Wireless Party in India

1 Wireless World Emerging
India’s pattern of telecom market growth is every bit like China, but its market structure is more like US.  The first telegraph line in India commissioned in October 1851 for the East India Company and first cellular phone was in 1995. In terms of tele-density, India reached 7.12% in March 2004. In order to create an open market situation, the India government has given out many telecom licenses. The Telecom Regulatory Authority of India (TRAI) finally cleared that the two players merging in a circle should not have more than 67% of the market share compared to 50% recommended initially.

    The mobile subscriber base grew more than 100% in the financial year 2002-2003 in terms of subscribers, and in fact mobile phones are expected to surpass the number of fixed lines across India soon. The number of GSM subscribers for the quarter ending July 2004 has reached a staggering 30 593 166. For the same period last year, the number was 16 298 598. However, Mahanagar Telephone Nigam Ltd. (MTNL), the second-largest fixed-line operator, saw a 5% declination in its subscriber base at the same time. Now Bharat Sanchar Nigam Limited (BSNL), the largest fixed-line operator, is also the forth-largest mobile operator in India after Reliance Infocomm, Bharti Tele-Ventures and Hutchinson Telecom (Hutch). It now concerns itself more with its wireless business growth.
BSNL, Bharti (AirTel), Reliance, Hutch, Tata Teleservices and Idea Cellular, compared in Table 1, are six major mobile operators in India, apart from other niche players such as Spice Communications, Aircel, BPL Mobile and BPL Cellular.

    Today AirTel (Bharti Cellular) is the number one in GSM services with about 22% market share and 15 out of 23 operation circles in India.  The company is also planning to buy out other mobile operators to increase its network footprint. Hutch offers competitive Value Added Services (VAS), and is one of the earliest operators to launch the GPRS system. It has the greatest ARPU (Average Revenue per User) from GSM.

    In May 2003, Reliance Infocomm shook up the India telecom industry through its CDMA deep pocket coverage. It has become India’s largest mobile service provider with over 8 million subscribers by June 30, 2004.

    State-run mobile operator BSNL offers services in 20 circles of India, with absence in Delhi and Mumbai. It provides GSM Prepaid, Postpaid and CDMA services. In fact the demands for BSNL brands exceed the supply. BSNL has sufficient capability to give tough competition to the private operators.

    Idea Cellular (belonging to Birla, Tata and AT&T) has the country’s first 100 percent EDGE compatible network in Delhi aiming at tech savvy consumers who are always moving. Idea Cellular has doubled its operation areas from 5 to 11 circles after acquisition of Escotel, whereas Tata Teleservices is aggressively rolling out CDMA based mobile services across the country.

2 Subscriber Growth, APRU and VAS
ARPU is the greatest sufferer with the industry quest for quick subscriber growth. The ARPU for the year
2003-2004 has decreased considerably among GSM operators. According to data available from the Cellular Operators Association of India, ARPU has dropped 17% from Rs.523 ($11.62) in the first quarter to Rs.432 ($9.60) in the fourth quarter. However, the hefty rise in subscriber numbers has compensated the loss due to sharp declination in ARPU to net revenue.

    As shown in Figure 1, the mobile service subscribers increased from 14.67 million in March 2003 to 34.42 million in March 2004. Reliance Infocomm has acted as a catalyst of the mobile market. Through its "Dhirubhai Ambani Pioneer Offer", it announced 40 paise per minute rate of STD (Subscriber Trunk Dialing—interstate calls made within India) calls made from Reliance to Reliance phone and free incoming calls, thus changing the rule of game. This added up 6.9 million subscribers for its mobile brand Reliance India in the first 10 months. Bharti used the prepaid service as a tool for sharp subscriber growth, Hutch concentrated more on postpaid services, and Idea Cellular had several features for prepaid and postpaid subscribers. Agreements have been signed with leading banks like SBI, HDFC Bank, UTI Bank, IDBI Bank and Citibank that would enable Hutch and Orange users to refill their prepaid cards by simply sending an SMS or using refilling options at one of the banks’ ATMs. This is called "Direct Top UP", which gives the subscribers the flexibility to refill for any amount between Rs.315 and Rs.5 000 instead of using
pre-denominated recharge coupons.

    With low ARPU, the mobile operators are now looking for new revenue generating streams to sustain their mobility businesses. Data services such as the Short Message Service (SMS), Multimedia Service (MMS), email, games and other VASs seem to be the best solution. Now service providers are concentrating on offering diversified VASs to the customers. GSM giant Airtel-Bharti is offering services like voice reminder and videos over GPRS handsets. Hutch is offering Push2talk, email check using MS Outlook, Hotmail and Yahoo Mail, chat via Yahoo Messenger, mobile gaming, miss call alert that informs subscriber of the calls missed while the phone was switched off or out of the coverage area, and location-based help service for locating the nearest police station, hospital etc. Several VASs are common to all mobile operators, such as wallpapers, astrology, jokes, Multimedia Messaging Services (MMS), voice response service, ring tone downloads, SMS based contest, group messaging, national and international roaming, WAP enabled websites surfing and rail and air ticket enquiry.

    Text-based messaging such as SMS, chat, SMS-based enterprise application used in banking, rail and air ticket booking, and TV polls have added up good data-based revenue to service providers’ accounts.

    Download of ring tones is also a good revenue resource for operators. Each time a subscriber downloads a ring tone, 70-80 percent of the revenue goes to the operator and the rest is shared by parties involved in developing such a ring tone.

    You will see a lot of people peering in their phones and thumbing away at their keypads here and there in India. What are they doing? PLAYING GAMES! The games have become an important source of revenue for mobile operators. Airtel-Bharti launched its gaming services in January 2004 in few major circles and generated 9 000 game downloads per month. Now it has increased to about 50 000 downloads a month. Service providers are offering games that are correlated with the current events and festivals. Games with cricket themes such as Indo-Pak series and Cupid games at the Valentines Day have been great hits.

3 Service Quality
Mobile telephony service providers (both GSM and CDMA operators) across the spectrum have failed to meet the customer satisfaction benchmarks set by TRAI, according to a private survey done by the International Data Corp (IDC) Voice & Data magazine. The official TRAI survey is due in the coming February.

    In areas like overall satisfaction, network availability, billing and customer care, mobile subscribers—irrespective of which service they use—are not ready to give even 80 per cent marks. According to TRAI, the billing error should be less then 0.1% per month. The result of the private survey is alarming. Reliance had the highest number of complaints—an average of 24 complaints for every 100 subscribers.  Besides Reliance, the billing complaints in the top five were for HFCL (19 per cent), Tata Teleservices (13 per cent), Idea Cellular (10 per cent), and Aircel (9 per cent). The complaints for BSNL, Bharti and Hutch are 7 per cent, 6 per cent and 5 per cent respectively.

    One of the interesting results of the survey is the less-than-satisfactory performance by the country’s two largest mobile service providers, Bharti’s Airtel and Reliance India Mobile, and better results from operators with small footprints like BPL and Tata Teleservices. It could be that Bharti and Reliance Infocomm, by virtue of their presence and subscriber base, were busy in expanding the network without looking at the quality aspect.

    The key for the excellent growth of Indian telecom industry is low pricing and Calling Party Pays (CPP) regime. If this continues, India may overtake other countries in the number of subscribers, but operators still have to achieve QoS up to the TRAI’s standards.

4 Most Competitive Market in the World
India is one of the most competitive telecom markets in the world, and no equipment vendors want to be left out of this wireless party.

    The benchmark of the lowest equipment price in the world was set by Reliance Infocomm’s deal with Lucent Technologies in 2002. However, Nokia is getting more aggressive, and its equipment rates have come down to as low as $25 per subscriber.

    Another landmark is the agreement between equipment vendor Ericsson and Bharti for revenue sharing of Enhanced Data Rate for Global Evolution (EDGE) technology. The agreement will allow Ericsson to earn a percentage of the revenue every time a subscriber downloads videos or plays a Java game.

    ZTE is now competitive in Indian market. ZTE bid $45 per line for BSNL’s 750 000 line CDMA contract last year. With its local partners ITI, UTL and ICOMM, ZTE has installed BSCs for BSNL in its 16 telecom circles, and 624 BTSs are meeting high expectations of the client. ZTE has emerged as the world-class telecom equipment provider and is bagging most of telecom and related projects. The next bid for 800 K MSC project of BSNL will cover 11 major circles in India. Apart from CDMA-based BSC and MSC projects of BSNL, ZTE has also acquired MTNL’s ADSL and BSNL’s DWDM and SDH projects.

    This wireless party is also attracting more and more interests from foreign operators. Media report says that Singapore Technology Telemedia, a Singapore based operator and Teamesk Holdings, Singapore based investment companies, are interested in acquiring AT&T’s 33% stake in Idea. Besides, leading European wireless player Vodafone is looking for opportunities into the country.

Manuscript received: 2004-09-27