If there is one company that has gained big time from the developments in the Indian telecom space it has to be San Diego based chip maker Qualcomm. The number of CDMA based pan Indian operators in the country will soon go up from two to four with the entry of Sistema and BSNL. The entry of these two players has more or less nullified any adverse impact from Reliance Communications and Tata Teleservices' decision to get into GSM based services. Qualcomm, which holds a monopoly on CDMA related patents, is hoping that 41 million handsets will be sold in the country this year. Though thats a little less than the 51 million done last year, the numbers are not bad given that everyone had written off CDMA in India a few months back (see 'CDMA's second innings'). But the real push for Qualcomm will come when India starts rolling out 3G services. The chip maker holds significant patents on 3G devices for both EVDO (to be deployed by CDMA operators) and WCDMA technologies (to be deployed by GSM operators). With 4 CDMA operators and at least 5 GSM players set to roll out 3G services in the country, thats a huge opportunity for Qualcomm. Already the company is drooling over the prospects and is hoping that India climbs up the ladder in terms of contribution to its global revenues. I met Kanwalinder Singh, the man who is driving Qualcomm's business in the country and he is bullish. In a bid to make third-generation mobile and broadband services affordable, Qualcomm is taking a slew of initiatives, including an Internet access device priced at around Rs 8,000. The company also plans to launch a USB port priced at around Rs 3,500 to access high-speed wireless broadband on laptops or PCs. While 3G services are yet to enter the country, Qualcomm is already gearing up to provide the end-devices at affordable rates.
“We are ready for 3G. We have the devices, and using our single chip solution we have been able to arrive at a price point that is suited to the Indian market. Once the policy is announced and operators start rolling out 3G services, we will make sure that consumers are able to take benefit of this technology,” Kanwalinder Singh said.
The USB port based on HSDPA technology is expected to be launched in the fourth quarter of 2008. “Our success with CDMA-2000 based USB ports has proved that there is a demand for wireless data access devices. We will replicate that success in the 3G segment by pricing the USB port at less than Rs 3,500,” Singh said. CDMA-based wireless data cards have been a huge hit in the country with as many as 5 million subscribers. Qualcomm also plans to introduce smart phones priced less than Rs 10,000 and based on multi-operating systems such as Windows, Linux and Android.
On the low-cost Internet access device, Mr Singh said the aim is to enable consumers to access broadband without having to invest in a laptop or PC. The product is in the design stage. Qualcomm is also in talks with Indian mobile operators to launch carrier branded 3G handsets. “Operators such as Vodafone and Hutchison have their own handset brands for 3G services in Europe. In India too we think that Indian GSM operators will launch 3G services bundled with their own branded handsets. We are in talks with them to work out the deal with an OEM (original equipment manufacturer),” Mr Singh said. Qualcomm is in talks with Indian handset brands such as Spice to launch 3G-enabled handsets. There's only a small hitch in the entire plan. Indian policy makers have been talking about 3G services for more than two years. Still there is no finality on when the high speed mobile service will actually be permitted, espcially since there is a question mark on the availability of spectrum. Qualcomm would be hoping that 2008 will be the year of high speed growth in India.
Wednesday, April 30, 2008
Saturday, April 26, 2008
M&A norms shuts out existing players
The new mergers and acquisition guidelines issued by the Department of Telecom seems to have disturbed the calculations of service providers. For starters the three-year lock-in period, mentioned in the new guidelines, will only be applicable in the case of mergers.
This means that companies including Datacom (owned by Videocon), Unitech and BPL will be allowed to offload up to 74 per cent equity to foreign companies as per the existing FDI norms or 100 per cent stake to any non-telecom Indian companies. But they will not be able to sell out to existing Indian companies. Both Datacom and Unitech have begun scouting for an international partner. This paves the way for foreign players such as AT&T, which will be able to acquire a controlling stake in any of the new licence holders such as Unitech or even operators such as Aircel and Idea Cellular, which have a mix of new and old licences. And since AT&T knows that the number of buyers aren't too many, it can quote a lower price. But existing pan Indian telecom players such as Airtel and Vodafone will, however, not be able to acquire equity in any of these companies. According to the M&A norms, no entity can have equity stake of more than 10 per cent in two different companies. So if Airtel wants to pick up more than 10 per cent stake in Datacom then it will not be able to do so. Both Airtel and Vodafone had shot off a month ago that the new players would be sitting ducks for them to acquire. After the final guidelines were announced Airtel's Sunil Mittal turned around and said that they were not interested in acquisitions in India anymore and are looking at international markets. The ring tones have surely changed.
Wednesday, April 16, 2008
Global majors fight for Indian enterprise communications market
The last time a British company had its Board meeting in India was probably when East India Company had made inroads into the country in the 18th century. Almost three centuries later, on March 27, 2008, all the top executives from the UK-based telecom giant British Telecom, including its Chairman, were in New Delhi for their first ever Board meeting outside the home country.
Though the meeting was a hushed affair, the significance of the event was not lost. For BT, India is clearly the focus market for its enterprise and professional advisory solutions.
The presence of a large number of corporates in India has certainly caught the eye of other enterprise services providers as well. Global telecom behemoths AT&T, France Telecom, Cable & Wireless and Verizon are fighting it out for a larger share of the enterprise segment.
So what is making these companies go after the enterprise segment at a time when everyone else is chasing the Indian cellular market?
Analysts reckon that though some of these telecom majors are contemplating a foray into the mobile business as well, it is the enterprise communication services that are more lucrative.
The Indian cellular market is a capital-intensive, low-margin, high-volume game, which may not bring immediate revenues, while on the other hand, the enterprise business is a relatively lower-investment and higher-margins opportunity.
With the Indian economy growing at over 8 per cent a year, most multinationals across the world either are already in the country or are planning a foray. And they are looking for telecom companies who can offer them connectivity with international quality standards. Sanjay Vig, Chief Executive Officer, Orange Business Solution, India, a division of France Telecom, explains, “The economic growth in India is attracting a large number of multinational companies into this market. These companies want the best solutions for not just their connectivity but also for their entire communication needs. One estimate puts the enterprise communication market to cross the $4,000-million mark by 2010 and we are going after that.”In a bid to get a larger share of the enterprise markets all these companies are scaling up their India presence and trying to differentiate their product offerings. Orange, which claims to service 600 multinational companies from its Indian unit, has accelerated its expansion in the country over the last year. “Our network presence has expanded to all metros with support services in key business centres across the country.
The network is supported by 10 points of presence (PoPs) in Bangalore, Mumbai, Delhi (dual PoPs) and Chennai, Hyderabad, Kolkata and Pune. Currently, Orange Business Services directly employs over 1,600 people in India,” Vig says.
Orange has also set up its third global service centre in India, which is not just for the Indian market but to also service its global clientele.Ahead of the pack
But when it comes to scale of operations, BT and AT&T seem to be ahead of the pack. Eyeing revenues of $250 million from India by 2009, BT has expanded its reach within the country to 14 cities. The company, which recently launched its international voice and data services, will hire 6,000 people by next year as it expands its operations in India.“With our increased presence in India we are gearing up to gain access to Tier-II and Tier-III cities. Our greatest challenge in India is to ensure that our services and operations exceed customers’ satisfaction. With leadership position in the Business Process Outsourcing (BPO) sector firmly established, BT is now extending its horizon to Indian multinationals going global, with specific focus on the Banking, Financial Services, Media, Broadcast, Pharmaceuticals, IT and Hospitality sectors. The challenge for BT in India is to stay ahead of the game,” says the BT India Chairman and Managing Director, Arun Seth.
With 14 connecting points in India, the company claims that it has the highest by any global service provider. The expansion is primarily targeted at Indian multinational companies that require global connectivity. At present, BT has more than 300 customers in India, most of whom are foreign multinational companies.AT&T plans
However BT’s aim of realising $250 million revenues from India may not be that easy with arch rival AT&T snapping at its heels. The US-based company is bringing a significant part of a $1-billion investment corpus into India in ramping up its local presence.
To start with, AT&T has already hived off India as a separate region, a status that was until now reserved for high-growth markets such as Japan and China. “With an 85 per cent year-on-year growth, India is clearly the fastest growing market for AT&T. We are setting up three additional nodes, taking the total to 10 and we are also setting up an Internet data centre in the country,” says Sanjiv Bhagat, CEO and Managing Director, AT&T India.Move up the value chain
The stiff competition in the segment is forcing these service providers to climb up the value chain and differentiate it from rivals. Until now, enterprise services meant providing leased lines for Virtual Private Network services, or providing ATM, frame relay and WAN-LAN integration services.
BT, for example, is expanding its professional services division in India. Professional services involve providing advisory services, best practices and best technology suited to the needs of their clients.
“Professional services give BT the edge over its rivals as it enables us to offer the best possible solutions to our clients by understanding their needs. BT offers a wide range of professional services on a consultancy basis to cover every aspect of business communications. We specify and explain the services recommended meeting needs and providing a detailed costing,” says Seth. BT is also now offering network IT services to its corporate customers.
On the other hand, AT&T is foraying into application services such as Web-based video and audio conferencing in a bid to be a one-stop communications solution provider to enterprises. Acquisitions, to boost appeal
As a strategy to keep adding to the value proposition that they would like to bring to their potential customers, these players are looking to acquire small and medium-sized companies that will enhance their product offering.
Both BT and Orange have already acquired companies with presence in India. While Orange picked up GTL’s IT services arm, BT has acquired i2i Enterprises and Singapore-based services firm Frontline, which also has a unit working in Chennai with 2,000 employees.
“This investment strengthens significantly our presence in Network Related Services and in the Asia-Pacific region, two major areas of growth in Orange Business Services strategy to be a leading global communication provider. The acquisition will help Orange further grow its business in India by reinforcing its local presence and to serve better European, American and Asian multinationals that need network-related services in India,” says Vig.
Verizon and Cable & Wireless, meanwhile, are still awaiting licences to kick-start their operations in India. Challenges ahead
But all is not rosy for these companies. One of the main concerns for the telecom giants is the low pricing in India compared to other markets.
“The large number of providers and the diminishing differentiation between them will heighten price competition, which has lessened in recent years. This will further commoditise a market already struggling with low margins. In turn, this will put more strain on service providers, especially those that invest heavily in building managed and IT services capabilities,” says Gartner’s Magic Quadrant for Asia/Pacific network service providers, 2007.
The other significant challenge for these global players will be from Indian telecom companies such as Tata Communications (formerly VSNL), Reliance Communications and Bharti Airtel, who are not only setting up a huge network of under-sea cables but also taking the fight for the enterprise market into BT and AT&T’s own backyard in Europe and the US.
“Asian carriers have improved significantly on their network performance and quality, even though they were late starting Internet Protocol virtual private network (IP VPN) services. This improvement, combined with their superior service and support and increasingly competitive pricing, means they present increasingly good value for money in terms of price-performance, which will allow them to step up the competition,” says the Gartner report.
The foreign players, however, are confident of replicating their global success in the Indian market.
“We have to be competitive if we want to stay in the market and with our global scale and expertise we are confident of sustaining our growth in India,” says AT&T’s Bhagat.
Though the meeting was a hushed affair, the significance of the event was not lost. For BT, India is clearly the focus market for its enterprise and professional advisory solutions.
The presence of a large number of corporates in India has certainly caught the eye of other enterprise services providers as well. Global telecom behemoths AT&T, France Telecom, Cable & Wireless and Verizon are fighting it out for a larger share of the enterprise segment.
So what is making these companies go after the enterprise segment at a time when everyone else is chasing the Indian cellular market?
Analysts reckon that though some of these telecom majors are contemplating a foray into the mobile business as well, it is the enterprise communication services that are more lucrative.
The Indian cellular market is a capital-intensive, low-margin, high-volume game, which may not bring immediate revenues, while on the other hand, the enterprise business is a relatively lower-investment and higher-margins opportunity.
With the Indian economy growing at over 8 per cent a year, most multinationals across the world either are already in the country or are planning a foray. And they are looking for telecom companies who can offer them connectivity with international quality standards. Sanjay Vig, Chief Executive Officer, Orange Business Solution, India, a division of France Telecom, explains, “The economic growth in India is attracting a large number of multinational companies into this market. These companies want the best solutions for not just their connectivity but also for their entire communication needs. One estimate puts the enterprise communication market to cross the $4,000-million mark by 2010 and we are going after that.”In a bid to get a larger share of the enterprise markets all these companies are scaling up their India presence and trying to differentiate their product offerings. Orange, which claims to service 600 multinational companies from its Indian unit, has accelerated its expansion in the country over the last year. “Our network presence has expanded to all metros with support services in key business centres across the country.
The network is supported by 10 points of presence (PoPs) in Bangalore, Mumbai, Delhi (dual PoPs) and Chennai, Hyderabad, Kolkata and Pune. Currently, Orange Business Services directly employs over 1,600 people in India,” Vig says.
Orange has also set up its third global service centre in India, which is not just for the Indian market but to also service its global clientele.Ahead of the pack
But when it comes to scale of operations, BT and AT&T seem to be ahead of the pack. Eyeing revenues of $250 million from India by 2009, BT has expanded its reach within the country to 14 cities. The company, which recently launched its international voice and data services, will hire 6,000 people by next year as it expands its operations in India.“With our increased presence in India we are gearing up to gain access to Tier-II and Tier-III cities. Our greatest challenge in India is to ensure that our services and operations exceed customers’ satisfaction. With leadership position in the Business Process Outsourcing (BPO) sector firmly established, BT is now extending its horizon to Indian multinationals going global, with specific focus on the Banking, Financial Services, Media, Broadcast, Pharmaceuticals, IT and Hospitality sectors. The challenge for BT in India is to stay ahead of the game,” says the BT India Chairman and Managing Director, Arun Seth.
With 14 connecting points in India, the company claims that it has the highest by any global service provider. The expansion is primarily targeted at Indian multinational companies that require global connectivity. At present, BT has more than 300 customers in India, most of whom are foreign multinational companies.AT&T plans
However BT’s aim of realising $250 million revenues from India may not be that easy with arch rival AT&T snapping at its heels. The US-based company is bringing a significant part of a $1-billion investment corpus into India in ramping up its local presence.
To start with, AT&T has already hived off India as a separate region, a status that was until now reserved for high-growth markets such as Japan and China. “With an 85 per cent year-on-year growth, India is clearly the fastest growing market for AT&T. We are setting up three additional nodes, taking the total to 10 and we are also setting up an Internet data centre in the country,” says Sanjiv Bhagat, CEO and Managing Director, AT&T India.Move up the value chain
The stiff competition in the segment is forcing these service providers to climb up the value chain and differentiate it from rivals. Until now, enterprise services meant providing leased lines for Virtual Private Network services, or providing ATM, frame relay and WAN-LAN integration services.
BT, for example, is expanding its professional services division in India. Professional services involve providing advisory services, best practices and best technology suited to the needs of their clients.
“Professional services give BT the edge over its rivals as it enables us to offer the best possible solutions to our clients by understanding their needs. BT offers a wide range of professional services on a consultancy basis to cover every aspect of business communications. We specify and explain the services recommended meeting needs and providing a detailed costing,” says Seth. BT is also now offering network IT services to its corporate customers.
On the other hand, AT&T is foraying into application services such as Web-based video and audio conferencing in a bid to be a one-stop communications solution provider to enterprises. Acquisitions, to boost appeal
As a strategy to keep adding to the value proposition that they would like to bring to their potential customers, these players are looking to acquire small and medium-sized companies that will enhance their product offering.
Both BT and Orange have already acquired companies with presence in India. While Orange picked up GTL’s IT services arm, BT has acquired i2i Enterprises and Singapore-based services firm Frontline, which also has a unit working in Chennai with 2,000 employees.
“This investment strengthens significantly our presence in Network Related Services and in the Asia-Pacific region, two major areas of growth in Orange Business Services strategy to be a leading global communication provider. The acquisition will help Orange further grow its business in India by reinforcing its local presence and to serve better European, American and Asian multinationals that need network-related services in India,” says Vig.
Verizon and Cable & Wireless, meanwhile, are still awaiting licences to kick-start their operations in India. Challenges ahead
But all is not rosy for these companies. One of the main concerns for the telecom giants is the low pricing in India compared to other markets.
“The large number of providers and the diminishing differentiation between them will heighten price competition, which has lessened in recent years. This will further commoditise a market already struggling with low margins. In turn, this will put more strain on service providers, especially those that invest heavily in building managed and IT services capabilities,” says Gartner’s Magic Quadrant for Asia/Pacific network service providers, 2007.
The other significant challenge for these global players will be from Indian telecom companies such as Tata Communications (formerly VSNL), Reliance Communications and Bharti Airtel, who are not only setting up a huge network of under-sea cables but also taking the fight for the enterprise market into BT and AT&T’s own backyard in Europe and the US.
“Asian carriers have improved significantly on their network performance and quality, even though they were late starting Internet Protocol virtual private network (IP VPN) services. This improvement, combined with their superior service and support and increasingly competitive pricing, means they present increasingly good value for money in terms of price-performance, which will allow them to step up the competition,” says the Gartner report.
The foreign players, however, are confident of replicating their global success in the Indian market.
“We have to be competitive if we want to stay in the market and with our global scale and expertise we are confident of sustaining our growth in India,” says AT&T’s Bhagat.
Wednesday, April 2, 2008
Video Kaun?
Ask anyone in the telecom industry on what he thought of Videocon's bid to buy out Motorola's handset business and chances are that you may get a smirk for an answer. No one gives Videocon's maverick owner Venugopal Dhoot any chance of being successful in this latest venture for two reasons. First - the money. Despite the huge losses it has suffered over the past few years. Motorola's handset business is still worth 4 billlion dollars. Given that Dhoot has shelled out Rs 1500 crore for acquiring telecom licences and will have to cough up another 5-6000 crore very quickly to roll out the services, it seems tough for him to raise the money required. Secondly, Videocon is an unknown entity in the international scene. When the news broke out that Dhoot has sent an expression of interest to Motorola, most of the global pundits were asking "Video who?" Most of the industry, including Motorola executives first reaction was that it was an April Fool's day joke. Others are dubbing it as a cheap publicity stunt by Dhoot. Motorola sources said that even if Dhoots was serious it was unlikely that they would sell the brand to Videocon since there was a huge gap in the brand value and visibility between the two companies. "We will have better owners" is what Motorola sources say. If Dhoot manages to acquire Motorola he will have a huge challenge given that the global market is dominated by Nokia and others like Sony Ericsson. After the sucess of its razr handsets, Motorola has not been able to bring any product that has had success in the market. Over the last year Motorola has dropped from the second largest handset maker to the third largest. Its market share in India, the fastest growing mobile market, is dismally low in single digits. Dhoot says that having a handset business is in synergy with his existing plans for telecom services and retail. But thats only in India. What will Dhoot do to kick back Motorola's poistion in the global market where margins are very thin and competition is high? For Videocon this is going to be a huge challenge.
Double Bonanza For Telcos
The Government has announced two major decisions over the past one week that will bring cheer to the telecom operators. One, the rural levy called Access Deficit Charge has been abolished and second, operators have been allowed to share infrastructure except spectrum. While removal of ADC is expected to enable operators to save nearly Rs 750 crore every year, sharing of infrastructure will bring them greater savings. With the average revenue per user plunging down, these savings will give the service providers more room to play.
Until now, operators were allowed to share only the passive part of the infrastructure which include towers, power equipment and air-conditioning at various cell sites. Almost 60 per cent of the passive infrastructure is currently on a shared basis bringing nearly 40 per cent reduction in the operator’s capital expenditure. But now, operators will be able to share active infrastructure which is essentially the technical equipment needed to transmit mobile calls such as antenna, feeder cable, radio access network and transmission system. That should bring down roll costs for the operators by another 30-40 per cent. Infrastucture companies are already making plans to take advantage of this move. GTL, for instance, has tied up with Vanu Inc to conduct trails for sharing active infra. The cost of passive infrastructure alone for an operator may work out to Rs 15 lakh for a roof-top tower and around Rs 25 lakh for a 45-meter ground-based tower. These apart, there are several operating expenses such as electricity bills, rentals (between Rs 10,000 and Rs 25,000 per month, higher in some metros) for the space occupied, apart from regular maintenance charges for each tower. This makes it clear why there is a substantial saving in capex and operating expenditure for mobile operators who share these resources. Sharing also opens up a new revenue opportunity as new players roll out their services they will look to buy space on existing infrastructure rathen than start from scratch.
A burgeoning subscriber base and a more stringent spectrum allocation regime may create a higher requirement of cell-sites or tower sites for operators, to accommodate more subscribers and allow greater reuse of the radio frequency allotted to operators. This is especially true in dense urban areas, where finding space may not be easy. Infrastructure sharing could come to mobile operators’ rescue in this context. More than 3 lakh more cell sites are required over the next 3 years and no operator can do this by itself. Infrastructure sharing is crucial in rural areas where the revenue per user is very low. In order to encourage sharing in rural areas, DoT has proposed to give financial support from the USO fund to all operators who share their infrastructure. While all this sounds good for the telecom operators one hopes that the huge savings will be passed on to the consumers in the form of lower tariffs.
Until now, operators were allowed to share only the passive part of the infrastructure which include towers, power equipment and air-conditioning at various cell sites. Almost 60 per cent of the passive infrastructure is currently on a shared basis bringing nearly 40 per cent reduction in the operator’s capital expenditure. But now, operators will be able to share active infrastructure which is essentially the technical equipment needed to transmit mobile calls such as antenna, feeder cable, radio access network and transmission system. That should bring down roll costs for the operators by another 30-40 per cent. Infrastucture companies are already making plans to take advantage of this move. GTL, for instance, has tied up with Vanu Inc to conduct trails for sharing active infra. The cost of passive infrastructure alone for an operator may work out to Rs 15 lakh for a roof-top tower and around Rs 25 lakh for a 45-meter ground-based tower. These apart, there are several operating expenses such as electricity bills, rentals (between Rs 10,000 and Rs 25,000 per month, higher in some metros) for the space occupied, apart from regular maintenance charges for each tower. This makes it clear why there is a substantial saving in capex and operating expenditure for mobile operators who share these resources. Sharing also opens up a new revenue opportunity as new players roll out their services they will look to buy space on existing infrastructure rathen than start from scratch.
A burgeoning subscriber base and a more stringent spectrum allocation regime may create a higher requirement of cell-sites or tower sites for operators, to accommodate more subscribers and allow greater reuse of the radio frequency allotted to operators. This is especially true in dense urban areas, where finding space may not be easy. Infrastructure sharing could come to mobile operators’ rescue in this context. More than 3 lakh more cell sites are required over the next 3 years and no operator can do this by itself. Infrastructure sharing is crucial in rural areas where the revenue per user is very low. In order to encourage sharing in rural areas, DoT has proposed to give financial support from the USO fund to all operators who share their infrastructure. While all this sounds good for the telecom operators one hopes that the huge savings will be passed on to the consumers in the form of lower tariffs.
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