high margins and high EBIDTA, earnings before interest, taxes, depreciation and amortization, booming valuations and enormous potential for growth in the next five years. However, certain constraints such as limited spectrum, high levies and declining average revenue per user, ARPU, still cloud service providers’ prospects. A well formulated spectrum policy is necessary for issues related to spectrum allocation, including licence fees, in order to sustain the current growth rate and lay down a clear path for future 3G services. There is also a proposition to reduce telecom levies so as to make the service attractively affordable to the masses, especially those in rural areas. The next phase of telecom growth will be driven by the proliferation of telephony access to the rural hinterland, and that could be challenging. The vast geographical spread and low population density means a much higher cost per subscriber for operators with lower ARPU. It is good to see that the government of India’s Department of Telecom has already prepared a strategy to tackle this by using the Universal Services Obligation, USO, Fund to subsidize operators’ concerns about supporting mobile infrastructure in rural villages. 3G – the next wave in India 3G, Third Generation, mobile telephony has been rolled out in more than 50 countries, with over 100 UMTS, Universal Mobile Telecommunications System, networks alone, across the continents. So far, only Japan and Korea, the first two markets to launch 3G services, have successfully achieved mainstream adoption of 3G. It is interesting to note that these two economies, with their distinctive cultural and market characteristics, have 3G penetration rates of about 40 per cent, and are leading the world in the rapid innovation of 3G mobile technologies, in terms of service capabilities, content, feature-rich multimedia handsets and pricing models. Europe, on the other hand, is still lagging behind in the 3G race. Even though 3G was introduced in the European market six years ago, there are several industry issues to be resolved before it can get into full swing. Exorbitant 3G licence fees are said to be the main reason for the delay in a global 3G roll out, especially in Europe. In Japan and South Korea, 3G licensing fees were theoretically non-existent; the priority was the development of a national IT infrastructure. On the other hand, their European counterparts spent over US$120 billion to acquire 3G licences. India’s 3G licence policy remains to be seen. It is widely believed that India will take advantage of the global 3G experiences elsewhere and adopt licensing that mitigates roadblocks for a quick rollout. The Telecom Regulatory Authority, TRAI, has already submitted its recommendation to the Department of Telecom, DOT, on 3G licensing; the Ministry of IT and Telecom has indicated that the 3G licensing process will be completed by mid-2007, with 3G commercial roll out envisioned by the end of the fiscal year 2007. 3G mobile technology and its evolutionary versions, such as HSPA, High Speed Packet Access, hold great promise in India as a new mobile wireless broadband technology. The tele-density in India, now at 16.3 per cent, and its broadband penetration at one per cent, are far below the global averages. Wireless technologies like 3G are the only cost effective means that can boost broadband deployment in India, where Local Loop Unbundling by incumbents is not happening, and private telcos have hardly any legacy fixed line infrastructure that can be leveraged in this direction. 3G will be even more significant from the perspective of its direct impact on India’s GDP, gross domestic product, and economic development – an ITU study states that a one per cent increase in tele-density will improve per capita GDP by US$240. The maturity of technologies, reduced costs due to economies of scale, the availability of multimedia phones at affordable prices, and the urgent need for capacity expansion of 2G networks in cities will lead to the success of 3G deployment. 3G provides huge benefits with improved throughput as well as an optimum multimedia user experience and provides a new revenue stream for operators. Most significantly, 3G mobile technologies offer expanded capacity and broadband capabilities that can support greater voice and data coverage for customers, especially in urban centres, as well as higher data transmission rates at lower operational cost compared to 2G. In the first few years after 3G roll-out, 3G data services will mainly be adopted by affluent populations in cities and towns and slowly permeate succeeding strata, subsequently providing broadband access. In India, five to seven per cent of all mobile subscribers are expected to switch to 3G by 2010, assuming that the government of India expedites the 3G licensing so that 3G can be launched by end of 2007. 3G offers a wide array of services, including music and ring-tone downloads, mobile TV, Internet browsing, gaming, transactions, horoscopes and dating services. Interestingly, messaging and email remain the largest contributors in terms of volume of messages sent, but amount to only a fraction of the data traffic according to the experience in other 3G markets. High speed Internet access, entertainment, e-governance, m-Commerce, telemedicine and e-learning are expected to be the leading services for India. Availability of suitable local language content and applications, reliability and quality of service, QoS, and affordability will be some of the issues of paramount importance. 3G is seen as a means to enhance the productivity and efficiencies of businesses by applying information and communication technology, ICT, widely in their business. Affordable broadband Internet and data connectivity will allow businesses, government and institutions to make use of online transactions for m-commerce and e-governance initiatives. From 3G to 4G WiMAX broadband wireless access technologies are evolving fast and are slated to be commercially available by late 2007 for mobile applications. Mobile WiMAX, often referred to as 4G technology, is more advanced than 3G and promises to provide much more bandwidth. It is being looked upon as a threat to 3G. Though 3G is commercially mature, it is still evolving in the form of HSPA to provide higher bandwidth support for high-quality multimedia services. Countries where 3G roll-outs have been delayed for various reasons may directly leapfrog to 4G. Mobile WiMAX holds great potential for the Indian market from the perspective of its broadband penetration. The recommendations by Telecom Regulatory Authority of India, TRAI, to the Department of Telecom, DOT, on spectrum allocation indicate that 3G and 4G rollouts may be mixed. This is still subject to the commercial availability of Mobile WiMAX and to the finalization of India’s spectrum policy. The global telecom market is being transformed; varying stages of its evolutionary progress can be seen in different regions and countries. The new business models of the telecommunication industry are now based upon ‘managed services’ and ‘bundled services’ and telcos provide not just telecommunications, but an ICT service experience to its subscribers. While voice is still the main revenue generating source for most operators, this is fast changing and it is expected that in the next three to five years voice may become just another one of the hundreds of services provided by operators and will, quite likely, be offered for free. ICT in India is emerging as the lifeline of businesses, like energy, as it penetrates each and every business function of businesses, and the personal and professional lives of the general public. The message here is clear: 3G will be widely adopted by individuals and corporations alike. Corporations need broadband Internet and data connectivity to create an ‘info-structure’ for their enterprise and enhance their competitiveness, productivity and efficiency. Individuals will look for the rich and diverse applications and multimedia services. Together they will power the engine driving India’s fast growing economy.

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