3G/WiMAX Finally off-the-block in India

India appears all set to finally auction 3G spectrum after one false start too many. Over 9 incumbent and new entrant operators have applied for the bidding process. While the list has all the usual suspects, a few names sure make you wonder. Videocon, with operations reportedly in only one city currently, Etisalat DB with no operations on ground and S Tel, an operator with a professed interest in low-ARPU C circles of the country makes one wonder if the hype around the India mobile story still continues to be strong. While 3G definitely can act as a boost to low-ARPU hit telcos, however, it is not likely to be a magic pill that will help new entrants rapidly pose a credible threat to established market leaders. At least not with the limited amount of spectrum that is up for grabs. It is in this context the Telenor's response to stay away from the auctions appears a well-taken decision. Indeed, opportunities to gain a 3G presence will increasingly present them as an inevitable market shakeout looks more certain with every passing month.

Despite past expectations, global players that currently don't have a presence in the market have stayed away from the bidding process. While one can debate ad nauseam the benefits of entering or staying away from the Indian mobile market at this point in time, a little less competition might be just what the doctor ordered for this hyper-competitive market. And while we are at it, here's hoping that the 3G pricing, when it finally hits the market in Sept 2010, is more realistic than what we have seen.

Thanks to the delayed 3G spectrum auctions, the collateral damage is more visible on the broadband front. While mobile growth has been extremely strong in the last few years, the same cannot be said of broadband growth. With limited fixed-line network presence across the country, and lack of last-mile unbundling, broadband has been the biggest sufferer thanks to lack of wireless options thus far. Naturally, the auction process for Broadband Wireless Access, tied to the 3G auction process, has received more applications, 11 in all. It has also attracted the attention of technology majors such as Qualcomm who are hoping to queer the pitch for WiMAX proponents in the auction. However, that is unlikely to take away from strong bids from WiMAX operators who are looking to use the technology to reach an under-served audience. To me, these auctions are probably far more significant in terms of the impact that they can have on India.

Be it 3G or WiMAX, it is about time the Indian consumer gets to experience the benefits of technology advancements. Here's hoping that the auction process and the subsequent service launches finally see the light of the day.

Google to offer stripped-down Nexus One phone in India?

This post first appeared in VentureBeat

Google may be preparing to launch a stripped-down, low-cost version of its Nexus One smartphone in India, and possibly other developing markets, according to speculation on multiple Indian technology sites. The rumors appear to have originated in a tweet from a TV show producer. But irrespective of how it got started, it sure highlights the importance that Google is placing on the developing markets.

Apple has historically focused on building high-margin products and slapping the legendary Apple Tax on them, but this strategy hasn’t found many takers in markets such as India. Indeed, many would say Apple has priced itself out of the market. In India, the iPhone 3G 8GB model is priced at about $680, while the 16GB variant is priced at about $790 (the 3GS has not yet been released, possibly due to the limited uptake that the 3G version has met). However, Google’s entry into the mobile handset space has to do with more than just device margins. The company is trying to increase the avenues by which consumers can interact with its services. Be it in the mobile space through Android or through its attempts at experimental fiber networks. And it is in this context that emerging markets such as India represent a large market that Google can ill-afford to ignore.

India is adding close to 18 million mobile subscribers every month, and the Indian telecom regulator TRAI estimates [PDF] there were around 127 million wireless subscribers accessing data services (essentially GPRS/EDGE based mobile data services) at the end of September 2009. That is a sizeable number, and one that continues to grow. Mobile advertising, too, is beginning to make its presence felt. Admob metrics [PDF] from January 2010 show India accounting for over 5% of all ad requests, behind only the US and ahead of many other developed mobile markets including Japan and the UK.

Moreover, Google already has some strong traction in the market. A Comscore September 2009 reportestimates that Internet users in India spent up to a third of their online time on Google sites, a figure that is over three times the global average. Given such strong usage indicators of its services, Google will want to build on its brand strength, while simultaneously tapping into the fast growing mobile space. Google is already experimenting with multiple mobile products for its Indian audience, including Google Phone Search (search using voice calls to a toll-free number, with results being sent as a text message), Google SMS Search (search using text) and Google SMS Channels (SMS-based mobile communities). Putting a feature-rich, yet low-cost phone into the hands of its users appears the right next step.

It is in this context that a stripped-down version makes sense from Google’s perspective. Google has previously signaled that it considers India an unfriendly marketplace for smartphones. One can only speculate on what components might be tossed, but there are a few low-hanging fruit. India does not yet have 3G networks, given that the required spectrum has not been auctioned yet (although that will likely change soon, hopefully). Similarly, GPS and WLAN chipsets could be on the block, if Google is looking at cutting down on the radios. The display, too, could be swapped out for a less expensive and smaller LCD screen as opposed to the OLED display that the Nexus One currently boasts.

The resulting device would definitely not be what Google calls a “Superphone“, and therefore would not qualify for its online webstore. However, that might do a world of good to Google if it were indeed to launch such a phone in India where online commerce is still finding its feet. Apple found out the hard way that in a large country such as India, having a presence at the neighborhood handset retailer store is critical to driving uptake (Apple’s iPhone is primarily available only at select carrier-owned distribution stores, which are very limited). While Google might not have the experience of dealing with large third-party distributors, it has shown that it does not shy away from such challenges. Indeed, the very fact that it chose to launch its own distribution channel for the Nexus One in the US is testimony to that.

India would likely not be the only target country for such a stripped-down version. Brazil comes readily to mind as another good candidate. For Google to translate its successes on the desktop to the mobile web, a strong presence across devices will be inevitable, be it through carrier partnerships or through Android-based phones, or better-still, a Nexus-One style device where Google exerts significant control. And emerging markets such as India with its large mobile base are probably the right entry point.

Bharti Finally (?) Goes Global

Update: Looks like I hit publish a tad quickly. News media is now reporting that Bharti and Zain have entered a period of exclusive talks. I believe unlike the MTN saga, this is likely to work out in favor of Bharti. Will update once details are reported.

Bharti has finally managed to break its international growth jinx. While the company already has a cursory presence in some markets, however, all the while, it has been lacking a truly global name tag due to its absence in the emerging markets of Africa. No more. In news coming out, Bharti has managed to snap up the African operations of Zain, giving it immediate access to over 40 Mn subscribers and the potential market of many more millions. Penetration levels in several of the markets that Zain operates are below the 20-25% mark, indicating their strong growth potential.

Bharti has been trying to break into the African markets ever since its twice-botched attempts at acquiring MTN. However, it has been out of luck thus far. It also helped significantly that Zain is currently undergoing a management change at the top.

International growth is increasingly an imperative for Indian telecom operators. Operators such as Bharti ,who have pioneered a low-cost high-volume model, now want to take their model global. Their Indian ops are more or less going on auto-cruise mode, and African markets in particular can offer Indian telcos significant experience in mobile financial transactions. With the Indian Government likely to firm up regulations around mobile transaction soon, Bharti can do with all the help in order to build a strong mobile banking model. Moreover, scale helps in driving down capex given the increased bargaining power that the company now has with equipment vendors.

It will be quite interesting to see how Reliance Communications, the other large home-grown telco now reacts. RCom has made multiple acquisitions in the enterprise communications space, but this move will likely force it to identify newer markets much faster. The company has been speculated to have been in the market for these very assets of Zain. As for Bharti, the deal offers it the first big opportunity of becoming a large global telco. It will be very interesting to see how fast Bharti can transfer the learnings from the Indian market and pick up skills from the African operations.

India Telecoms : Storm Before the Calm?

That might very well seem to sum up the current happenings in the Indian mobile market. Rapid growth in the past couple of years has seen the entry of a host of new players into the market, and more are set to enter in the coming months. Indeed, the attractiveness of the market can be gauged by the fact that even at this late stage, where there are 10+ operators for each circle, more operators are reportedly interested in making an entry in to the market. It's a different matter that the cost of entry might be much lower than what other global telcos have had to cough up, given the significant noise associated with the prospective target, Datacom and the consequent delay in launching services.

However, all is not well with the Indian mobile market. Rise in competition, coupled with a rapid dis-proportionate decline in industry revenues, is pinching the incumbents hard, while the new entrants appear to have resigned themselves to a long battle. The current price war, triggered by the new entrant into GSM Tata DoCoMo with its per second pulse plan, has forced other operators to follow suit. In the process, mobile tariffs, that were already significantly low compared to other emerging market peers, sank. However, unlike the past, the elasticity appeared missing. Declining tariffs had led to significant uptick in usage in the past. However, latest results of listed telcos indicate that the usage is flattening, and more worryingly, showing signs of decline. And we are not yet done with launch of all operators. Some of the operators with pan-India rollout license are yet to do so, and there still remains the threat of newer larger global players. And let's not forget the fact that 3G license auctions are yet to be done, and despite the limited spectrum on offer, many expect atleast one more new global player to enter the market.

Does all this mean that the great Indian mobile opportunity is lost?  I don't believe so. The current market scenario where there are 10+ operators in a given circle cannot sustain itself. Hyper-competition, whilst good for the consumer in the short-term, results in creating tariff wars with seemingly bottom-less levels. Players with deep pockets and a genuine interest in the market over the long-term will battle it out, and survive. Non-serious players that entered the market looking at it as a get-rick-quick geography will increasingly find their hands tied and will exit, sooner, if not later. Indeed, the present storm appears to forebode a period of consolidation in the Indian mobile market.