When I wrote the Telecom set to transform in 2014 analysis earlier this year, I had hoped most of my predictions will come true. As we prepare for 2015, when I look back at the analysis, it appears the outlook for the segment was over-optimistic. 2014 cannot be described as (arguably) a successful year for the telecom industry albeit a few developments did revive hopes for a turnaround in the industry.
Ambiguity over spectrum allocation, pricing and availability continued to prevail. Except for the recent Supreme Court respite, there's barely clarity on 3G roaming services. LTE, believed to bring the next revolution in the industry, didn't go mainstream which many had predicted. 4G only saw sporadic roll out in the country, while most importantly the much-needed ecosystem for LTE tech couldn't become reality as yet.
But, not everything was under dark cloud. With the new government taking over, we saw a lot of positivity building around. Initiatives such as Digital India and Make in India have at least made the industry talk about exploring sectors that have remained untapped for a very long time. Since 'communication' is the core of these two missions, telecom sector is certainly going to be benefited. So let's quickly begin how the telecom segment should/will unfold in 2015:
4G - LTE to go mainstream, finally?
As said earlier, 4G has seen sporadic roll out in the country. So far, Aircel is the only operator other than Airtel to launch 4G services. Aircel recently expanded 4G services in Tamil Nadu and Jammu and Kashmir circles. Reliance Jio Infocomm, however, is going to be the game changer as it holds pan-India spectrum for 4G services. We are hoping Reliance Jio finally rolls out its 4G services, which it claims to be affordable and much faster, next year.
Key to success will be the ecosystem, which is comprised of affordable data packages, smartphones and superior network. While a few companies have already launched 4G phones in India, we hope more brands to join the bandwagon.
Confirming plans to launch 4G phones in 2015, Karbonn's Executive Director Shashin Devsare says: “In the coming year, we have plans to launch 4G devices in the country. We are currently working on TDD-LTE and FDD-LTE technology in association with leading telecom service providers to bring affordable 4G LTE smart devices to our consumers. We are planning to launch LTE enabled smartphones next year that will feature dual base-band supporting 4G& 2G and 4G & 3G plans to suit the requirements of the customers.”
“In 2015, we will witness multiple Indian players launching 4G on a more efficient 1800 MHz spectrum and Indians subscribers will adopt 4G wholeheartedly to satiate their need for mobile data. We expect 4G LTE subscribers to reach 10-15million by Dec 2015 driven by competitive pricing, superior network experience and affordable smartphones,” says Arpita Pal Agrawal- Leader- Telecom, PwC India.
“ One has to understand that 4G is an evolutionary technology and not a revolutionary technology. If one takes an example of data advanced countries like Japan, the 4G networks there are deployed to decongest the 3G networks. While some operators in the country today are launching their 4G services, the 4G device ecosystem is not mass ready yet and hence it will impact the growth of 4G in the country in the near future,” says Mr Ranjan Banerjee, Head of Strategy, MTS India.
As far as other networks are concerned, status quo - co-existence of 2G, 3G and CDMA – will be maintained, though we hope faster networks to dominate.
Resolution of spectrum issues
The ongoing stalemate on allocation of more spectrum and auction pricing has continued to thwart the growth of the industry. Hopefully next year the regulators come up with clearer guidelines and policies that are long-term and benefit the service providers as well as customers.
“Issues like spectrum auction, its fair pricing which is in sync with both ecosystem and business realties along with other aspects like spectrum sharing and trading policy still need clarity. However, one remains hopeful that all such issues will be addressed in the coming year,” adds Ranjan Banerjee.
Recent developments such as defence ministry agreeing to give up some spectrum for telecom operators have hinted at positive measures to be rolled out next year.
TRAI’s recommendation to take back 1.2 MHz spectrum in the 900 MHz band from BSNL from all LSAs where their licences expire in 2015-16 (except Punjab), would add to the available spectrum for auctions. The addition of the entire 2x60 MHz in the 2100 MHz band for commercial use will further boost the spectrum capacity on offer. This will be critical in achieving the Broadband aspirations of the government,” says COAI in a recent post.
"We also appreciate the TRAI’s acknowledgement of the need to conduct auctions in all available bands (800 MHz, 900 MHz, 1800 MHz and 2100 MHz) simultaneously as this will allow adequate supply and will also give more flexibility and choice to the operators to structure their operations and business plans.”
Data to drive the future
Most of the telecom operators have seen a significant growth in the data segment. With wider adoption of 3G network and smartphones, data consumption has grown massively, and is most likely to grow in the coming years.
Vodafone's revenue grew over 11 per cent to Rs 20,746.9 crore for the first six months of the current fiscal mainly due to data growth. Data average revenue per user (ARPU) rose to Rs 142, as compared to Rs 130 in the same period last year. The average revenue per minute stood at 49.9 paisa and ARPU at Rs 200. Other major operators including Airtel and Idea saw growth in the data segment.
“ If we look back at the year gone by we see a trend that voice revenues have grown by around 8%, while the non-voice revenues have grown by 35%. One does not expect a fierce and competitive price war in the voice segment. However when it comes to data, it is a different case altogether. The growth today is happening in the data segment and the industry is fully aware of the potential it has. Most operators today are concentrating on data business and are rolling out services and plans especially targeted at the data customers in the country,” adds Ranjan Banerjee.
“ Given the steadily increasing divergence between data revenues and cost, a trend that will likely sharpen in 2015, mobile companies will start looking at unconventional monetization options. These would span strengthening of internal capabilities to offer differentiated network experience (“Smart Pipes”), as well as harnessing the extended ecosystem including OTT plays,” adds Arpita Pal Agrawal.
Public Wi-Fis, NOFN and Smart Cities
Public Wi-Fis are likely to be a bigger phenomenon in the coming year. So far, we've seen Tata Docomo, NDMC launch public Wi-Fi service in Delhi's Connaught Place. Gurgaon's Rapid Metro also added free Wi-Fi service via MTS.
Telecom operators have also shown a keen interest in setting up public Wi-Fis as they look to reduce load on their networks. Also Read: In focus: MTS India's free Wi-Fi service on Rapid Metro Gurgaon.
2015 is most likely to see installations of heterogeneous network (hetnet) model, which emphasises on better indoor coverage. Airtel is already working on the model in Gurgaon that is comprised of outdoor Wi-Fi points, macro cell sites and pico cells, to cater to varying data requirements.
Moreover, the Indian government has already announced plans to provide Wi-Fi connectivity at public places in top 25 cities with population of over 10 lakh. The government will empanel three to four Wi-Fi service providers in order to gain flexibility needed to ensure that a speedy roll-out takes place by June 2015. The project is jointly being worked by the Department of Telecom and Ministry of Urban Development.
Under the Digital India initiative, the government plans to connect about 2.5 lakh panchayats across the country with broadband. The government aims to set up the 'broadband highway' in the next three years.
“ Public WiFi to become a reality. India will see a significant spurt in WiFi hotspots driven by both Government “Smart Cities” and “Digital India” and private sector initiatives. However, wired broadband for retails consumers is likely to remain work in progress by end of 2015,” adds Arpita Pal Agrawal.
Yes, you read it right. Airtel has just announced charging customers for Internet calling – a move that's considered as an attempt to breach net neutrality.
“ We have made some revisions in the composition of our data packs, and will offer VoIP (Voice over internet protocol) connectivity through an independent pack that will be launched shortly. Our customers can continue enjoying voice calls over data connectivity by opting for this VoIP pack, or simply use VoIP services on pay-as-you-go basis,” says the operator in a statement.
It may be recalled the operators have long demanded the over the top players share revenues for using their network. According to a Times of India report, telcos have been “hit hard” by services such as VoIP, which is extensively used for international calling. The government has assured to look into the matter.
The development comes amid reports of WhatsApp, the popular messaging application, planning to launch voice calling feature.
We believe net neutrality is going to be one of the most debated issues in the coming year. It will be really interesting how the telecom regulator tackles the issue as it has already rejected proposals to ask Over The Top players to share revenues with telcos.
Wearables and Internet of Things
After smartphones, wearables and Internet of Things are considered to be the next big thing. While we already have SIM enabled wearables and machines, we hope groundwork for wearables and Internet of Things is laid in the country.
“ The wearables space, Indian consumers have shown most interest in buying fitness monitors (80%), smart watches (76%) and internet-enabled eyeglasses (74%). Price points expected to go down with Chinese / local manufacturing. Increasing penetration of smartphones and their ability to carry confidential subscriber data will be a significant driver for traction in security applications for smartphones,” says Arpita Pal Agrawal.
2015 is evidently going to be a very challenging year for the telecom industry. Not only it faces the daunting task to deal with the existing issues such as lack of spectrum and roll out of 4G, it has heavily invest in building ecosystem for new technologies that are most likely to dominate the market.
What other challenges or trends do you foresee for the telecom sector in 2015? Let us know your views in the comments section below or @1987kulbhushan
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