Caught in the Web

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Twitter suspends my account but gives no reason

I wanted to tweet something today morning and instead I am blogging about how I can't. Thats because Twitter has decided to suspend my account without giving any reason. Now a service provider has the right to withdraw the service at any given time but I think they owe an explanation at least to the user. But Twitter doesn't think so. The only message I got was a warning box on top of my page which informed me about the suspension.

To top it all, the email they sent me, after I sent an application for reinstating the account, asks me to explain if I knew why the account has been suspended!!. No, I did not do anything that violates the rules.

I know I am not the first one to get knocked out. Sometime back twitter accidently suspended a number of accounts due to human error. My grouse is with the secrecy around such an action. Talk about social network being "open".

So if you are trying to find me on Twitter and you can't, it's because Twitter has suspended my account. I am just hoping that its another human error or their computer automatically locked me out of my account. Twitter please give me back my account.

UPDATE:

Twitter has restored my account after two weeks and after I had made a new account. Got a mail from them saying that my account got suspended by mistake along with some spammers.

Weakening Signals

The alarm bells have gone off. Once the poster boy of India's economic reforms, the telecom sector is witnessing disturbing trends. Operator revenues are stagnating, profitability is declining, investments are slowing and costs rising.

Consider this. Vodafone's Profit after Tax margins have declined from 17 per cent in 2007 to just 0.01 per cent in 2011. Bharti Airtel's Return on Capital Employed has decreased from 29 per cent in 2007 to 19 per cent, and Idea Cellular's operating expense as a percentage of revenue has increased from 12 per cent to 31 per cent during the four-year period.

Add to this the fact that operators' average revenue per user has declined from Rs 262 in 2007 to Rs 100, minutes of usage (MoU) per user have fallen from 465 to 369 and net subscriber addition has fallen from 14-15 million a month to just over 8 million, and you have all the signs for a disaster in the near future.

“The slowdown in the sector should be an area of great concern as the growth journey of the sector is only partially complete. More than half of the people in the country have not yet subscribed to mobile services and they mostly reside in rural areas. While large-scale additional investments are the need of the hour, the sector is witnessing a reverse trend,” says Siddarth Vishwanath, Executive Director, PwC India.

According to the consulting firm, the capital expenditure of Bharti Airtel, Idea Cellular and Reliance Communications has declined from Rs 29,600 crore in 2008 to Rs 9,500 crore in 2010.

All of this is giving mobile companies sleepless nights. “The financial trends are very worrying. This is compounded by the regulatory uncertainty over crucial issues like spectrum pricing, licence renewal, and merger and acquisition rules,” says Rajat Mukarji, Chief Corporate Affairs Officer, Idea Cellular

TOO CROWDED FOR COMFORT

It's not too difficult to see what triggered this slowdown. According to the Cellular Operators' Association of India (COAI), the industry body representing GSM operators, the entry of new players in 2008 is one of the factors that put pressure on the industry. “Intense competition, with 10-12 operators in a service area, has led to a free-fall in tariffs. However, this has not been matched by an increase in minutes of usage per connection per month. Thus, negative influence on revenues due to falling tariffs is not being compensated by increase in MoUs,” says Rajan Mathews, Director General, COAI.

The industry association reckons that a lot of the misery has been caused due to the heavy taxes and levies imposed by the Government on the sector. Mobile operators in India pay 19-28 per cent of their annual revenues to the Government in the form of licence fees, spectrum charges and service tax. In addition, the industry has had to bear the cost of implementing Mobile Number Portability — estimated to be around Rs 500 crore, and an equal amount is expected to be invested to satisfy the Government's security concerns. “I see it as a schizophrenic tendency on the part of the Government because, on one hand, they want us to improve tele-density, roll out broadband in rural areas and fulfil social rollout obligation, and on the other, we have to bear heavy costs,” says Mathews. The Government earned Rs 1.36 lakh crore from the telecom sector in 2010, compared to Rs 9,100 crore in 2004. According to PwC, mobile companies on average pay 23.5 per cent of their annual revenues to the Government, even as the most-efficient operator's profit after tax was lower at 20.2 per cent of the annual revenues.

FUNDS ARE DRYING UP

Increasing costs have forced operators to resort to debt to finance network rollouts in rural areas, and paying for 3G/broadband spectrum. This has significantly raised their debt ratios. For instance, the net debt to EBITDA ratios of Idea Cellular and Reliance Communications have increased manifold from 1.3 and 2.6 in 2009 to 2.9 and 5.3 respectively at the end of 2010.

“This high indebtedness is likely to lead to slower expansion of 2G networks in rural areas as well as slower upgrades in urban areas, and delayed rollout of 3G,” says PwC's Vishwanath.

The immediate impact of the slowdown has been on foreign investors, who are cagey these days about putting big bucks into Indian telecom — a sharp contrast from pre-2007 when investors were queuing up. FDI in the telecom sector was $1.7 billion in fiscal 2011, down by 35 per cent compared with $2.6 billion in fiscal 2010. Of late, Indian banks are also going slow on lending to telcos. Gross credit exposure of Indian banking industry to telecom has fallen from Rs 1,00,425 crore in March to Rs 94,319 crore in June this year.

The other major impact has been on consumers, who are now being asked to pay more. Many mobile players including Tata DoCoMo, Bharti Airtel and Vodafone have increased tariffs over the past two months, indicating a reversal in trend. “Continuously declining margins, high 3G and BWA auction prices, constrained spectrum and rural rollout aspirations leave us with little choice but to make some price corrections,” an Airtel spokesperson had said soon after increasing prices for some of its prepaid packages. If industry fundamentals stay poor, further tariff hikes could be on the cards. While this will help operators protect margins to some extent, the party for telecom consumers seems to be over for now.

The biggest impact, however, has been on the new players, whose business case has been adversely affected due to hyper competition. Even three years after acquiring licences, they have only 5 per cent market share and 2 per cent of the overall revenues. Further, they have only around one-third of the ARPUs that the incumbent players have.

ROADMAP FOR GROWTH

But not all is lost and operators are betting on a combination of Government policy impetus and potential market growth to revive their fortunes.

“The silver lining is that there are 500 million more people without a mobile connection, which means there is a lot of scope for growth. Broadband is another avenue of revenue growth. But along with this we need clear policies from the Government to stimulate the sector,” says Mukarji.

Though the Government is working on the New Telecom Policy 2011, the industry feels its real concerns are not being addressed.

To start with, the industry wants cuts in taxes and levies to help lower its costs. Second, it wants a correction in the market structure through a liberal merger and acquisition norm. And, finally, it calls for freeing more spectrum at reasonable prices.

“The Government, on its part, has to decide whether it wants the telecom sector to bounce back to its thriving old glory or whether it wants to continue to milk it," says Mathews

Fight For India's Enterprise Communications

Miles away from his home in Australia, Drew Kelton, the President of Bharti Airtel's Enterprise Business sits in his Gurgaon office and occasionally plucks at his guitar whenever he wants to relax. The high profile executive was roped in by Airtel in July 2010, from Telstra, for only one purpose – to transform Airtel's enterprise business from a connectivity provider to one offering a host of services to corporates in India. So over the past year Airtel has announced a number of partnerships with the likes of Savis and VMware to offer managed IT and cloud services to enhance the value to its corporate clients.

“My objective is to make managed services a key part of our enterprise business. This is being driven by growth dynamics of the industry where, on one hand, corporate customers are demanding a single-window solution and on the other hand, it helps us to increase customer retention. Providing a broader suite of services increases stickiness,” says Kelton.

Like Airtel, other large Indian telecom companies including Tata Communications and Reliance Communications are also engaged in transforming their dumb network pipes to build layers of services on top of them.

“Three years ago we took a decision to move from being a network company to offer all services which are required by corporate. So we have now built an array of offerings including managed services, data centres, data security, telepresence and cloud. There is no option but to make this transformation,” says Srinivasa Addepalli, Senior Vice-President (Corporate Strategy), Tata Communications.

While enterprise customers' growing needs are forcing this change, Indian telcos are speeding up this transformation due to a bigger threat – the one from large global service providers such as BT, AT&T and Verizon.

These big boys of enterprise communication had started making inroads into the Indian market three years ago. (See http://www.thehindubusinessline.com/todays-paper/article1112390.ece.) Their entry was driven by the growing number of multinational companies setting up shop in India. But in addition to foreign MNCs, slowly these global players have been able to get contracts from some large Indian multinational companies, until now considered assured business for the Indian telcos.

Check out these facts. Paris-headquartered Orange Business Services has more than 600 customers in India including a large number of local companies and State Governments. Cable & Wireless has 10 of the top 15 BPOs in India as its clients. AT&T's India business is growing at a CAGR of 30 per cent since it got a licence four years ago even as the industry is growing at only about 8 per cent. And BT boasts of having the likes of Wipro and TechM as its customers.

Bala Mahadevan, CEO - India, Orange Business Services, says, “Our customer base in India has seen a significant increase in two areas. First, on the network connectivity side, we are witnessing the global expansion of many Indian companies, and hence the international connectivity needs are expanding. Compared to a traditional international customer base which has offices in India, the trend is now two-way with Indian companies expanding.” The French company is aiming for a four-fold revenue growth in the Indian market by 2015.

Cable & Wireless has 150 customers in India with some major wins last year. “In 2010-11 in India, we have closed seven large enterprise deals, secured a new contract with one of the top three Indian banks, signed up with two of the top BPOs in the country – including Mphasis – and achieved a strong performance with some our existing global accounts,” says Shali Thilakan, Managing Director, India , Cable & Wireless Worldwide.

These global telecom firms are driving a multi-pronged strategy with the services piece at the core. As it is they have network infrastructure that is spread across the globe to cover more than 100-150 countries. On top of that they have built a battery of services such as MPLS, Ethernet, unified communications, CRM, virtual data centres, virtual private networks, and hosted IP telephony. In addition they are earmarking more resources to ramp up their presence in the region.

BT (formerly British Telecom), for example, recently embarked on a regional expansion plan as 80 per cent of its largest customers by company turnover are expanding in Asia, with the majority expanding aggressively into India. “Our customer-led investment programme is designed to support the growth of large enterprises in this region, ensuring we are able to provide businesses with a broad suite of propositions and professional services that are the same wherever they operate,” says Sudhir Narang, Managing Director, BT India. BT was among the first global players to announce the intent to target Indian corporates. The company had said it would achieve a target of $250 million in this market. Though BT does not want to say whether it has been met, market analysts said the British firm's revenues have gone much beyond this number.

Not to be left behind, US telecom major AT&T is also expanding into more Indian cities. “We are enhancing the nodes in Hyderabad, Mumbai and Bangalore. We are continuing development of managed hosting and infrastructure services capabilities, enhancing AT&T Telepresence services with new Telepresence rooms in AT&T's offices in Delhi, Bangalore and Hinjewadi, Pune and capitalising on network expansion and subsea cable investments to improve capacity and diversity. A case in point is the recent Europe India Gateway cable implementation,” says Gopi Gopinath, Chairman and CEO, AT&T Global Network Services India Pvt Ltd.

While Indian telcos are relatively new to the services game, to protect their turf they are leveraging their strong domestic network to cross-bundle other telecom services. “We are not just an enterprise service provider, we have data services, mobile services and fixed telephone. We offer a package deal. If a big MNC needs all these services in India, where will it go? To Airtel or to a global service provider?” poses Airtel's Kelton. Airtel boasts of MNC clients including Intel, Thomson Reuters and Goldman Sachs.

Indian telcos are also betting on their ability to design low-cost business models to deliver services targeted at new segments such as the small and medium enterprises. Tata Communications, for example, was the first to start the concept of public Cisco Telepresence rooms. Compared to millions of dollars required to set up a private Telepresence room, these public facilities are available on an hourly pay-per-use basis, and located in central business centres. This approach increases the market pie for the Indian telcos because the global players are in no position to go after the SMB market or the mobile enterprise segment.

To take the battle further into the foreign operator's camp, the Indian telcos have opened up another front by competing in the international emerging markets. Tata Communications, which had bought undersea cable systems such as Tyco Global a few years ago, is leading the charge. “We cannot compete with the global players in markets like the US and Europe as it is their home turf but we are there in neutral countries such as South Africa and South-East Asia. We cannot compete with them on global connectivity but we are strong in services like multi-location telepresence and data centre solutions,” says Addepalli. Both Airtel and Tata Communications are moving into Africa and West Asia in a big way.

But the global players are not too concerned yet as Indian telcos still have a lot of catching up to do. “Many carriers have partnerships with solutions companies to offer one-stop managed services solutions. However, AT&T's advantage is that we can do this just about anywhere in the world and provide consistency of service wherever a multinational company operates,” says Gopinath.

Back home, Indian telcos are looking to innovate in value addition. For example, Airtel, which has more than 160 million mobile customers, is exploring the option to link enterprise customers to the retail consumers to take services to a whole new level. The operator is in talks with one of its MNC enterprise customers – a global healthcare technology firm – to leverage the new b2b2c model. While this may not add anything financially to Airtel, it is hoping that giving access to its retail customers could be of value to its enterprise customers – something the global players will not be able to emulate. If this strategy succeeds Kelton may be able to play his guitar more frequently.

Network for Things

Soon, your mobile could be chatting with your car or your umbrella so as to simplify your work day and home life.

How many times have you stood outside your home, looked up at the sky and wondered whether or not to take the umbrella to combat a possible shower? And on how many occasions have you driven around a busy shopping area desperately looking for parking space for your car?

Soon, these everyday problems will be taken care of by your umbrella and your car, respectively. Your umbrella will send a message to your phone giving you the exact moisture content in the air and whether you should pick it up or not while going out. And your car will tell you exactly where a parking slot is available in an area.

This is being made possible by what technology companies call Machine to Machine (M2M) communication. In M2M, devices and sensors communicate with each other or a central server rather than with human beings. These devices often use an embedded SIM card for communication over the mobile network.

So the umbrella will be embedded with a SIM card that will communicate with a server tracking the local weather.

Once the SIM card gets an update on the weather condition, it sends out a message to your phone which could read something like “it's going to rain so pick me up if you plan to go out”.

Globally, a number of top operators are already cranking up their investments in the M2M space with plans to launch a wide range of applications using this technology.

According to a new report by Juniper Research, M2M connections will be the catalyst for over $35 billion of service revenues across a diverse range of industry sectors by the end of 2016.

Sectors identified by the report as having particular potential include: Consumer and commercial telematics; smart metering; Point of sale; Retail; Banking; Mobile health monitoring; Smart buildings and security.

T Mobile, for example, has launched a wireless parking meter that senses when an automobile has left a parking space. The parking meter then sends out a message to a smart phone application on the consumer's handset that detects what spaces are available. There are other applications that can be embedded into things such as washing machines, refrigerators and even a dog collar. So a SIM embedded into a Coke vending machine can communicate with the soft drink company to inform exactly how many cans have been sold and how many are left in the machine. This information can be used by the company to manage its supply chain more efficiently.

New revenue streams

Swedish telecom equipment maker Ericsson reckons that there will be 50 billion connected devices by 2020.

That's ten times the number of people who are connected to mobile networks at present. “We are on the brink of the networked society where everything that benefits from a connection will be connected. This has just started,” says Douglas Giltsrap, Senior Vice-President, Chief Strategist, Ericsson.

As traditional voice and data markets gets saturated, mobile operators have to look for new revenue streams. Therefore the possibility of a networked world that connects billions of machines around us is developing into a mouth-watering proposition for mobile companies and technology firms around the globe.

US operator Sprint claims its newly launched M2M division is generating Average Revenue Per User (ARPU) of around $5-10 each month, a figure that generates a very high profit margin.

Geoff Martin, Manager of Platforms and the Collaboration Centre for Sprint's M2M Business Unit, says, “M2M is one of the most profitable customers we have. There's no customer care cost for M2M either. M2M is clean and profitable and not burdened with subsidies.”

“In five years' time, you won't be able to buy a digital camera that won't give you a way of uploading your photos to Facebook. Every single auto manufacturer will be coming out with one flavour of M2M,” he adds.

Facebook's Mobile Strategist Dhiraj Kumar says that there could be a day when machines could be part of social networking Web sites. A washing machine could leave a status message on its social networking site that it has finished washing clothes which would act as a signal to the owner to shut down the machine even from miles away through his mobile.

Cost, maintenance advantages

The best thing about M2M is that it does not require 3G or high-speed data network. A lot of applications only require a few kilobits of bandwidth, which is possible on a basic GSM network.

The other good thing is that the operators do not have to bear the cost of customer care operations like in the case of people-to-people business. In an M2M environment, there are no live customers to retain, so there is no need for elaborate customer care operations.

In very broad terms, if a retail telecom operation requires anywhere between 50 and 100 support people to operate, an M2M operation needs 10 to 20 people.

In India, operators are not yet talking about it yet but vendors say that this is inevitable.

“We do not differentiate between developed and developing economies when we talk about opportunities in the M2M space. We have a uniform platform which we will bring to anyone who wants it and then we can get into specifics of using that platform for what type of services and applications,” says Gilstrap.

According to Indian market watchers, the first adoption in M2M could happen in the rural areas for the purpose of education and healthcare.

Some technical issues

But there are still some key technical issues that need to be addressed before M2M takes off in a big way.

One major problem that everyone is trying to figure out is how to bill the service. The other problem could be interoperability issues as different technology companies are developing their own proprietary systems.

“The big issue is that there are so many domestic variants and that slows things down. There is not a single standard out there. You have different verticals and different applications. It is going to take horizontal and vertical integration for this to take off,” says Gilstrap

Tough call on Mobile TV

Watching television is probably the most popular form of entertainment for many Indians. But are consumers keen to receive TV channels broadcast onto a mobile device? The Ministry of Information & Broadcasting certainly thinks so and is making plans to auction spectrum for launching Mobile TV services in the country. According to this plan, the I&B Ministry wants to sell 96 units (in Mhz) of spectrum in the 700 Mhz frequency band to four players for offering Mobile TV services.

But this plan has sparked off a debate between the I&B Ministry and the Telecom Ministry. The Telecom Ministry is opposing the I&B Ministry's plan on two grounds — first, the 700 Mhz band ranges from 698 Mhz to 806 Mhz and has been identified by the International Telecommunication Union for telecom services; and second, Mobile TV services have not taken off in a big way in other countries. Even an attempt by Doordarshan to launch Mobile TV service commercially in 2007 has so far failed to take off.

To be clear, Mobile TV service is different from the unicast TV services over mobile networks, which telecom operators currently provide on their third-generation (3G) network using media delivery platforms such as those provided by Apalya technologies. While Mobile TV enables users to get as many as 30 high-quality channels on a handset, 3G-based technologies' TV services may be in the form of short clips of two to three channels at most. TV on mobile networks can be offered using the same spectrum, infrastructure and handsets used for availing 3G services.

Mobile TV, on the other hand, is based on broadcast technology for which operators need a separate network infrastructure and dedicated spectrum. Consumers would also need a device that supports Mobile TV. This means additional investments from both the operators and the consumers, making the business case a difficult one. “There are a range of issues standing in the way of developing an environment that will enable Mobile TV to take off as a successful industry. These range from infrastructure issues and a lack of investment to the simple absence of evidence to prove the consumer-use case,” says Tim Renowden from technology analyst firm Ovum, which recently released a report on Mobile TV.

Another issue that could come in the way of Mobile TV rollout in India is the lack of a major technology player backing the ecosystem. Globally, there are predominantly two main technologies to offer Mobile TV services — MediaFlo developed by Qualcomm and Nokia-backed DVB-H platform. But these technologies are facing an uncertain future as both Qualcomm and Nokia have given up on their respective platforms. While Nokia had sold off its DVB-H unit to Wipro in 2009, Qualcomm recently palmed off its MediaFlo business in the US to AT&T as it could not find enough subscribers to sustain operations. Operators in Finland, Germany and Switzerland who started Mobile TV services using DVB-H technology had to shut down their service as they found the going tough. Though there are other technologies such as the ISDB-Tmm being used by NTT DoCoMo in Japan, these are highly localised platforms that are unlikely to work in India.

“Absence of global standards and large technology players in this segment makes the future look bleak in terms of developing network equipment and handsets or devices that support Mobile TV. Availability of a wide variety of affordable devices is crucial to the success of any wireless technology,” says a telecom operator. Mobile players prefer to offer TV services using their existing 3G spectrum for which they paid billions of dollars rather than having to build out new infrastructure for Mobile TV. For example, Reliance Communications and Tata DoCoMo have partnered with Apalya to offer TV content to their 3G subscribers.

Despite the lack of interest among telecom players, the Ministry of Information & Broadcasting wants to bring Mobile TV in India and is giving final touches to the policy to auction air waves. Possibly, it is betting on broadcasting companies to show some interest in buying spectrum in order to get access to the mobility market. “For broadcasters, Mobile TV opens up a new distribution channel for live programmes on a multitude of new devices. This could both complement and act as a competitor to the main living-room TV, with potential advertising and premium subscription revenue gains. However, with a long list of challenges to be overcome, it remains a huge risk for television networks,” says Ovum's Renowden.

Not wanting to take a chance with the I&B Ministry's plan, the Department of Telecom, which is the custodian of all spectrum usage in the country, is in no mood to part with the 700 Mhz band. Under the draft National Frequency Allocation Plan (NFAP) for the year 2011, prepared by the Wireless Planning & Coordination wing of the DoT, 700 Mhz has been earmarked for broadband services. Mobile TV has been relegated to using frequency band below 698 Mhz band.

If this is implemented, then the I&B Ministry will not only have to give back the about 40 units of spectrum allocated to Doordarshan in the 700 Mhz band but also look for a technology that works in the new band proposed in the NFAP. Now that's a major challenge that the I&B Ministry will have to deal with before consumers can hope to watch TV channels on mobile devices.

Officially retired, but mail active

Siddartha Behura, the 2G scam-tainted official retired from the Department of Telecom (DoT) a few months ago, but if you send an email to the Secretary, DoT, it will still land in Behura's personal Yahoo mail. On the DoT Web site, if you click on the DoT Secretary's e-mail ID (secy-dot@nic.in) an Outlook Express window pops up into Behura's personal ID sidbehura@yahoo.co.in in the ‘To' address.

Curiously, this also happens in the case of Member (Technology) e-mail id which resolves into former Member K Sridhara's personal Hotmail. So, if people are sending official documents/information, thinking they are going to an official person, they may be landing at a retired official's inbox, even those arrested for criminal conspiracy. Check out for yourself. Heres the weblink http://www.dot.gov.in/rti/teldir.htm click on DoT. Secy's email id. At a time when DoT is after telecom operators to tighten security, probably they should look inwards first.

Sibal's escapology

When it comes to wriggling out of trouble, the Minister for Communications, Mr Kapil Sibal, could have taught Harry Houdini a thing or two. His claim that there was no financial loss to the country as a result of the 2G spectrum allocation policy followed in 2008 is breathtaking, if only for its sheer nerve. That not even Congressmen believe it is another matter altogether. Whatever calculations Mr Sibal might deploy to prove his theory, the central question remains: why was a scarce national resource priced in 2008 at 2001 prices and then allotted to a few select companies? Mr Sibal has not answered this. Instead, his contention that start-up spectrum is anyway free because it is given to operators bundled with the licence, is misleading. It may have been needed in 2001, when the industry was stalling, but its value in 2009 becomes evident from the subsequent deals struck by some of the companies who sold equity stake to foreign players at multiples of the entry price they paid the Government without even putting up a single tower or owning a subscriber. Surely, the foreign players did not pay millions of dollars just to get hold of 2G licences, which are but pieces of paper, without spectrum.

Instead of dismissing the price-related observations of the Comptroller and Auditor General, Mr Sibal would have done well to have focused on the more serious allegations — namely, how laid-out procedures were subverted in awarding licences to a select few. The Government has to answer why it decided to hand out licences to the likes of Swan, Datacom and Unitech, when as many as 46 companies had put in their applications. It also needs to explain why the Department of Telecom shifted the deadline for receiving applications from October 1, 2007 to September 25. As a result of this, 408 applications, from the likes of AT&T, Hindujas, Sterlite and Moser Baer, got automatically disqualified. Also, on January 10, 2008 DoT changed the first-come-first-served criteria by giving priority to those who paid the entry fee first instead of those who had applied first. Only two hours' notice was given to the applicant companies and yet how did a few of them get bank drafts worth thousands of crores of rupees, dated a day ahead, as if they had got advance information about the impending notice? Until these questions are answered, Mr Sibal will continue to edge the Raja ball rather than, as he hopes, drive it cleanly. That said, he is probably right in criticising the notion of imputed losses. They tend to distort the picture and allow the wrong-doers a chance to wriggle out of trouble.

Finally, by taking on the CAG in the manner he has done, Mr Sibal has started a bad precedent by undermining its already diminished authority. In that sense, he has not acted very responsibly and the Prime Minister, if he was ignorant about what Mr Sibal was proposing to do, should speak sternly to him.

There's money in the mobile

Subodh Mandal manages to make about Rs 200 a day, working hard as a rickshaw puller on Delhi roads. Today he doesn't have too many options to quickly reach the hard-earned money to his family of six back home in Jharkhand. But soon, Mandal will be able to use his cheap mobile phone for sending money to his family within minutes. This will be made possible because mobile operators and handset makers are now beginning to roll out mobile banking services in a big way.

People like Mandal slogging away in urban areas and the millions of consumers in the rural village will be able to walk into a mobile operator's retail outlet and open a bank account. And once you get an account, things like sending money to your relatives and buying vegetables from your local merchant will be just an SMS away.

Financial inclusion

“Mobile payments will be the next step for delivering financial services to hundreds of millions of “underbanked” people or those who are under-served currently, both urban and rural customers, especially in emerging economies. Our vision is to make mobile money part of our phones just like we have made camera an integral part of the handset,” says Gerhard Romen, Director, Mobile Financial Services, Nokia. The Finnish handset maker was among the first to start mobile payment services with a pilot project in Pune in partnership with Yes Bank last year. Since then, Nokia has started pilot services in Chandigarh and Nasik and is now all set to go commercial.

Recently, mobile banking got a huge boost with Bharti Airtel and Vodafone announcing separate partnerships with State Bank of India and ICICI Bank, respectively. While Bharti Airtel and SBI have formed an exclusive joint venture, Vodafone has agreed to become a Business Correspondent for ICICI Bank.

The joint venture between Airtel and SBI will invest about Rs 100 crore to set up the system for becoming the Business Correspondent of SBI. The JV will engage Airtel's retailers as Customer Service Points (CSP) all over India in a phased manner. With this, existing and new Airtel mobile customers will be able to visit these outlets and open new SBI bank accounts and avail of other banking products and services available at the CSPs. Additionally, existing SBI customers will also get serviced at these outlets. Under the ICICI Bank and Vodafone Essar Ltd tie-up, both entities will offer a bouquet of financial products, such as savings accounts, pre-paid instruments and credit products through a mobile phone-based platform.

These two initiatives take mobile banking services to a whole new level. While Vodafone manages over 1.5 million retail points for acquiring customers and servicing them, Airtel is present across 5,101 towns and more than 5,00,000 villages.

That's a big deal considering that The National Sample Survey data reveal that 51.4 per cent of nearly 89.3 million farmer households do not have access to any credit from institutional or non-institutional sources. Only 27 per cent of farm households are indebted to formal sources. Only 13 per cent are availing loans from the banks in the income bracket of less than Rs 50,000.

With mobile phones reaching over 650 million people (compared with only 90,000 bank branches and 45,000 ATMs), it will enable the population to get access to financial services on the mobile device. “India thus provides an ideal case for leveraging low-cost mobile services to provide financial inclusion to the un-banked population in the country. SBI is interested in inclusion and Airtel is a microcosm of India and increasingly rural, so both will leverage the expertise of the parent organisations to provide low-cost, secure, easy-to-use banking services,” says Sriram Jagannathan, CEO, mCommerce, Bharti Airtel.

The World Bank estimates that by 2012, 1.7 billion people across emerging markets will have mobile phones and one in five of them will be picking up mobile money to create a $5 billion market by 2012. As per Arthur D Little's 2009 M-payments report, mobile payments will grow globally at 68 per cent, reaching a transaction volume of $250 billion by 2012 and as per Gartner estimates the global number of mobile payment users will reach more than 190 million by 2012. In India, the value of mobile payment transactions will reach up to $1.28 billion by 2013 as per research firm Palo Wireless Market Research.

How you sign-up

Signing up for the service is simple. For example, for availing Vodafone's ‘m-Paisa' mobile banking service, consumers can walk into its selected outlets and fill up a form to open an account with ICICI Bank. This is vetted by the bank and in a few days it is verified and activated. Once the account is activated, the consumer can put in money with the Vodafone outlet. He gets an SMS informing the credit available with which he can buy stuff from merchants registered within the system or send money to another Vodafone user.

“Since more than 90 per cent of the mobile subscriber base is pre-paid, consumers are used to paying upfront at a mobile retail shop. The comfort factor is very important, especially when we are dealing with money,” says Samaresh Parida, Director (Strategy), Vodafone Essar. Vodafone is hoping to replicate its success in Kenya and other countries where it has 20 million customers for financial services.

But experts point out that setting up the merchant ecosystem and ensuring a fool-proof retail and distribution network is the crucial part. Nokia, for instance, has tied up with over 300 small and medium merchants in Pune and Chandigarh to create a merchant ecosystem. “Technology is not an issue but getting the ecosystem in place is the important part. We have partnered with utility companies, telecom firms, gas companies to enable mobile payment,” says Romen.

While regulation has done a lot to facilitate mobile banking services, there are some more hurdles. Over the past few months, the Reserve Bank of India has increased the amount of money that can be deposited with the mobile operator. The RBI has also allowed banks to appoint for-profit banking correspondents (BC), including telecom operators and limits relating to having the BC within a fixed distance of the bank have also been relaxed.

“The regulation on mobile banking is moving in the right direction but the RBI should look at lowering the entry cost. For example, the KYC norms applicable to telecom companies should be enough for opening an account instead of the banking KYC. This will reduce costs,” says Parida.

“A few more enabling regulations largely centred on unifying account opening and controls between operators and bank will lower cost and increase viability. Increased viability will ensure faster scale-up and proliferation of this service,” says Jagannathan

But operators are not losing sleep over it yet. “Regulations always evolve over time. We will work with the RBI,” says Nokia's Romer.