China 3 G tender - 5 firms to divide the pie

­Huawe­i, Motorola and Ericsson are reported to have been the biggest winners in the latest WCDMA infrastructure tender from China Unicom. The firm believed to have issued a tender to cover 55 cities in 30 provinces - the first stage in a rollout to cover 282 cities with a total CAPEX of around US$11 billion during 2009. Huawei is understood to have won 30.6% of the tender - and will carry out the work in cooperation with Motorola, which outsourced manufacturing parts to Huawei. Ericsson and its partners (New Postcom and FiberHome) secured a 25.6 per cent share.

In a move which surprised industry watchers, ZTE managed to take 21.5% of the tender - despite being weaker in the WCDMA market than its rivals. Nokia Siemens Networks took 11.1% of the tender, followed by Alcatel-Lucent which picked up 10.2 percent.

China Unicom is pushing to launch its 3G network by the middle of May this year - in an effort to catch up with China Mobile which has been building its own trial 3G network for over a y

Is the hype about infrastructure sharing over in India ?

Here is a news item from ET which suggests that the hype about infrastructure sharing may be over in India.

"Mumbai based telecom network services company GTL has cut its revenue growth guidance from 11-12% to 6-7% for FY 2009 citing increased pressure on pr
icing and slower rollout from the telecom operators.

The company posted 18% fall in its net profit (PAT) at Rs 32.1 crore for the quarter ended December 2008. The drop in PAT was despite 5% rise in consolidated sales at Rs 467.8 crore as the company reeled under the pressure on its margins. Operating profit grew by 5% to Rs 56.8 crore.

It's performance during the third quarter has been quite muted compared to the previous two quarters of the current fiscal when both sales and profits had witnessed double digit growth. On margin front, the company could maintain its operating margin at 12% compared to the year-ago number thanks to cost cutting measures.

Going ahead, the company has signaled delay in new network rollout by telecom operators given tighter credit situation in international market and slowing pace of economic activities. This is likely to keep the business growth sluggish in the coming quarters.

The company has recommended buy back of shares at a price not exceeding Rs 260 per share for a cost of Rs 225 crore. The stock ended at Rs 220.8 on NSE on Thursday, a rise of 0.8% over the previous day's close. "

More than 500 million mobile financial services users expected by 2013 !

­The number of mobile phone subscribers that use their phones for mobile banking transactions will exceed 150m globally by 2011, according to a new study by Juniper Research. These figures refer to additive banking which is focused on developed markets rather than transformational banking. Additive banking in this context adds further choices or distribution channels for banks to serve their customers or make the banking experience more convenient for existing customers.

The Juniper Research report determined that the mobile banking market is currently most advanced in the Far East, but that growing numbers of mobile banking services are being offered in North America and Western Europe. The developed nations of the Far East, North America and Western Europe are forecast to account for over 70% of the user base by 2011.

Transactional or "push" mobile banking is being offered increasingly by banks via downloadable applications or the mobile web, complementing existing SMS messaging services for balance and simple information enquiries. Mobile banking is a key element in banks' distribution channel strategies as they compete to attract and retain customers. The Juniper report highlighted the extra user convenience as a key benefit. The mobile phone is the device that people - especially Generation Y - will not leave home without. Mobile banking is an addition to the wide choice of applications and services that they can access through their handsets to make life easier, especially via smart phones such as the iPhone.

However the report identified several factors that will need addressing to really foster market development including financial regulations which vary from country to country, application slickness, and security. Whatever the reality of the strength of the security, it is the perception and image in the mind of the user that dictates whether they will trust the service.

­Mobile technology market-watchers are always on the lookout for the next “killer app,” and according to ABI Research, mobile financial services are very likely to become the “next big thing” that will attract many millions of consumers.

“Mobile financial services have the potential to be bigger than mobile TV and premium mobile content in terms of numbers of subscribers,” says senior analyst Mark Beccue. “They have the broadest demographic appeal: almost anybody over the age of 18 is a potential user.”

Mobile financial services are of three kinds: mobile banking (essentially a mobile form of today’s online banking), mobile domestic person-to-person payments, and international person-to-person payments.

While mobile banking services are likely to find their greatest market in the industrialized world, mobile domestic and international person-to-person payments may be game-changing developments in less prosperous regions, enabling commerce, extending services to rural regions, and possibly even helping people previously excluded from the financial system to lift themselves out of poverty.

The major promoters of this market, will be banking institutions. It allows banks to increase customer ‘stickiness,’ to cut costs and automate, and most importantly, to reach the unbanked. They are scrambling for ways to do it. Moreover this market is largely recession-proof because with few exceptions it’s not about consumers spending their money, but managing it.

When it comes to mobile banking, Bank of America has been a leader. It launched its mobile banking services in May 2007 and by June of the following year already had a million mobile banking customers. Currently the service covers about 1.5 million subscribers.

Will Indian Telecom sector M&A activity shrink in 2009?

For Indian telecom’s M&A story, 2009 will be all about making meaningful acquisitions where firms looking at India and Indian firms planning to buy overseas will look for clear value. The year ahead may not present too many huge billion dollar plus deals, but the M&A saga will continue. The paucity of funds will be a deterrent and that is expected to bring in deals with more competitive valuations.

By all counts, 2009 will be a year which will be characterised by limited access to funds and valuations that are likely to be more compelling. The symptoms were actually being felt this year which had its fair share of deals with a ticket value of $1 billion.

Among them were Norway’s Telenor deciding to pick up a 60% stake in Unitech for $1.2 billion and the more recent instance of Japan’s NTT DoCoMo acquiring a 26% stake in unlisted Tata Teleservices for $2.7 billion.

The total value of all telecom M&A deals for 2008 has been just over $9 billion which was less than half of the $22 billion clocked for 2007, according to Thomson Reuters’ data. The year 2007 witnessed the sale of Hutchison’s telecom business in India to Vodafone for $10.8 billion. This accounted for a huge chunk of the $22 billion.

Interestingly, 2008 has been a year that witnessed the entry of new operators like Etisalat, Telenor and NTT DoCoMo. Consolidation in telecom accounted for one-third of the total M&As in the country. The largest of around 20 deals this year was Japanese major NTT DoCoMo's purchase of a 26 per cent stake in Tata Teleservices. In another deal, Dubai-based Emirates Telecommunications Corp (Etisalat) bought a 45 per cent stake in Swan Telecom in cash for USD 900 million.
But 2009 may see M&A activity to emerge in infrastructure business. Please CLICK HERE to read related article.

Mobile tariffs to lower further in 2009?

As per reports in Economic Times, come 2009, telecom tariffs are set to fall significantly! Sector regulator TRAI on Wednesday set the ball rolling for lower tariffs by seeking the industry's views on reducing the interconnect charges (IUC).

Since IUC charges constitute a significant amount of the call charges, any reduction in this will reflect in a direct fall in tariffs. A reduction in IUC tariffs coupled with increased competition with the entry of several new players could lead to local call tariffs being as low as 10 paise per minute and STD at about 25-35 paise per minute by 2010.

Inetrconnect Usage Charges are those charges that are payable by one telecom operator to the others for use of their networks either for origination, termination or carriage of a call. Inter operator calls constitute a major part of the total calls handled by the telecommunications network. These charges are important as they can transfer network costs between operators and thus affect their relative scale and prosperity.

The current regime is as follows:

Mobile termination charge ranges from Rs 0.13 to Rs 0.30 per minute

Fixed termination charge varies from Rs 0.19 to Rs 0.28 minute

Average Carriage Charges per minute after considering the cost in respect of all NLDOs ranges from Rs 0.16 to Rs 0.72 per minute

These charges were fixed way back in 2002-03 and have not been reviewed since then, even as the overall call tariffs have by over 300% during the same time period.

The regulator will announce a reduction in IUC charges after it receives inputs from the industry.

In addition to lower tariffs, a reduction in IUC charges will also enable several of the new players who were granted telecom licences earlier this year to reduce their operational costs when they launch services. New entrants and some of the existing operators have been demanding a reduction in IUC tariffs for a long time.

Indian telecom tower industry heading for capacity surplus?

The telecom tower industry in India seems to be heading for a capacity glut. The sector will close this fiscal with over 2,50,000 towers owned by operators and stand-alone firms. With companies having aggressive tower rollout targets for years ahead, India could end up with more number of towers than required. The telecom regulator Trai has said the industry requires 3,00,000 towers by FY11.

The over-capacity situation will not only lead to longer pay-back periods for tower companies, but will also trigger consolidation in the sector. Also, tower companies will have to lower the rentals amid fierce competition, feel analysts. The announcement of merger of Quippo Telecom Infrastructure with Tata Teleservices’ tower arm alludes to significantly falling valuations in the sector. Capacity creation has risen much ahead of the aggregate minutes of usage (MoU), putting pressures on incremental margins. We are likely to see two parallel but mutually contradicting trends. With the advent of 3G services and increasing MoU in the urban markets, we are likely to see good growth in utilisation, fresh investments and rentals. But rentals and utilisation in the low population density rural markets are likely to remainunder pressure for the next 2-3 years.

Indus Towers, the joint venture between Bharti Airtel, Vodafone Essar and Idea Cellular is expected to have 95,000 towers by March this year while the figures for Bharti’s tower arm Bharti Infratel is 27,000 and for Reliance Infratel is 48,000. Besides this, Vodafone has 5,000 towers (ex-Indus), BSNL 39,000, Tata-Quippo joint venture 18,000 and GTL Infrastructure is targeting 10,000 towers by fiscal-end. This takes the total count to 2,43,000 and excludes those owned by MTNL, Idea, Aircel and tower firms like Excel and Essar Telecom Infrastructure.

As far as capacity is concerned, the sector will have more than it may require. There is going to be consolidation. Only those companies that have tenancy ratios of two and above will be profitable. In the meantime, rentals will have to take a hit.
Companies, however, have big expansion plans going forward. While Tata-Quippo is looking at a portfolio of 50,000 towers by 2012, GTL is eyeing 25,000 towers by 2011. Indus is learnt to be adding 3,000-4,0000 towers every month. By March 2010, RCOM wants to expand tower infrastructure to over 70,000 multi-tenancy towers, each capable of supporting four or more operators.

But the big question is where is the demand going to come from. While new operators like Unitech and Swan Telecom are readying to roll out operations, they will not be able to make a big difference to the demand-supply situation in the sector. Also viability of these new players remains questionable.

8 million GSM mobile customers added in Dec 2008 in India

India's GSM players have added over 8 million mobile customers in December 08.
As per the latest data compiled by the Cellular Operators Association of India (COAI), the GSM subscriber base has touched 258 million as of December 2008, up 3.25 % from 249.7 million in November 08. The growth witnessed in December was lead by Bharti Airtel, which added over 2.7 million new users taking its subscriber base to about 87 million. Bharti now commands a market share of 33.22% in the GSM place.

Vodafone Essar with a market share of 23.63% added 2 million subscribers in December 08 taking its total subscriber base to about 60 million. Idea Cellular added close to 1 million subscribers during the same period taking its total subscriber base to 38 million.

State-owned Bharat Sanchar Nigam Limited (BSNL) recorded a positive growth with about over 8 lakh additions in the given period, taking its all India subscriber base to 41 million.

Interestingly, among all circles, category C circle witnessed the highest rate of growth at 3.83%, followed by category B circle at 3.56%, with metros recording the lowest growth rate of 2.3%.

SMS will continue to be the cash cow of mobile data revenues

A new report from Portio Research focused on mobile messaging suggests that SMS will continue to be the cash cow of mobile data revenues for some time to come. The whole mobile messaging industry worth USD 130 billion in 2008 is predicted to be worth USD 224 billion by 2013, 60 percent of non-voice service revenues. The report, ‘Mobile Messaging Futures 2008 – 2013’ ventures that there is nothing likely to stop continued growth of mobile messaging in the short term, driven by a cocktail of ubiquitous SMS, media rich MMS, enterprise based mobile email and youth conscious mobile IM.

SMS remains ‘King’ because there is no cheap, easy to use alternative that will work with all phones and across all networks, it is loved the world over. Indeed in the US market, where SMS was a comparative slow starter, use per subscriber per month is now almost double the European average. In China average users send over 100 messages each month whereas the Filipinos continue to be the leading exponents with 755 messages each month.

Portio also predict a bright future for mobile email even though Japan is the only market where consumer mobile e-mail has surpassed the use of SMS. Email is still the most popular form of business communication and the report suggests that mobile e-mail users worldwide will quadruple from approximately a quarter of a billion users in 2008 to over a billion users by the end of 2013.

The rising star in the mobile messaging constellation is mobile instant messaging (MIM), which is still beset by the technical problems of interoperability. Portio however predict exponential growth in mobile IM users, surging from a worldwide total of 111 million users in 2008 to hit a massive 867 million users by the close of 2013. This massive growth in users will be accompanied by an equally impressive 5-fold increase in revenues from approximately USD 2.5 billion in 2008 to approximately USD 12.4 billion in 2013.

Since MMS hit the mainstream in 2004 the press and analysts have been critical about its level of success. Back then, they wanted to MMS reach the same value as SMS, USD $30bn, for it be considered a success; finally in 2009 this will be a reality. MMS is growing fast and certain countries, such as China and the United States, are becoming very big markets. Worldwide MMS traffic of 75 billion messages in 2008 is impressive, and the future growth looks very good in Asia, as affordable camera-equipped handsets flood the market with China leading the way.

More than 5 billion mobile subscribers worldwide by 2013 !

According to Informa Telecoms & Media, by 2013 the number of subscriptions worldwide will have risen to more than 5.3 billion and annual revenues from the global mobile market will top USD 1.03 trillion. From end-2007 to end-2013, the global mobile market will see huge growth, increasing in size by over half (56%), according to the latest edition of Informa Telecoms & Media’s Global Mobile Forecasts to 2013.

It took over 20 years to reach 3 billion subscriptions, but another 1.9 billion net additions are forecast in just six years, with the global total nudging past the 5-billion milestone in 2011. With this extraordinary growth, total annual revenues derived from mobile operators will grow by over a third (33.9%), jumping from USD 769 billion in 2007 to USD 1.03 trillion six years later.

Informa Telecoms & Media forecasts more than three quarters (78%) of global net additions between 2007 and 2013 to come from markets in Asia Pacific, Africa and Latin America, which will be the powerhouses of organic growth over the next five years. Astonishingly, nearly half (47%) of the 1.9 billion global net adds will come from just five markets – India, China, Indonesia, Brazil and Russia. By contrast, the mature markets of North America and Western Europe will in total contribute just 8% of global net adds, reflecting the high level of saturation in these markets.

Globally, subscription penetration will approach the 75% mark in 2013, while some countries will push past the 150% barrier – Romania (152%), Russia (153%), Italy (168%), Ukraine (173%) and Greece (183%). Growth in subscriptions (the number of SIMs) will outstrip growth in subscribers (the number of unique users), pointing to greater multi-SIM ownership. The global ratio of subscriptions to subscribers will increase from 1.29 in 2007 to 1.32 in 2013. In Western Europe, the ratio will reach 1.55 in 2013, and even higher (1.75) in Eastern Europe.

As the global subscription base expands, total annual revenues will increase to over USD 1 trillion in 2012. Voice revenues will continue to make up the lion’s share of total revenues, but will see slowing growth, and even a decline from 2010 onwards. With regulators worldwide looking to promote competition, forcing operators to push down voice tariffs, Informa Telecoms & Media expects voice revenues to peak as soon as 2009 in Western Europe, and even by end-2008 in North America. In more developing markets such as the Middle East and Asia Pacific, voice revenues will not peak until 2011, and 2012 in Latin America and the Caribbean.

Operators globally will be challenged to generate sustainable revenues as average revenue per user (ARPU) continues to drop. To keep annual revenues on the up, operators will need to promote usage of data services. Annual data revenues, unlike voice revenues, will go from strength to strength, and will more than double from USD 148 billion in 2007 to USD 347 billion in 2013. As a result, the proportion of total revenues generated by data services will increase from less than a fifth (19.2%) in 2007 to over a third (33.7%) at the end of the forecast period.

With voice revenue streams diminishing, industry players will encourage data spend among subscribers by innovating in non-voice services and differentiating their data service offerings from those of their competitors. While 2G will remain the dominant technology generation by subscription numbers until 2013, its market share will fall from over two thirds (66.9%) in 2007 to less than one third (32.7%) in 2013, as 3G+ technologies continue to gain ground. 3.5G technologies accounted for just 1.2% of total subscriptions in 2007, but will represent nearly a quarter (22.9%) of the global subscription base by 2013 and exceed the number of 3G subscriptions.

China ready to go 3G finally !

China's government has finally issued the 3G network licenses after years of waiting. The announcement is excepted to trigger hot competition for among the network equipment companies. Chinese carriers are expected to spend 280 billion yuan on base stations, switching gear, transmission networks and other infrastructure.

The government will issue licenses for three different 3G standards: WCDMA, CDMA200 and a homegrown Chinese standard, TD-SCDMA. They all fulfill the ITU requirements for 3G standards. By developing its own standard, Chinese telecommunications companies will be able to reduce high royalty and patent payments for the use of foreign technologies. The announcement did not say which companies would receive licenses. But earlier it has been reported that China Mobile Ltd., the dominant carrier, would be assigned the TD-SCDMA standard. The WCDMA will go to China Unicom Ltd. and the TD-SCDMA to China Telecom Ltd.

Beijing repeatedly postponed issuing licenses while it tried to develop its own standard to compete with the global systems. At the same time the operators have been setting up large test networks for at least three years.

The issuance of licenses means some of the world’s biggest telecommunications companies could profit from huge spending on network and mobile phone upgrades, including phone towers and switches. China now has more than 600 million mobile subscribers, and there is fierce competition among international companies to capture market share.

By some estimates, China could have 150 million 3G cellphone subscribers by 2010.

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