How telecom can enrich billion lives in next few years?

How telecom can enrich billion lives in next few years?

v  Bridging the digital connectivity gap

·         Overall telecom penetration gap – VLR (Active mobile customers)- 707.3m; If we exclude multiple connections[1] and ~325m population below age of 15[2], somewhere about 375m Indians do not have an active telecom connection yet.

·         Rural telecom penetration gap – Almost 500m rural population does not own a phone

·         The rural mobile subscriber base is anticipated to grow at a compound annual growth rate of 12% between 2012 and 2016, at nearly twice the expected growth rate of the saturated urban market. It is likely that 62% of the new mobile subscribers added in the next five years will be from the rural market.^[3] The National Telecom Policy (NTP) 2012 also envisages to increase rural teledensity from the current level of around 39 to 70 by the year 2017 and 100 by the year 2020.[4]

·         Internet access gap is likely to be bridged in next few years by mobile broadband. 3G subscribers are expected to reach 142 million by 2015, accounting for 12% of the total wireless subscriber base. Further, 3G subscribers are expected to be more than 300 million by 2020, accounting for 20% of the total wireless subscriber base.[5]

v  Financial Inclusion through Mobile Platform   

·         Primary attribute of inclusive growth is financial inclusion which requires  greater access to capital.

·         Out of approx 1200 million of Indian population, nearly 70 percent lives in rural locations and over 90 million rural households are on farming.

·         Approximately 27 percent are indebted to formal sources and 13 percent are availing loans from the banks in the annual income bracket of INR 50,000 or less.

·         Millions of people in rural India have little or no access to credit, even from non-institutional sources. Approximately 50 million farmer households in India have not taken any bank credit so far

·          Rural banking does not appear to be a financially viable activity for banks either.

·         Banks have ~7.4 lac point of sales, ~ 1 lac ATMs, ~94000 branches of scheduled commercial banks[6] , 18.3m credit cards and 302m debit cards[7]. Whereas Telecom Service Providers have ~150 Lac point of sales and cover 80% of Indian geography.

·         Mobile platform by creating a branchless banking system for the communities can be a  potential tool for financial inclusion. 

·          Low tariffs and low cost of handset provide a clear value proposition for driving financial inclusion through mobile platforms.

v  Efficient delivery of public services

·         By virtue of their ubiquitous nature, mobiles enable anytime, anywhere access to and delivery of services, bridging the last mile gap without huge upfront investments, even from rural and remote areas of the country, where computer and internet penetration is still low.

·         Department of IT  finalised the Mobile Governance Policy Framework in January 2012

·         The Framework  addresses  many essential issues that can help efficient delivery of public service through mobile

o    making government websites mobile-compliant,

o   developing mobile applications  in open standards to become interoperable across various operating systems and devices,

o   use of uniform/single pre-designed numbers in the form long/short codes for mobile services,

o   creation of Mobile Service Delivery Gateway (MSDG) as the core integrating infrastructure for multi-channel delivery

·          Department of Information Technology (DIT), Government of India, has created National e Governance Division (NeGD) as an autonomous business division within Media Lab Asia, under the Ministry of Communications and Information Technology, Government of India, for taking up the tasks being carried out by the Programme Management Unit National e-Governance Plan (PMU-NeGP) at DIT. NeGD through Centre for Development of Advanced Computing (C-DAC), has been developing the modularly-scalable Mobile Service Delivery Platform and Gateway (MSDP/ MSDG)

·         Strengthening this framework and bringing more and more government schemes and services under it in next few years can help to bring in inclusive growth

v  Effective transfer of benefits under govt. schemes

·         The service, based on mobile phones and biometric authentication, can form the core micro-payment platform for the transfer of benefits under various government schemes

v  Creating more jobs

·         Research conducted by ITU and several other entities have shown direct correlation of increased telecom penetration and broadband access to economic development

·         While the telecom industry in the rest of the world obtains 35-50% revenues from non-voice services, India derives only ~15% of sales from non-voice/ data services. Projections by UBS for major telecom players in India indicate that the non-voice revenues are going to be ~30% of total revenues for these players by 2020 With digitization of cable TV services, convergence encompassing TV, broadband and Telecom is possible. All this will shift the focus towards multi lingual content creation and VAS innovation.

·         More jobs expected in telecom related equipment and handset manufacturing, network expansions etc

What should be the policy focus?

·         Further improve percolation of internet/broadband

·         Improve impediments(like Right of Way and tower site clearances) for creating physical infrastructure

·         Further enhancement of network capabilities (esp. Optical fiber network) in rural areas

·         Improve resilience/robustness of  mobile infrastructure esp. for  remote areas

·         Bring down cost of entry level handsets to below Rs 500 & smart phones and tablets to below Rs 2500; Make available multi-lingual handsets

·         Foster innovation in local/rural content and VAS with a focus on regional languages

·         Promote R&D and indigenous manufacturing of telecom and related equipments

·         Complete integration of mobile delivery infrastructure with the core e-Government backbone infrastructure. 

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[1] GSMA report says on average every mobile users in India has 2.2 SIM, compared to worldwide average SIM per person of 1.85;  If we take world average of 1.85 it means of 921m subscriptions in India, the unique subscribers are about 497.8m

[2] http://www.nationmaster.com/country/in/Age_distribution

[3] Source – Evalueserve research estimates  www.evalueserve.com  

[4] http://www.dot.gov.in/ntp/NTP-06.06.2012-final.pdf

[5] Enabling the Next Wave of Growth in India : Ernst &Young  and FICCI

[6] excludes rural post offices -1.15 lac , co-operative banks, agricultural credit societies, self help groups etc

[7] http://www.rbi.org.in/scripts/ATMView.aspx

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.

Oiling the rural connectivity - Idea Cellular uses biodiesel to fuel its BTS's power !

Indian mobile operator Idea Cellular, in an attempt to bring cellular phone service to remote areas where the electric supply is at best spotty, has begun installing mobile base stations powered by fish oil and used frying oil from local restaurants. It's believed to be the first time in the world that biofuel has powered a cell phone installation.
The oil is processed locally into biodiesel fuel and used to fuel the generators that power the base stations. So far four base stations have been installed in the Indian state of Maharashtra by Ericsson for Idea, using a grant from the GSM Association's Development Fund. The four sites were described by Ericsson as "greenfield sites that have not previously had access to a mobile network and are located in areas with unreliable power supply."

Exploring alternative power solutions, such as biofuels, is key to the development of cost-effective ways to extend mobile networks to the 20 percent of the world's population that don't have coverage today. The three companies pointed out that an important factor is that the biofuel is produced locally, creating employment in rural areas while reducing the need for transportation. Biodiesel has a much lower impact on the environment than conventional diesel, they also pointed out. The cleaner burning renewable fuel also requires fewer site visits and also extends the life of the base station generator, reducing operator costs, according to the companies.


The use of fish and cooking oil, while novel and undoubtedly an interesting recycling technique, is only temporary. Eventually the biodiesel for the cellular base stations is going to come from oil made from the seeds of the Jatropha Curcas, a tree being widely promoted worldwide as a biofuel source. That tree is said to yield four times as much biofuel as soybeans for a given size piece of land, and about half as much as highly cultivated corn. Unlike corn, though, Jathropha will grow in wastelands. India has been pushing use of Jathropha in a huge range of applications, from the biodiesel fueling the cellular base stations to use of a Jathropha extract as an anti-constipation medicine. According to an article in Wikipedia, the rail line between Mumbai and Delhi is planted with Jatropha and the train itself runs on 15-20 percent biodiesel.

Growth in Indian rural tele-density not an easy task - says E & Y !

Research firm Ernst & Young (E&Y) has said while the government and private operators continue to push for rural telephony, its proliferation in the hinterland will be faced with many challenges. “The cost of delivery is likely to be high in view of the specifics of the Indian reality. Hence, connecting rural India would mean incurring a much higher cost per subscriber to capture low ARPU subscribers,” said E&Y telecom industry practice leader Prashant Singhal.

Telecom operators may be banking big time on the untapped rural markets for the next wave of growth, but the number of connections in hinterlands will not increase beyond 150 million by 2011, according to a study. “Mobile connections in rural geographies will be constrained by coverage of network infrastructure and affordability of handsets which will limit consumption,” London-based Centre for Telecoms Research (CTR) has said. The government has set a target of 500 million cellular connections by 2010 and DoT expects a fifth of these will be in rural areas. While operators are rolling out extremely low-cost handsets, industry analysts feel driving usage in rural areas will not be easy. Network management itself remains a challenge in the difficult terrains and this is topped with erratic power supply leading to high genset costs. The main stumbling block in rural areas is the high cost of building infrastructure versus low revenue opportunity. However, government initiatives like the Universal Service Obligation fund (USOF), shared infrastructure and managed network services would help to address these issues. All operators contribute 5% of their revenues to the USOF, used to provide rural telephony. Recently, the government has finalised contracts for setting up 8,000 towers in rural India with support from USOF. This is expected to help the government in providing an additional 50m connections in rural India. Currently, the rural teledensity is nearly 2% while urban teledensity is over 40%. This hyper growth in urban areas will also make things difficult for operators going forward. The CTR study expects urban populations of India to reach high levels of mobile phone saturation in the next five years, to the extent where many phone users will have two or more handset connections. A large portion of this growth will arise from pre-paid connections, driven by the increasing affordability of handsets and tariffs amongst India’s lower middle classes. “The phenomenal growth in the Indian mobile phone market has largely been driven by urban consumption. We expect this to continue with urban geographies achieving saturation levels similar to current Western European markets in the next five years,” said CTR research director Raj Modi.

India's Reliance communication has big rural expansion plans

Reliance Communications (Rcom) will set up over 8,900 base terminal stations, which will provide telecom services to over two lakh villages, in the next one year under the Universal Service Obligation (USO) programme. The project comprises of commissioning 8982 base terminal stations, which will provide telecom services in 2,34,000 villages, which do not have any telecom connectivity at present. The announcement of the 'World's Largest and Fastest Rural Infrastructure' project comes a day after signing of MoU for USO programme with the Department of Telecommunication (DoT). The company aims to launch the telecom services within two months, after provisioning of passive infrastructure in these locations. It has also formed a special task force for the National Rural Rollout. The National Rural Marketing Team would be responsible for the completing this task. Last year, RCom had established its telecom network in over 40,000 villages under the USO fund and added close to 7.5 lakh new subscribers in these areas. The company also plans to enhance its network coverage to 25,000 towns and 4.5 lakh villages by March 2008 and has earmarked a capex of 2.5 billion dollars (Rs 11,000 crore) for its expansion plans during this fiscal.

Indian Teleco's ready to woo rural customers

In line with a slew of steps taken by other service providers, Bharti Airtel has lowered the bar on lifetime prepaid to Rs 495. A similar move enabled RCOM to set what it claimed was a global record by selling over a million handsets in under a week. A day after RCOM’s move, the world’s leading handset maker Nokia chose India for its global launch of seven entry-level handsets. At the same time, the newly-merged Nokia-Siemens Networks lauched its ‘village soultion’ which lowers the capex for service providers by 50% in order to tap rural markets. This concept will see village entrepreneurs sign up as franchisees, while Nokia-Siemens will provide them with the requisite equipment to provide GSM services within a 4-5 km (2.5-3 mile) range to rural residents for as little as $3 a month. Cellular operators will link their own network to the ‘village solution’ networks on a revenue-sharing basis.

The rural plans of Indian private operators
Recently, Bharti Airtel has said the company would invest up to $3.5 billion in fiscal ‘07-08, the bulk of which would be spent on rural India. Similarily, RCOM plans to invest $2.5 billion this year to connect every town and village with a population of over 5,000. Vodafone plans to launch ultra low-cost handsets in India soon.

What's the big deal in life time plans ?
A six-month long study carried out by Trai, after the introduction of lifetime pre-paid services last year, has shown that at least 72% of subscribers opting for this scheme recharge their phones every month, instead of merely receiving incoming calls as commonly perceived. The average monthly revenue per user (ARPU) for lifetime pre-paid users across the country is Rs 218 compared with Rs 261 for normal prepaid users. Pre-paid (lifetime and normal) subscribers constitute over 80% of India’s cellular base of over 165 million. It does not stop there — the Trai study also notes that these are high users of value added services. “This implies that from revenue proportion, lifetime schemes are no different from the general tariff plans offered by mobile operators in the market,” observed Trai after studying the data.
For cellular operators, telephony usage by subscribers under this scheme is more lucrative as the tariff charges here are higher than those for normal prepaid customers. This implies, if a customer on a lifetime scheme uses his mobile for a minute, his operator gets Re.0.80, when compared to Re. 0.77 for a normal subscriber. Trai on the success of lifetime validity schemes over six months revealed that 16% of the country’s mobile base had opted for such schemes. Off these, only 51% were new users, while the rest had migrated from their exisiting schemes. Besides, 28% of the total additions during this period was on account of lifetime validity schemes. “The revenue composition of lifetime tariff schemes shows that a large proportion of revenue is contributed by outgoing calls and other services. This implies that from the revenue proportion, lifetime schemes are no different from the general tariff plans offered by mobile operators,” Trai said. The big picture emerging from the analysis based on empirical data is that the scheme has been very popular. Along with halving the entry price, operators have also come introduced Rs 25 top-up vouchers. The Rs 25 vouchers bring down call charges in the lifetime schemes to normal ratesAn analysis by telecom regulator

Bharti's strategy
Bharti Airtel, has lowered the bar on lifetime prepaid to Rs 495 in a move that could change the dynamics of the telecom sector. So far, lifetime pre-paid services have been available for Rs 999 (or at equal monthly instalments of Rs 99 for 12 months) and halving of the charges is expected to expand the market by making mobile services more affordable. In practice, ‘lifetime’ validity allows users to receive incoming calls for the duration of a company’s licence, which is for 15 years. It gives subscribers the flexibility to choose any plan for outgoing calls. Recent history shows that other operators are likely to follow suit soon with attractive lifetime offers. Bharti’s move is in line with a slew of steps by handset manufacturers, service providers and network majors over the last two weeks to lower the entry barrier and tap into the country’s massive low income market.

The catch with Bharti’s new offer launched on Thursday is that subscriber will have to use ‘‘a minimum of Rs 200 every 180 days to continue enjoying lifetime validity benefits.’‘ The existing Airtel Easy Lifetime prepaid subscribers (Rs 999 offer) can also avail this scheme by recharging with Rs 495. The tariff rate will be Rs 1.99 for a local call and Rs 2.99 for other calls in India. Tariff rates for local calls under the non-lifetime schemes is as low as up to 40 paise for local call.

Tata Teleservices, which pioneered lifetime pre-paid services in October 2005, saw rapid increase in subscriber base at a time when it was struggling for stability in the fast-growing sector. Soon, other operators including Bharti and Reliance Communications (RCOM) also launched such services.

Motorola installs wind & solar driven GSM cell site for rural areas

Motorola says that it has deployed a wind and solar power system to operate MTC Namibia's GSM cell site at Dordabis village in the Khomas region of Namibia. The trial with MTC Namibia supports the African operator's strategy for increased voice and data service coverage in rural areas of Namibia and is the first of its kind globally.

By incorporating renewable energy solutions into communication networks Motorola is trialling this solution as a feasible option for operators instead of utilising costly fuel generators or waiting long periods for a mains grid connection. Though this particular trial is being delivered on a GSM network, the Motorola solution has the capability to be applied to other wireless networks that have rural cell site power issues. Once installed, the cost of power is almost zero, and wind and solar powered cell sites require minimal maintenance unlike a diesel driven generator which generally requires, at a minimum, a monthly visit for refueling.

Nokia Siemens introduces 'Village Connection' - a solution for affordable rural connectivity in new growth markets

Nokia Siemens Networks has introduced its new solution, Village Connection, for affordable rural connectivity and coverage in new growth markets. NSN Village Connection offers an easy concept to build rural connectivity village by village, enabling an innovative franchise-based business model between an operator and local village entrepreneurs.
The solution supports GSM based voice and SMS services, including roaming and connection to the outside world. A range of value-added services can be added, such as cost-effective Internet services in villages via the Internet protocol link.

The Village Connection comprises GSM access points located in villages and regional access centers. A village would typically host one access point module comprising GSM radio, power and IT hardware and software components.
The access point only requires simple installation and powering can be done, for instance, by solar energy. Each access point connects to standard GSM mobile devices and autonomously handles calls within a village through local switching.
Access points are connected via Internet Protocol links to a regional access center. The access center connects the villages to the main GSM core network and handles the calls between the villages.
The Village Connection allows transferring responsibility for network and business functions to a local level, building cost-effective connectivity village by village. It can employ local people to manage access within each village, or local entrepreneurs may license the mobile access rights for their surrounding area. The solution will be available in 2008.

USO bid for setting rural telecom towers

The Department of Telecom has received bids from 22 stand-alone infrastructure providers and all telecom operators for the setting up 8,000 telecom towers in rural India at an estimated cost of over Rs 3,000 crore. The government will provide the capital to set up these towers from the Universal Service Obligation Fund (USOF) through a bidding process. All Telecom companies pay 5% of their adjusted gross revenues towards the USOF, which is used for funding telecom infrastructure in rural India. Last year, the government had allocated Rs 1,500 crore towards the USOF in the budget. As per the Economic Survey released on Tuesday, off the Rs 10,787 crore collected towards USO fund till March 2006, only Rs 4,232 crore has been disbursed so far.