3G: Will it ever take-off?

I was at GSM> 3G in Mumbai. Not surprisingly, the focus was on what else but 3G.

Where is 3G headed? Forget emerging markets, 3G has yet to really happen in Europe.

As far as Indian operators are concerned, they are still waiting for spectrum. The biggest mobile market, China too does not have 3G as yet. That's because the Chinese government is looking at starting 3G services on an entirely new standard, the TD-SCDMA (Time Division-Synchronous Code Division Multiple Access). It believes that there is no reason for it to to follow the western standard--WCDMA. Maybe.

That leaves just Europe where 3G is happening. Even within Europe, 3G is still being used as a voice service as opposed to a data service. According to a survey, in the UK, 49% of 3G subscribers did not use their mobile phone even once for video telephony. In Europe, only Italy has 10% of its subscribers on 3G. Other nations fall in the 1-5% range. Only Japan has over 10% of its mobile subscribers using 3G, as opposed to possessing a 3G enabled handset.

So where does that leave 3G in India?

It's definitely going to take a long, long time before Indian subscribers actually start using 3G services. Use of 3G for data services could take even longer. That will depend on how services are priced. That in turn depends on how the bidding for spectrum goes. If prices for spectrum go through the roof, then you can simply forget all about people using high-cost 3G services in India. The other issue is the cost of 3G enabled mobile phones. In a market that prefers $ 20 handsets, it will take a while before a dent can be made in high-end phones.

But despite all the negatives on 3G, operators in emerging markets have launched 3G services. The list includes Telkomsel (Indonesia), Globe (Philippines) and Dialog (Sri Lanka).

What is clearly evident is that the big winners in 3G are the vendors more than the operators. After all, people end up buying high-end handsets with a plethora of features that they never, ever use. So even if the operators lose out, the vendors are raking it in.

BSNL growth is stuck for now

The contentious case of state-owned Bharat Sanchar Nigam Ltd (BSNL) tender for 60 million GSM lines is still stuck in court. Unless this case is settled, there is no way that BSNL can go ahead and expand. As things stand, it's network capacity is almost full.
That's great news for the private mobile operators who are adding on a huge number of subscribers. While BSNL added just 643,350 subscribers, Bharti Airtel added 1.71 million and Hutchison Essar added 1.03 million. Despite the poor show by BSNL, the country added over 4.64 million GSM subscribers in December.
In the run-up to 250 million subscribers, the Department of Telecommunications had estimated that BSNL would account for half the 250 million subscribers. Today it has just 67 million of the country's 189 million telecom subscribers (both mobile and fixed). It will take a Herculean effort for BSNl to get back into the race and add another 60 million subscribers by the end of the year. So, it remains to be seen what magic BSNL can do in court so that it can get down to the job of providing phone connections.

The iphone has arrived

After months of debate, it is finally there--the iphone from Apple. It will be available on the Cingular network in the US. The design is mind blowing. So you have the first mobile phone without a key pad. No stylus too. And a big, big screen. Now isn't that what mobile users have been waiting for. At $ 499 it is definitely expensive. But, by the time it arrives in India, prices will be definitely lower.
The iphone is a three-in-one device. It is a phone, an iPod and you can surf the web While the Gang of four--Nokia, Motorola, Sony Ericsson and Samsung--are still silent, I am sure we'll see clones of the iphone by the end of 2007. After all, this is one product that could affect their bottomlines.
But, despite the hype, Steve Jobs will have to battle it out with router company Cisco Systems to use the name. That's because Cisco owns the trademark iphone after it acquired Infogear in 2000. Irrespective of what happens, one thing is clear: this in one product that will change the way the world talks.

The boom continues

The Indian mobile growth saga continues. In December, 4.64 million new GSM subscribers signed up. Add to that 1.4 million CDMA subscribers for Reliance Communications. That's the third month in a row that over 6 million subscribers have been added on. However, the Tata Teleservices (CDMA) numbers are still not available.
Now, India's GSM subscriber base is at 105.42 million. Of that Bharti Airtel accounts for 32 million. State-owned BSNL is behind at 23.36 million followed closely by Hutch Essar at 23.31 million subscribers. During the month, Bharti Airtel added 1.71 million subscribers, while Hutch Essar added 1.03 million subscribers. Reliance Communications too added a million subscribers across CDMA and GSM.
Among the circles, Assam recorded the highest growth at 9.22%. That's double of the national average of 4.6%.
The GSM subscriber base has shot up by 46.92 million during the year, an increase of 80.2% pver December 2005 base of 58.5 million.

Will bid in two weeks: Sarin

Arun Sarin, CEO Vodafone is in Delhi for a day-long visit. He met up with commerce minister Kamal Nath and communications minister Dayanidhi Maran. Yes, he did meet Bharti Airtel's Sunil Mittal. What he did confirm was that Vodafone would put in its bid for Hutch Essar over the next couple of weeks.
He did not rule out partnering with the Essar group. That would ensure that Vodafone does not violate the government norms of 76% FDI in the telecom sector. (Essar has a 33.01% stake in Hutch Essar. However, 22% is through a company abroad.) Vodafone's entry could spoil the party for Anil Ambani's Reliance Communications.

Vodafone in the final lap

Anil Ambani's Reliance Communications is almost out of the race to acquire Hutch Essar. It will be Vodafone that ends up picking Hutch Essar. As things stand, Vodafone is looking at acquiring a 76% stake. However, the catch is that it wants the balance 24% to be widely distributed among Indian shareholders. That's tricky because government norms specify that a significant partner should hold a 10% stake in the venture. That's something that Vodafone does not want. All this is part of its global strategy of full control.
The other thing that Vodafone wants is remote control over the telecom network. This is again something that is not allowed under Indian rules. It has roped in the European Union trade commissioner Peter Mandelson to talk to Indian commerce minister Kamal Nath. This is quite on the lines of what Nath did during Lakshmi Niwas Mittal's battle to acquire Vodafone Arcelor.
Vodafone CEO Arun Sarin is in Delhi to meet prime minister Manmohan Singh, communications minister Dayanidhi Maran and commerce minister Kamal Nath.
However, though it seems now that Essar is also on the sidelines, it could change the game by going to court. That will be to the benefit of Reliance Communications, Bharti Airtel and Essar. The losers will be Hutchison and Vodafone.
Apart from this, the only problem that Sarin will have to contend with is the entry of the Hinduja family into the race. For them money is not a problem. Also, the next generation Hindujas are very tech savvy. As already mentioned before, the battle could be finalised within the territorial limits of the UK.

Voda's at the doorstep

Looks like the battle for Hutch Essar is being coordinated out of the United Kingdom. That's because while Vodafone is based out of Newbury, the Hinduja brothers are in London.
The big question is how many partners will Voda bring to the table.
I guess, Voda finally realised that there is no way that it can get a higher stake in Bharti Airtel. Globally Voda has a controlling stake in most markets. So much so, it has a 100% stake in 15 of the 27 markets it operates in. But it has yet to make a mark in two of the biggest mobile markets. It has 10% in Bharti Airtel and only a 3.3% share in China Mobile. It pulled out of the Japanese operations in 2005. So, out of the four biggest mobile telecom markets, Voda is there only in the United States.
But, irrespective of what Vodafone wants, under DOT norms it can have a maximum of 74% equity in the venture. The rest has to come from Indian investors. Going by that, Vodafone could pick up 51% in the venture while letting Essar increase its stake to 49%. That's what Essar has been wanting to do for a long time. But, that could lead to the next round of battles with Essar, something that Hutchison has had to face for awhile.
Also, Vodafone could get a lot of support from Bharti Airtel. That's because Vodafone will be just as big as Hutch Essar is now. However, if Reliance Communications picks up Hutch Essar the competition could simply overwhelm it. There is talk that Bharti Airtel could even agree to an infrastructure sharing arrangement with Vodafone.
Similarly, the Hindujas are flush with cash. They had also operated the Gujarat licence, Fascel before selling to Hutchison. It had only recently sold its 5.11% stake in Hutch Essar for $ 450 million.
With the focus shifting to Vodafone, the pressure is beginning to tell on Reliance Communications, the Mumbai based telco that is looking to make it to the top of the Indian mobile sweepstakes. if newspaper reports are to be believed, it is willing to pick up a 10% stake in Hutch Essar. However, that does nothing for Anil Ambani, who is looking to operate and control a nation-wide GSM network.
It's time for Arun Sarin-headed Vodafone to flex its muscles. After all his team is checking out on the intricacies of Indian law with the babus in Sanchar Bhawan.

Voda's Blues__to bid or not to bid

UK-based Vodafone is flush with cash. But, should it pay $ 21 billion to get a slice of India's booming mobile market?
One, it already has a 10% stake in Bharti Airtel. It could make a killing by selling off the stake it picked up for $ 1.5 billion (Rs 6,700 crore) in October 2005. Now it needs the approval of Bharti's Sunil Mittal before it acquires Hutchison Essar. That does not seem too difficult.
The real issue is can Arun Sarin justify the high price of the acquisition to picky Vodafone shareholders. Considering that Vodafone has just got out of the mess it went into after acquiring Germany's Mannesmann for $ 202 billion in 2000, that could be a rough call.
However, Vodafone officials are already doing the rounds of New Delhi's Sanchar Bhawan, home to the Department of Telecommunications.
Even if it does manage to acquire all of Hutchison Essar, it will have to dilute 26% of the equity to Indian shareholders. (India caps FDI in telecommunications at 76%). The other way round would be to align with Essar. That could be an issue in the not-too-distant future. Hutchison has had major problems with Essar.
How quickly will Vodafone move? That could be the decider.

Battle for Hutch Essar

It's the third week of the tussle for Hutchison Essar, India's fourth largest mobile service provider. By now, the race is restricted to homegrown Reliance Communications and UK-based Vodafone. The enterprise value of Hutchison Essar has been on the rise. It's gone up from $ 12 billion in early December to $ 21 billion in January.
It's payback time for the Ruia brothers--Shashi and Ravi--who have had serious financial problems over the last few years. This is when their 33.01% stake in the venture could get them anything between $ 5 billion (Rs 22,500 crore) to $ 7 billion (Rs 31,500 crore). For a group that was virtually wiped out a few years back, that's will be an unbelievable come-back.
The best part is that Essar can sell-out, buy up Hutchison's 67 per cent stake or simply sit back and watch the fun as the world rushes in to buy up Hutchison Essar.
In case Essar decides not to sell, it ensures that Reliance is out of the race. Under the Department of Telecommunications norms, no telecom company can have more than 10% stake in two operators in a circle (basically a state). The only way out is to pick up a 100% stake.
Considering that rivalry that Essar had with the undivided Reliance group, that may be an option. But, since the Essar fight was with Reliance patriarch Dhirubhai Ambani and Mukesh Ambani, letting Anil get his share would be a way to settle scores. That, of course remains to be seen.