Indian Media & Entertainment Industry Report

Who says print media is a dying breed. Atleast in emerging markets such as India, where disposable incomes are beginning to rise thanks to a strong economy over the past few years, the media and entertainment industries show no signs of slowing down. The annual FICCI survey (carried out by KPMG this year) of these industries reveals some interesting numbers. Print media revenues are expected to grow at a CAGR of 9% between 2010-2014. However, what is more interesting is that subscription revenues in TV & Print are estimated to grow at a CAGR of over 12% during the same period. The report is packed with stats and gives a ringside view of India's M&E sectors. You can download a copy of the report from KPMG India, or view it below.
FICCI-KPMG India Media & Entertainment Report 2010

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.

Nokia's Key to Long-Term Relevance : Emerging Markets

A version of this post appeared first in VentureBeat


Cellphone maker Nokia may not get as much love (or press) in the US as Apple does, but internationally, it's putting on quite a show. The company has 39% of the global smartphone market, according to a new report from market researcher Strategy Analytics.But put the smartphone market to the side for a moment, and take a look at some other markets Nokia's currently building out -- markets most other device makers have largely ignored. The company has been rolling specialized services out to emerging markets in Brazil, China, India, and parts of Africa where there's a high demand for affordable, practical mobile services.

Yesterday, the company announced its latest progress on this front. It has already offered English-language services on Nokia phones and via mobile portals in China since 2007 (a service called MobileEdu), but now it's partnered with international education firm Pearson to bring other types of educational content to phones in China in a joint venture called Beijing MobileEdu Technologies.

The MobileEdu service to date has over 20 million subscribers in China, according to Nokia, with over 1.5 million active users every month. The site offers downloadable courseware that appears to be typically priced at 2 Yuan (~$0.3). The new venture will obviously seek to expand that market.

Services such as these, coupled with a strong presence in low-cost handsets, have resulted in Nokia gaining a significant leg-up on competition in emerging markets across the world, including two of the biggest -- China and India. Be it in terms of coming up with highly cost-competitive, yet utilitarian, phones (think of the 1100 series), or in terms of carefully building up a brand that endears itself to the bottom of the pyramid, Nokia has demonstrated that its understanding of emerging markets is next to none. While other vendors such as LG/Samsung/Motorola have traditionally focussed on LC (Low-Cost) and ULC (Ultra Low-Cost) handsets to drive sales, Nokia is probably the only handset vendor taking an active interest in services that it can bundle along with its low-cost phones.

One of these services, similar in intent to the MobilEdu initiative, Nokia Life Tools (currently available in India and Indonesia), is offered through partnerships with content providers such as Reuters and forms a key part of this services thrust. The SMS-based service offers agriculture, education, and entertainment services through an on-demand or a subscription model. The service has been available in India at prices of Rs.30 - Rs.60 ($0.65 - $1.3) since mid last-year. It is targeted at rural consumers, for whom the mobile phone is the primary means of connectivity to the external world. The agriculture services enable farmers to get market rates directly on their mobile, without having to travel to distant towns. That means they can accurately identify the right price and right market for their produce. And it means those farmers no longer have to go through a middleman to conclude a sale. Nokia promotes this service with its strong existing distribution channels and with its innovative "Nokia Vans" with which it reaches into the hinterland. The service is currently available in over 10 languages. And with India's adult literacy rate of ~66%, the company indeed has a sizeable target market for the service. While Nokia hasn't disclosed any uptake numbers in India thus far, I assume they're good, since the company extended the service to Indonesia and has announced plans to introduce it in Africa too.

Life Tools is only one example of Nokia's push into emerging markets through unique phone/service bundles. Others services include money-transfer solutions such as Nokia Money, a basic service that provides banking services to the unbanked, and Nokia Tej, a mobile order and supply chain management solution.

A focus on these markets is also likely to help the company over the long-term. These are markets where subscribers wouldn't be able to afford $30+ monthly data plans and where literacy levels aren't high enough to justify deployment of complicated mobile applications. And that's precisely why Nokia is going behind these subscribers with a two-pronged strategy of low-cost phones + highly relevant services. While the margins may be slim on the actual phones, the volumes are significant. And so is the opportunity. For instance, India just added over 19 million mobile subscribers in December 2009, and this is a country in which Nokia holds a 50% market share.

It also greatly helps that the company has built a solid brand that is valued high for reliability. The company was voted the most trusted brand for the second year running in the annual brand survey conducted by India's Economic Times business newspaper.

Nokia certainly has to figure out how to deal with North American carriers and sort out how to create phones that appeal to a North American audience. However, in the meantime, it's putting up a strong show in the global smartphone market. And whether its hold on that market is sustainable or not, one thing that it can safely lay claim to is an understanding of consumer behavior and needs in emerging markets. And these markets are the reason Nokia is not going to vanish anytime soon.

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.

3G in India-A Non Starter?

That India's 3G spectrum auctions have been jinxed right from the start has been more than clear, given the clear timeline of regulatory delays. The DoT and TRAI, aided by the finance ministry, have contributed more than their part in ensuring consumers in India are denied 3G services.   Nevertheless, operators have been patiently waiting for the spectrum matter to be cleared, and tap on to the data-starved Indian consumer. Indeed, some have even expressed the intent to enter the Indian market using the 3G route ! However, the acute spectrum crunch in most major cities of India, and consumer reticence towards using high-priced data services are very much likely to act as a dampener. Add to this, the fact that operators have not really encouraged consumer friendly tariff plans when it comes to data and you have a picture that is definitely not encouraging for uptake of 3G based services. Operators such as Reliance and Tata Teleservices recently launched their wireless broadband services based on EVDO revA (grey area when it comes to its classification/spectrum usage). And the prices belie any real interest in encouraging uptake. With prices hovering around Rs.1,200/- for an unlimited connection, and fair usage caps coming in at a paltry 10GB, uptake is quite likely to be muted. Given India's abysmal broadband penetration, and with limited visibility on local loop unbundling, one would have thought the mobile operators would have been a bit more aggressive on pricing their mobile broadband services. That ain't to be, sadly though ! 

The intriguing part is the pricing strategy adopted by the two state owned incumbents, BSNL and MTNL.  MTNL's pricing at Rs.5/MB and BSNL's Rs.3/MB on 3G spectrum that they have already been granted displays limited understanding of the potential and of their first-mover advantage of this space. By pricing next generation services out of reach of most potential consumers, operators continue to display their disconnect with the consumer on data services. While most operators have successfully demonstrated the demand that could be generated by offering affordable voice services, sadly, when it comes to data, they don't appear to be inclined to do so, atleast, as yet! It is probably no wonder, that reports in media suggest a very poor uptake for the 3G services that have already been launched by BSNL/MTNL. Operators need to appreciate the scale of the opportunity that delivering mobile broadband and data services offers in India. However, it appears very likely that operator focus will continue to remain on voice for the immediate future, given the galloping growth rates. Nevertheless, with voice pricing set to be commoditized pretty soon, operators would do well to start paying more attention to data services.

The Beginning of the End

Prophetic as it may seem, the official launch of Sistema-Shyam's mobile service in India, under the MTS brand, indeed appears to portend the beginning of a slowdown in the great Indian mobile story that has thus far been steaming ahead. With Sistema being the first of five new entrants to get off the ground, along with expansion from incumbents, the word competition just got a whole new meaning. Also, with the subscriber base likely to rise strongly over the next two years, and slowing down therefrom, the battle for top-line and bottom-line growth is only likely to get more intense, pushing back payback periods. 

Sistema appears to have recognized the new imperatives of the market and the impact that it is likely to have. Their break-even, which they have hinted at seven years, suggests the same. More than the increase in competition, it will be interesting to see how some of these global majors bring their expertise and strategies into the Indian market. MTS has been following a micro-segmentation strategy of its consumers based on demographic and behavioral patterns, and to add, with reasonably strong success. Operators in India, have thus far been using one-size-fits-all solutions. With it's low cost and segmented strategy, it will be quite interesting to see the strategy that MTS adopts and incumbent operator response to it. Early indicators of MTS' strategy appear to be seen in the variety of special value vouchers that it has already launched. Likewise, it will also be interesting to see how Telenor, with its GSM focus and strong experience in other emerging markets, plays out in the Indian context. Moving beyond current land-grab strategies will prove the litmus test for incumbents, and new entrants sure will play their part in playing spoilsport for the incumbents.

Indian Media Factbook 2009

Came across this comprehensive report on performance of various segments of Indian media in 2008. 

The Mudra Media Factbook 29 01 2009

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