India Week continues at DTW

This is turning into 'India Week' here at DevelopingTelecomsWatch. Today's musings begin by revisiting yesterday's discussion here about the imposition of Mobile Number Portability (MNP) in the country. We will also consider - not for the first time - the ways in which the Indian Government's concerns about national security might lessen the appeal of this vast, growing market for foreign telecoms groups.

The reason we are returning to the MNP debate so quickly is that yesterday saw an open house discussion in Hyderabad on this theme. Hosted by the TRAI, India's telecoms regulatory body. This rejoiced in the snappy title 'Determination of Port Transaction Charge, dipping charge and porting charge for mobile number portability'. The surrounding media coverage provides more information on the range of concerns expressed by India's cellcos.

Speaking to an Economic Times reporter at the workshop was TRAI Chairman SJ Sharma, who said he expects MNP to go live on December 1st. While Sharma is confident that his agency will have its MNP regulations in place by the end of August, he expressed the belief that some of the operators do not seem to have ordered enabling equipment yet, meaning that a delay of 2-3 months is likely.

Yesterday, ahead of the Hyderabad discussions, we considered the estimated cost one operator had calculated for the implementation of MNP. State-owned BSNL had come up with a USD 250 million estimate, complaining about this cost in light of its contention that only 2% of "elite customers" are likely to use the facility.

Today, drawing on an article from K.V. Kurmanath of the Business Line, we can see how BSNL's numbers stack up against the estimates of some of its competitors in the mobile space.

Reliance Communications, and Tata Teleservices have indicated that they expected MNP-related expenditure to the tune of USD 20.6 million each. Vodafone India has come up with the much larger figure of USD 72.3 million. Much lower numbers than those mentioned by BSNL, then, but still pretty significant sums of money. I invite anyone with a view on this to offer an explanation for why this set of estimates varies so much.

"The regulator asked the service providers to send in their points on these issues by Tuesday," Mr T. R. Dua, Deputy Director-General of the Cellular Operators’ Association of India, told Business Line, whose article states that "keeping in mind the huge expenditure", the telecos want the TRAI to ensure that they are compensated for their "huge investments".

Let's see, then, if December 1st really is the date after which Indian mobile users can elect to switch their cellular providers while keeping their phone numbers.

In the meantime, I want to consider once again how the Indian authorities' concerns about national security are impacting on the telecoms sector.

In a recent piece here about worldwide developments across the footprint of Scandinavian telecoms group Telenor, I noted that the company had been facing difficulties around establishing a controlling interest in Unitech Wireless, the start-up Indian cellco in which it currently has a minority stake. For India's security agencies, the stumbling block was Telenor's presence in Pakistan and Bangladesh - apparently a cause for concern in light of strained relations with both of these neighbouring countries.

Telenor's immediate problem appears to have been resolved with the Indian Home Ministry's suggestion that security clearance for a bigger stake in Unitech Wireless up could be provided on the condition that none of the staff who have worked at the Norwegian firm's Pakistan operation are employed in India. Other security concerns affecting the telecoms sector more broadly, however, continue to be aired pretty regularly.

For example, all telecoms firms present in India may find themselves subject to further personnel restrictions. Late last week, Joji Thomas Philip of the Economic Times wrote that India's intelligence agencies now want all telcos to have a native Indian in the post of Chief Operating Officer. At present, only operators' CTOs need be a resident Indian citizens, while foreigners are allowed to hold all other key positions such as Chairman, MD, CEO and CFO, subject to clearance from the Home Ministry on a yearly basis.

If enforced soon, this proposed new regulation might not make a big impact right away because, as Philip notes, none of the existing telcos currently has a foreign COO.

This is not to say that such restrictions will have no impact, however. An article in today's Financial Times goes as far as stating that such stringent personnel requirements would lessen the appeal of India for foreign strategic investors and will restrict the freedom of companies already operating in India to make use of existing foreign expertise within their global organisations.

The article also contends that such restrictions on management positions could complicate corporate merger and acquisition activity such as Bharti Airtel's planned tie-up with MTN, the South African telecoms firm with interests across and beyond Africa. This would just add to the concerns of some analysts who are already sceptical about the wisdom of that proposed deal for Bharti Airtel shareholders. On Monday, India's Financial Express noted that day's 4.8% drop in the market-leading cellco's share price, which seems to have been triggered by worries that the company will increase by 5-10% its offer to buy a stake in MTN. The article quotes Sonam Udas, VP Research at BRICS Securities, who says: "we don't understand the logic for this deal at all. Why does Bharti want to change from a company with a net cash position of USD 1 billion to a debt-ridden firm? We do not buy the argument the deal is going to add value. There is nothing in the deal to highlight as adding strategic value."

Operators may not be the only telecoms value chain participants affected by the Indian Government's security concerns. Joji Thomas Philip writes that the Home Ministry fears that "suspect vendors may install back-door entries, remote logic facilities and also design Trojan horses in networks and hardware. This could be used to remotely bring down the network or to monitor it." Philip states that the agencies are particularly concerned about Chinese vendors.

One definite casualty of all this worry about national security is Swiss-registered firm ByCell. On Saturday, the Economic Times confirmed that after much wrangling, the company is to be prevented from entering the Indian mobile services market, with security concerns about the company and its shareholders being the deal-breaker.

A busy week for Indian market watchers so far, then. Let's see if the rest of the week has enough action in store to warrant another look here at DTW.

India Week continues at DTW

MNP draws closer in India: How will cellcos be affected?

After years of discussions, it now seems that the imposition of Mobile Number Portability (MNP) in India really might be imminent. As noted in local reports last week, the Telecom Regulatory Authority of India (TRAI) recently announced that its guidelines for MNP should be in place later this month and has asked operators to be ready for a quick implementation.

In the meantime, the country's cellcos continue to disagree on the desirability and likely impact of number porting in the country. Joji Thomas Philip of the Economic Times reports that, "in a move which could make it significantly costlier for mobile users to change their operator while retaining the number", GSM operators are demanding that only those who wish to change their numbers be made to bear the cost of the enabling technology.

Philip writes that state-owned telco BSNL estimates its implemtation costs for MNP will be around USD 250 million and that only 2% of "elite customers" are likely to use the facility. Philip contunues that "going by BSNL's formula, back of the envelope calculations show that it will cost about [USD 125] per user to port... number[s]".

BSNL, then, is proposing that these costs should not be borne by the subscriber base as a whole:

"Only those customers for the benefit of whom the MNP is being implemented should be made to bear the cost of the same and not the ordinary customers, who are not going to get any benefit from the implementation of MNP. All these customers, who will utilise the MNP, are big entrepreneurs, professionals [and] businessmen who will save huge switching costs, otherwise, they will have to invest on informing friends and business partners about new number, missing calls from uninformed people and updating company web pages, brochures and business cards etc. These customers can afford and must pay for availing this facility," BSNL said in a statement to the TRAI.

This concern for the vast majority of less affluent subscribers seems admirable enough. BSNL and fellow state-owned telecoms operator MTNL, though, would appear to have a compelling need to avoid taking on a lot of extra cost, if we are to believe some analysts. As reported today by Rashmi Pratap (another Economic Times writer), industry watchers such as HSBC Securities analyst Rajiv Sharma are warning the public sector telcos not to make significant further investments in 3G mobile technology.

Sharma feels that MTNL is better placed to leverage its fixed line infrastructure for wireline broadband products, and is sceptical about the chances of the operator's plans for partnering with an overseas telecoms player to run its 3G operations, asserting that "the chances of MTNL benefiting from such a structure will be restricted as the state-owned enterprise culture of the company will get in the way of foreign telcos, restricting their ability to deliver."

Rakshmi Pratap also quotes Alok Shende of Ascentius Consulting, who believes that the below-industry ARPU recorded by MTNL and BSNL reflects that the companies have attracted price-sensitive, low-MOU subscribers who do not use VAS and would not gain from the enhanced capabilities of a 3G offering. Sharma writes that in the six months since its 3G launch, BSNL has roped in just 10,733 subscribers and that the figure for MTNL stands at "a dismal 902", an average of just 150 per month across Mumbai and Delhi, considered the two most lucrative 3G markets in India.

If these observations about the state-owned telcos' subscribers are accurate, I can perhaps see why BSNL has said that only a very small percentage of its customers are likely to gain from MNP. If the bulk of the telco's subscriber base really is so price sensitive, I'd guess that use of multiple prepaid SIM cards is widespread, with customers switching between service providers to take advantage of the optimum tariff for any given call.

How widespread? Gartner analyst Madhusudan Gupta, quoted in a Forbes India article by Rohin Dharmakumar back in June, estimates that 10% of all mobile connections in India might be instances of one phone/person with multiple SIM cards. Dharmakumar writes that India's mobile subscription numbers may also be somewhat inflated by churn, stating that 35-50% percent of prepaid connections (which, he says, form 93% of all mobile connections in India) become idle. Separating live (but infrequently used) subscriptions from totally inactive ones seems to be made harder by the existence of numerous approaches to gauging the validity of a given sub. Due to the rapid evolution of lifetime offers, writes Dharmakumar, each operator is saddled with lifetime subscribers bound by different contracts - some are required to recharge once in six months to stay active while others get by simply by getting an incoming call every few months.

In this context of low ARPU subscriptions and high churn, one can perhaps sympathise with BSNL's point of view regarding the costs of implementing MNP services only likely to benefit an affluent minority of their customers.

Joji Thomas Philip notes that two other GSM players are supportive of BSNL's argument. Bharti Airtel, for example, is of the view that "all operators who make the investment (for MNP) are entitled to recover their costs". The market-leading cellco has told the TRAI that "the investments being made by operators for the implementation of MNP needs to recovered only from the consumers who want to port their numbers" and that "ordinary customers should not be penalised by increased tariffs and call charges." Idea Cellular has chipped into the debated by observing that service providers should be compensated for the one time CAPEX and recurring OPEX involved in MNP.

Strongly opposed to this line of argument, writes Philip, is CDMA operator Reliance Communications, which also launched GSM services earlier this year. The cellco asserts that since it costs less than Rs 50 (around one US dollar) for a prepaid subscriber to take a new connection, the porting cost should be lower than this figure and has suggested that the any fee charged to the individual consumer be fixed at Rs 20. If we are to believe the output of MTNL's number-crunching, Reliance Communications seems to be a strong advocate of spreading the much, much higher costs of MNP across a subscriber base most of which is not likely to be interested. Is Reliance motivated to take this position by its status as a new entrant in the GSM space? To do so, I would have thought, is to buy the idea that MNP helps new entrants and hurts incumbents. The last time DevelopingTelecomsWatch visited the MNP issue, we considered an alternative view - as articulated by Raymond Yu of telecoms think tank Ovum - that all MNOs are vulnerable to MNP-driven churn. Yu cites the cases of Greece and Lithuania, where the largest operators actually managed to increase their market shares immediately following the introduction of MNP.

Aside from this disagreement about how best to spread the cost of implementing MNP, what else might India's operators need to consider? ARPU may be one worry, reported Rajesh Kurup of the Business Standard in June, basing his article on a study by stokebrokers Angel Broking. This study indicates that ARPU would be negatively impacted by around 5% and that telcos' margins would also drop by 100-150 basis points and earnings per share estimates would be pruned by 9-21%. Angel Broking belives that an increase in subscriber acquisition and retention costs plus higher capital expenditure to improve service quality are also expected to exert pressure on margins and earnings growth.

What proportion of post-paid subscribers might be motivated to churn once they have the option of retaining their existing numbers? An EFYTimes article last month, drawing on a recently conducted Mobile Consumer Insights study by the Nielsen market research company, reports that around 18% of contract customers will change service provider once MNP is live. The figure is higher for customers of Tata Teleservices and Reliance Communications.

According to the study, around 55% of respondents were generally satisfied with their operator, but only 48% are satisfied with network quality. The operators are probably concerned by the fact that scores for network quality satisfaction were down compared to previous iterations of the Nielsen study. Bharti Airtel, BSNL and Reliance Communications have registered the biggest drops in this metric. According to the study, 43% of the people polled are satisfied with the price they pay for their service.

My feeling is that ARPU in India is already so low that differentiation by quality of service could prove to be a more powerful tool for any operators which cope best with this issue in India's highly competitive market. I don't imagine that competing more aggressively on price than is currently the case could be sustainable for very long.

India's operators may be interested to note that loyalty to operators is, according to the study, higher among lowest socio-economic groups, older age groups and among female customers.

Lots to think about, then, for India's numerous competing mobile operators. Let's see, however, if this end-of-year deadline for MNP going live is really going to be met. Past delays have been numerous and India would not be the only country in the world to see shifting deadlines as the many concerns about MNP are debated. Right now in Thailand, for example, while MNP regulations have come into force, it is not yet clear when mobile subscribers will be able to port their numbers as operators are not yet ready for the service, TelecomPaper reports.

MNP draws closer in India: How will cellcos be affected?

Where will MNP go live in 2009? How should MNOs respond?

With Mobile Number Portability now about to hit the Indian market, the country's technology media are following the debate about how much impact this is likely to have.

Jatinder Singh, writing for Voice & Data magazine, notes that MNP has been a long time coming:

"After years of discussions and apprehensions by major telecom operators, MNP or mobile number portability, is finally going to make inroads into the Indian telecom market. [The] TRAI has approved the pan-India implementation of MNP, and [the] DoT has framed the timeline of its implementation; it is expected to hit the market by year-end."

Singh notes that MNP will be phased in piecemeal, region by region, starting with Delhi, Mumbai, Kolkatta and Chennai, with nearly 18% of the total cellular subscriber base given the option to change service providers while retaining their current mobile numbers. Singh also expresses the opinion that MNP may force operators to improve quality of service in order to avoid losing customers to rival MNOs.

So, how seriously are India's operators taking MNP in terms of threats and opportunities it might create? A range of views are reported in Jatinder Singh's article:

Kuldeep Goyal, Chairman and MD of BSNL, which currently occupies 4th place in terms of mobile market share with 11.95% of subs according to WCIS, seems upbeat about MNP, saying "It would certainly offer opportunities in the Indian telecom market. We are positive with our market share and would be eyeing more customers once things are in place."

From market-leading Bharti Airtel, Dr Jai Menon (Director, Customer Service and IT) notes that MNP has had varying levels of impact in markets worldwide. "We are ready and believe that it allows more and more customers to come to our network and enjoy the services," says Dr Menon. Also speaking for Bharti Airtel, Deputy CEO Sanjay Kapoor told the Business Standard earlier this month, that MNP "is more relevant in countries where you have long-term contracts", going on to explain that because "India is a prepaid market... number portability won’t be a game-changing opportunity for anybody." For Kapoor, the vast, price-sensitive prepaid segment is already so inclined to regular churn with "the exit and entry cost on prepaid connections... so low", that he does not believe MNP "really adds to value."

It is, perhaps, tempting to assume that a newer market entrant would be welcoming MNP much more enthusiastically, mindful of an improved opportunity to grab customers from established rivals.

Raymond Yu of telecoms think tank Ovum, writing earlier this month, however, contends that all MNOs are vulnerable to MNP-driven churn. He cites the cases of Greece and Lithuania, where the largest operators actually managed to increase their market shares immediately following the introduction of MNP. Yu also recalls the case of Hong Kong, where although all MNOs experience a large number of ports, "this is not unique to the customers of the market leaders."

In India, considerations of this kind may account for the apparently quite muted repsonse of new kid on the block Sistema Shyam Teleservices. The Voice & Data article quotes Vseovolod Rozanov, the company's CEO, as saying "it is more of an opportunity than a threat. However, looking at the experiences of global markets, the influence on change in the market share is not very dramatic." This is not to suggest, however, that Rozanov is completely disinterested in MNP. In a recent Economic Times article he is quoted as saying "number portability will... drive growth for us." The Sistema-backed operation, which has now harmonised its brand with that of the giant Russian cellco which is part of the same group, has, according to WCIS, yet to break the 1% mark in terms of market share.

The Bharti Airtel CEO's comments about market conditions in India somewhat diminishing the relevance of MNP are echoed, to a degree, by remarks made by the head of the telecoms regulatory agency in Uganda. In this case, however, market size rather than the behaviour of prepaid users is being put forward as the argument against imminent deployment of MNP.

A recent Cellular News story quotes Patrick Masambu, Executive Director of the Uganda Communications Commission, as saying that "at this stage, number portability is not something we see as a remedy in this market." Mr Masambu feels that the Ugandan market needs to grow further before the costs could be justified. He added, however though that once the country has passed the 10 million subscriber mark, then MNP could be viable. I find it a little curious that Mr Masambu chooses 10 million subs as the trigger for more actively considering MNP. If you read his comments without knowing the size of the Ugandan mobile market, you might imagine that the country has rather fewer than the 10 million subscriptions. According to WCIS, however, the country had 9.95 subs as of March this year. Hmmm...

In neighbouring Kenya, the deployment of MNP may also be some way off, if a recent article from the country's Standard newspaper is to be believed. The Standard's Robert Ndingwa notes that the Communications Commission of Kenya (CCK) has just three months to go before its September 2009 deadline to implement its version of number portability but states that the regulator is yet make a decision on whether to licence local number portability operators, "leaving consumers at the mercy of dominant mobile service providers." Ndingwa alleges that the CCK "prefers, instead, to hide behind its so-called principle of technology neutrality in the new market structure it introduced."

With some operators and regulators apparently lukewarm about the need for and effects of MNP, it might be worth asking whether views of this kind might mask a degree of fear about number portability. If so, Ovum's Raymond Yu dvises operators in particular not to be too worried, suggesting that each MNO must decide whether to view MNP as a threat or an opportunity and then devise an effective strategy in response.

Yu argues that "essentially, there are two ways to react to the introduction of MNP: either promote it or keep it under covers." In most cases, challenging operators would take the aggressive stance, says Yu, "whereas dominant operators are initially more reluctant to push MNP."

Yu notes that popular strategies for promoting MNP include making it a normal part of the sales process and using marketing to increase consumer awareness and perception of the facility to retain their numbers when switching providers. Strategies to defend against MNP include, according to Yu, simply not advertising it, implementing strong win-back strategies in line with porting requests and employing stronger loyalty and retention initiatives.

Let's see which of these options are chosen by MNOs in India - and in Uganda and Kenya, should MNP become a reality any time soon. According to Raymond Yu, other markets to watch for MNP deployments this year include Ecudaor, the Dominican Republic, Peru and Thailand.

Where will MNP go live in 2009? How should MNOs respond?

A naked giant in a perfect storm

I enjoyed constructing the title of today's offering. The image of a stoic titan leaning into a howling maelstrom of wind and rain, bereft of protective clothing, is a colourful one, not least on a rare day of hazy sunshine and light Spring breezes here in the north London suburbs (when I started this; the rain is now hammering down). I don't expect it's at all obvious what the title refers to, however. I just looked back at recent post headings and thought they've all been a little too prosaic. That Spring feeling just seems to have me waxing lyrical. Dont' worry. What follows is the usual sensible stuff... and the nude giant in the story makes an appearance before the end of this piece.

The giant concerned is South Africa's former land-line monopolist Telkom, which continutes to adapt to a range of changes in its home market. The managed liberalisation of the country's telecoms sector was catalysed by the Telecommunications Act of 1996 and the Telecommunications Amendment Act of 2001, which paved the way for a second national fixed-line operator. With the exception of full mobility, that second wireline player, Neotel, provides a wide range of products including basic voice and data services, high-speed Internet access, VPNs, and network management and hosting.

The new kid on the block, however, has not found competing with Telkom to be without challenges. South African telecoms and tech news portal MyBroadband yesterday picked up a newspaper article whose broad theme is that although the Neotel provides a "welcome" alternative to Telkom, "it doesn't quite offer all the answers."

Penned by Barrie Terblanche of the Mail & Guardian, the article focuses on particular difficulties faces by Neotel in the business telecoms market. Terblanche writes that "years after Neotel received its license to provide South Africa with an alternative to Telkom, by far the majority of small businesses are still forced to depend on the old behemoth for basic fixed telephony – even those businesses situated in the middle of Neotel’s coverage areas in Johannesburg, Cape Town and Durban."

One reason for this, argues Terblanche, is the lack of fixed-line number portability.

The country's telecoms regulator, ICASA, launched a Mobile Number Portability system in Q4 2006, the first instance of MNP on the African continent. This might have happened even earlier had South Africa's three mobile operators not twice asked the regulatory agency to postpone the introduction of the MNP platform. As my former colleague Matthew Reed (editor of Middle East and Africa Wireless Analyst) noted in a South Africa market update some months later, Cell C, MTN and Vodacom claimed more than once not to be "ready to implement portability" on the earlier scheduled launch dates of March and September 2006. This aroused the ire of no less an individual than billionaire industrialist Sir Richard Branson, whose Virgin brand is used by more than 360 companies worldwide - as I write this, I am still aching as a result of my most recent session in a Virgin Active gym and have yet to pay off the credit card bill for my recent trip to the USA on Virgin Atlantic Airlines.

Branson's interest in South Africa's delayed implementation of MNP stemmed from attempts of the country's Virgin Mobile-branded MVNO to carve out a share of the cellular market. Early last month, when discussing the prospect for MVNOs gaining traction in Africa and India, I observed that this has not been an easy task, noting that Virgin Mobile South Africa had signed up just 600,000 subs by end-2008, of which only 200,000 were active. Back on September 27 2006, a member of Matt Reed's MEAWA team quoted Branson as saying "South Africa's mobile players are dragging their heels on this issue, because it isn't in their best interests... they want to lock their customers in. You shouldn't be held hostage by your mobile phone company."

In the same article, this was refuted by a Vodacom spokesman, who said that the delays had been caused by "the technically complex nature of MNP, which requires new business processes to be designed and implemented."

The article, however, also contended that Cell C, then (and now) the country's third placed mobile operator had lobbied for MNP to be introduced more quickly but that Vodacom and MTN had insisted on a longer delay.

Whichever operator(s) may or may not have been behind any alleged MNP foot-dragging, the MEAWA article of the time raised the question of whether number portability would really have any very significant market impact. "Local analysts have played down the likely effect of MNP on the market," stated the article, which reported the view that fewer than half a million subscribers would be likely to change networks within a year.

I don't have to hand a detailed analysis of to what extent MNP may have driven customer churn in South Africa. There was, however, a little jostling in the year which followed the implentation of number portability. Market-leading Vodacom lost ground a little, but maintained a significant lead over it rivals. The bigger winner over that period Sept. 2006-Sept. 2007 seems to have been Cell C, though not to such a degree that the market changed dramatically. Cell C has, however, coninued to make up ground on its competitors since then - according to the World Cellular Information Service, the Oger Telecom-backed MNO now owns 13.80% of South Africa's mobile subscriptions, up significantly from the 8.61% logged in September 2006. I am absolutely not qualified even to speculate to what degree this is due to MNP. That said, my sense is that number portability has not massively changed the South African mobile market.

What, then, is behind Barrie Terblanche's claim for the degree to which the non-availability of fixed-line number portability has hampered Neotel's efforts to compete with the incumbent wireline opearator? He contends "that only business start-ups really have a choice between Neotel and Telkom, because established businesses can ill afford to give up an existing number."

Terblanche goes on to say that it is not only in the small business space that Neotel is finding the going tough. "Another huge hurdle in the full-scale adoption of Neotel by slightly larger businesses", he writes "is its lack of line-hunting facilities. This provides a business with one public telephone number linked to several lines in the business. When a customer phones the number, the exchange hunts for the first available line and puts the call through." The lack of line hunting, apparently to be solved in the next few months, "means that a business with a PABX still has to rent Telkom lines for incoming calls", continued this Tuesday's Terblanche article.

Tuesday was a good day for commentary on the South African telecoms market. Carried the very same day by MyBroadband was another article taken from the country's Financial Mail. This one, penned by a Duncan McLeod, zeroes in on the former fixed-line monopolist. While Barrie Terblanche contends that Telkom is better positioned than its rivals to compete in the enterprise telephony markets, McLeod constructs an interesting piece around the large number of challenges faced by the incumbent.

The article begins by noting that Telkom is soon to dispose of its 50% stake in market-leading cellco Vodacom, which, despite the advances of Cell C, continues to own slightly more than half of the country's mobile subscriptions. McLeod feels that "the divestiture will reshape SA’s telecommunications landscape for the better" and asserts that "it's sink or swim time for Telkom." Despite Neotel's struggles in the business telephony space, McLeod feels that the incumbent's fixed-line business "is going nowhere fast and, with new competition, it is going to have a hard time defending its top-line revenue and profit margins."

Given the powerful position of Vodacom in its home country, and given its valuable collection of subsidiary opcos in Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo, why would Telkom seek to get rid of its stake in the business?

Let me turn once again to MEAWA's Matthew Reed, who in November last year wrote that the sale would free Telkom "from an unsatisfactory relationship with Vodacom." Matt stated "Telkom had hoped that Vodacom would help it to expand into the fast-growing mobile sector and into new markets in Africa, but it has been disappointed by the level of cooperation."

As Matt noted then, Telkom has begun a wireless play of its own. Earlier this month, as reported by TelecomPaper, the operator launched its new Mobi service, which offers mobile voice over a WCDMA network. The mobile service is currently available in Gauteng and Cape Town only.

My understanding is that the shareholder agreement with Vodacom prevents Telkom from building a national mobile network. Instead, to establish a nationwide presence, Telkom must sign a roaming agreement with with MTN and/or Vodacom. Cell C does not fit the bill, having not yet established a 3.5G network.

Beyond the home country, Telkom may also be working to find its own route into the mobile arena. Matt Reed observed in November that the operator had, in 2007, "acquired a 70% stake in Nigerian CDMA operator Multi-Links... and... is thought to have had separate talks with both Zain and Nigeria's No. 2 mobile operator, Globacom, about the possibility of forging partnerships."

Will Telkom's sale of its stake in Vodacom prove, then, to be a smart move? According to Duncan McLeod's article, one vocal supporter of the decision is the incumbent's CFO Peter Nelson, who has praised CEO Reuben September, saying "it showed a lot of leadership and courage... the new Telkom is standalone — I call it the naked Telkom."

This naked giant, McLeod contends, looks set to be caught in "a perfect storm" with the telecoms sector wide open to new competition. Cellcos MTN and Vodacom are free to compete in the wireline area, McLeod writes, also inviting readers to "consider also that new undersea cables will finally end Telkom’s control of international bandwidth."

McLeod reports that Mr. September is, however, "clearly relishing the company’s imminent divorce from Vodacom and the demands of a competitive market" and expresses admiration for the Telkom CEO's willingness to take tough decisions, such as shutting down Telkom Media, the pay TV unit for which a buyer could not be found.

Duncan McLeod wonders whether September will "take flak" for deciding to postpone a project that was set to outsource 19,000 jobs, questioning whether this has resulted from political pressure ahead of the country's elections. CFO Nelson, however, has defended the postponement thus: "We won’t outsource problematic and poorly engineered areas because what happens is you lock in inefficiency and you pay for it forever." McLeod conceded that this is a fair argument, going on to say that "Telkom is still SA's most important communications operator. It is critical for the economy that it doesn’t stumble and fall. Whatever South Africans might feel about Telkom — and it’s often not flattering — September deserves their encouragement."

A naked giant in a perfect storm

India: Aircel invests in expanded coverage; TRAI/DoT wrangles to hamper new MVNOS?

My most recent post here was a discussion about the prospects for MVNOs gaining traction in emerging markets. Specifically, I rounded up views about which of India or Africa (taken as a whole) would be first to see truly mass-market MVNOs.

Anyone betting on India may be disappointed to hear about potentially quite unhelpful disagreements between the country's telecoms regulator and Department of Telecommunications. One of these is a difference of views about the question of whether prospective MVNOs should be allowed to be hosted by more than one MNO in a given area. According to an Economic Times (India) article today, the TRAI position is that each MVNO should stick to a single network. The DoT has decided otherwise.

This, and other bones of contention, may delay the market entry of MVNOs. As the Economic Times article notes, while the Indian Government has already cleared the entry of MVNOs, it has not issued policy guidelines because of the DoT and the TRAI failing to arrive at a consensus on several important points.

The TRAI justification for wanting to restrict MVNOs to single operator tie-ups is built on a stated concern about further complicating mobile number portability. A DoT communication to the TRAI also stated that calculation of spectrum charges would also become difficult if virtual operators tied up with multiple MNOs "as each service provider has a different slab for calculating these levies (based on the number of customers they have)." The regulatory body, states the Economic Times article, has also expressed concerns about monitoring and and maintaining service records if MVNOs are allowed to tie up with multiple operators.

The TRAI has also taken issue with the DoT suggestion that each mobile operator should be allowed to share their networks with no more than two MNVOs. The article indicates that the feeling at the TRAI is that this would not work to attract a good number of MVNOs onto the Indian market.

When (and whether) MVNOs make a significant impact in India remains to be seen, then. One Indian cellco, however, is working hard to ensure that its own impact on the market is greatly increased.

­A Cellular News story today reports that Aircel, in which Maxis Communications of Malaysia holds a 74% stake, has announced plans to double its subscriber base and invest USD 5 billion in its network over the next three to five years.

Aircel is not currently among the giants of the Indian cellular area. According to the World Cellular Information Service, the company had just under a 5% share of the country's mobile subscriptions by the end of 2008. Thus far, Aircel has not extended its reach to all 23 of India's circles (regional markets). The Cellular News piece quotes the company's COO Gurdeep Singh as saying that following recent expansion of Aircel's coverage "by April-end, we will launch our services in rest of Maharashtra, taking the total number of circles to 18." Singh added that "Hyderabad is the 13th circle where we have launched our services and with this we have completed our southern footprint."

India: Aircel invests in expanded coverage; TRAI/DoT wrangles to hamper new MVNOS?

Protectionism and unfair competition in Europe's mobile markets?

As someone used to spending a busy week doing business at the Mobile World Congress, I have spent a little time this week wondering what opportunities I might be missing by not attending this year. Given that I am writing this on a pleasant South Florida morning, looking out at a swimming pool, a line of trees and the St. Lucie River beyond them, it might seem odd that I would spend even a second missing the harsh lighting and the long slog around Barcelona's Fira. Two reports from Spain, however, seem to vindicate my decision to use this short hiatus between one job and another to enjoy a family holiday.

The first comes from Dean Bubley of Disruptive Wireless. Dean highlights a few things he's taking away from this year's MWC, of which I was most interested in the idea of "CTO-to-CFO friction" within mobile operators resulting in revived HSPA+ plans and LTE deployment timelines "being pushed out a bit". Dean also reports detecting less overall pessimism about the economy than he had expected but wonders if that might be "because the real doom-mongers all had their travel expenses cut this year." Interesting though these observations are, the part which made me feel really good about taking a vacation during the cellular sector's annual get-together was Dean awarding a "villains of the year" gong to "the GSMA Stasi demanding photo ID to get into the Fira precincts in the morning." While I daresay I will throw myself back into the MWC fray again in 2010, this is the kind of thing I don't miss.

The other MWC report reaching me here in sunny Palm City, Fla. is the ever-amusing Week in Wireless, penned by the mysterious 'Informer' who observes that attendance was noticeably down on previous years. The Informer’s straw poll of a score or so of exhibitors puts the contraction at an estimated 20-25 per cent. The Informer was intrigued to notice that this year there was no sign of exhibition staff scanning badges at hall entrances, something which has been done in recent years to gauge footfall. The Informer wonders if this was a cost-cutting exercise and reserves judgement about the suggestion made by "one naughty cynic" that not measuring traffic in the exhibition halls simply removes any obligation on the part of the GSMA to report exact figures to exhibitors "in a year where those figures might not have encouraged onsite rebooking." The Informer is quite right to label this a cynical suggestion.

This stuff, as the Informer says, is for the conspiriacy theorists. More important than this, the Informer feels that there was also a lot less news than in years past. This is what makes me feel OK about missing out this time. I daresay the next time I attend the old buzz I know and love will be back.

In my most recent post, I was reflecting on the large population of Polish migrant workers in the UK, something which came up in the context of discussing mobile international money remittance services worldwide. The Informer reports remarks made in Barcelona this week by Chris Bannister, CEO of P4/Play, Poland's newest mobile operator, which has been in business for around two years. Mindful of the significance of this large Polish presence in the UK for his international business, Bannister complained about the serious problems caused by failing to get a roaming agreement with Telefónica-owned O2 UK until only three months ago.

According to the Informer, Bannister also has to contend with mobile number portability taking a whopping 51 days in Poland. The Play CEO says that 15% of his subscribers are former customers of the operator's longer-established rivals. Bannister suggests this figure could double if more effective MNP was introduced. The Informer writes that "the incumbent players, Vodafone (Polkomtel), Orange and T-Mobile (PTC), have no interest in seeing this happen", according to Bannister, who also discussed data roaming rates: he can get Eur 3.75 from T-Mobile (I assume this means T-Mobile Germany) whereas E-Plus will do it for Eur 0.25.

Play is one of the core members of the Mobile Challengers Group, an alliance of third and fourth placed competitors in various European cellular markets. The aim of the group is to challenge the competitive environment of the European mobile industry. One of this association's stated intentions is to create a level playing field for all operators and to provide greater choice and better conditions for consumers.

The Informer writes that five CEOs from the Mobile Challengers Group were on hand in Barcelona to raise their grievances about what they see as the protectionist activities of incumbent carriers. The Informer feels that "the existence of this group reflects the power structure of the GSMA, which is controlled by the largest players" and was told by one employee of one of the member companies, when asked about the Mobile Challengers Group's relations with the GSMA: "they hate us."

The Informer observes that "some might view the challengers’ complaints as sour grapes from carriers that lack the scale to compete with more successful players", but feels that 51 days for MNP in Poland and Mr. Bannister's reported discrepancy in wholesale roaming rates does indeed smack of protectionism.

In addition to all of this, I noticed a few WiMAX stories emanating from Barcelona, some of which have a bearing on the question of how far that technology is set to succeed in emerging markets. I will turn my attention to that next time. For now, I really should get on with enjoying my holiday.

Protectionism and unfair competition in Europe's mobile markets?

India's WiMAX/3G debate revisited

It does seem to be India week here on Developing Telecoms Watch. When I posted a link to this blog at the Mobile Consultants LinkedIn group, a member who has worked as an RF networks engineer for a number of the country's cellular operators was very keen to assert in response that his market is "the blue eyed baby for the [global] telecom sector nowadays and adding 8 million subs per month". In my respondent's view, interesting developments to look out for in India will include:

• Site sharing to save OPEX and CAPEX, with "some operators [having] set annual targets of 50-60% incremental sharing".
• As a result of looking at carried traffic and site utilization, "operators are taking a call to switch off some sites during night time to save OPEX".
• Single billing systems for all services provided by an operator, such as mobile, DTH, data usage, IPTV etc.
• Operators identifying common weak coverage areas and areas in high security zones - and planning single sites instead of deploying multiple sites in those areas.
• Operators waiting for number portability "to be deployed ASAP to maximize their revenues".

I concluded Sunday's India-themed post by choosing to infer from a recent report by consultants BDA that there seems to be reasonable case for WiMAX and an even stronger one for 3G in India. Since then I've read articles in which the prospects for both are enthusiastically talked up.

Making the case for 3G, in an interview in an interview with Business Line yesterday was Mr P. Balaji, Ericsson India's VP of Marketing and Strategy. Balaji asserts that Indian operators will be able to roll out services with minimal additional infrastructure costs and that 3G will help to bridge the urban-rural digital divide. "Telemedicine, e-education and e-governance can be offered through 3G in rural pockets," says Ericsson's Balaji, "and this is bound to improve the quality of life of the people."

Asked how 3G stacks up against WiMAX, Balaji states "we believe the Government should leave it to the market forces and not dictate technology choices" and that in his opinion "3G will score in the Indian telecom market because it offers greater economies of scale, faster time to market and multiplicity of handsets".

This is not very surprising. Outlined in a white paper released last month, the Ericsson view of comparisons between WiMAX and HSPA can is as follows: "While the peak data rates, spectral efficiency and network architecture of HSPA Evolution and Mobile WiMAX are similar, HSPA offers better coverage. In short, Mobile WiMAX does not offer any technology advantage over HSPA. What is more, HSPA is a proven mobile broadband technology deployed in more than 100 commercial networks... [and] can be built out using existing GSM radio network sites and is a software upgrade of installed W-CDMA networks. Compared with other alternatives, HSPA is the clear and undisputed choice for mobile broadband services."

The Swedish vendor certainly seems to have lost enthusiasm for the IEEE 802.16 family of standards since making extremely positive noises when joining the WiMAX Forum in December 2004.

Feeling more upbeat about WiMAX in India is research and consulting house Strategy Analytics, whose recent study sees the country's WiMAX subscriber base hitting 14 million by Year 2013 and growing annually by nearly 130%. An Economic Times article on Saturday indicated that the Strategy Analytics report predicts initial investment in WiMAX ventures will top $500 million in India. The US-based research firm feel that after initial deployments primarily in major urban areas pockets, "WiMAX will find relatively greater utility and less competition from competing technologies in smaller towns and villages."

This last point seems to go head-to-head with the claims made by Ericsson's Balaji regarding his envisioned role for 3G networks in India's rural areas. I wonder who will turn out to be right? Or will it be a case of both being half-right?

Another thing for me to wonder about: I wonder if tomorrow will be the day when I finally managed to discuss something other than India's WiMAX and 3G prospects here...

India's WiMAX/3G debate revisited