Broadband penetration in India’s rural areas continues to be quite low at 29.1% against national average of 51% with 687 million subscribers as of March 2020, according to a new report by Deloitte titled “Broadband for inclusive development—social, economic, and business.” Also noteworthy, fixed broadband penetration in India.
“Broadband penetration has grown at an impressive CAGR of 35% in India over the past three years (2017-2020). However, existing levels of broadband penetration in rural areas (29.1% penetration) and fixed broadband penetration (7.5% of Indian households) across the country offer significant opportunities for growth,” the report said.
Sathish Gopalaiah, Partner and Telecom Sector Leader Deloitte Touche Tohmatsu India LLP said, “This report briefly highlights the state of broadband in our country, how critical and transformative broadband can be for us, the key challenges holding back its growth potential, and certain key interventions that can be made through government policies, government spending, impetus to R&D and product development, and effective on-ground implementation of large initiatives.”
Gopalaiah said the country has witnessed significant progress in broadband in the last three years, primarily on the back of smartphone growth and low data prices. “In the next innings, broadband penetration in rural areas and mass adoption of fixed broadband hold the anchor to continue and accelerate this growth trajectory,” he added.
The Deloitte report also cited statistics from the International Telecommunication Union (ITU) that an increase of 10 percent in fixed broadband penetration yields an increase of 0.8 percent in GDP, and an increase of 10 percent in mobile broadband penetration yields an increase of 1.5 percent in GDP.
According to Deloitte, key challenges holding back the potential growth and mass adoption of broadband in India are right of way issues, cost of infrastructure deployment, levels of digital literacy, and access to affordable devices.
Photo Credit: Mint
Harnessing the full power of broadband is a multi-stage process that would involve availability of stable and high-speed broadband connectivity; accessibility to not only internet but affordable devices such as computers and mobiles; and usability (digital skills and applications/websites for users to rely on, that too, in the relevant vernacular languages).
While India has made significant development in broadband speeds over the years, “there is a large scope for growth in speeds” to enable further growth of technology platforms, social development programmes, businesses, and economic growth.
“As identified by TRAI (Telecom Regulatory Authority of India) significant improvements can be achieved in broadband speeds in the country. An important step is to pursue increasing the minimum broadband speed from 512 kbps to 2 mbps,” it said.
“Significant increase in demand for fixed broadband is estimated to continue, as a result of the pandemic, with extension in work-from-home for most corporates and permanent changes in digital behavior of people in the new normal. The broadband penetration has positive correlation with GDP growth and employment. According to a World Bank report, a 10 per cent increase in broadband penetration levels in developing countries is estimated to lead to 1.38 per cent GDP growth,” the report stated.
The cloud computing market in India has almost doubled from US$2.5 billion in 2018 to US$4.5 billion in 2020 and is set to grow to approximately US$7 billion by 2023. Meanwhile, “IoT connected devices in the Indian market have grown from only 60 million in 2016 to an estimated 1.9 billion in 2020. This growth is expected to continue for both consumer and industrial IoT with multiple sectors adopting IoT,” the report said.
India based IT services provider Tech Mahindra says it has the capability to build and run an entire 4G or 5G network in India. The company’s partnership with Japanese greenfield telco Rakuten Mobile [1.] will help it get more meaningful business in India’s telecom industry, a senior executive said.
Note 1. Rakuten Mobile, together with NEC, is building a 5G Open RAN and cloud native 5G core network based on their own specifications. Open RAN and cloud native 5G core network are two different and independent initiatives.
“We can build and run an entire 4G and 5G or any enterprise network. We have done that already. We bring to the table our ability to design, to plan, to integrate and deploy and then to manage the entire suite of network capabilities, including designing various parts to it in a disaggregated world,” Manish Vyas – President, Communications, Media & Entertainment Business, and the CEO, Network Services, Tech Mahindra, told the Economics Times of India.
In August, the company announced German telecoms company Telefonica Deutschland had selected it for its network and services operations, in addition to further developing 5G, artificial intelligence, and machine learning use cases.
“We are pleased to announce this partnership with Tech Mahindra. We are supported by a globally experienced service provider to consistently drive forward the development of our network and services operations, thus leading to further enhancement of 5G, artificial intelligence and data analysis use cases,” said Mallik Rao, Chief Technology & Information Officer of Telefonica Deutschland.
“This strategic partnership strengthens our long-standing relationship with Telefonica, in which we support the company in realizing its vision of becoming the ‘Mobile Customer and Digital Champion’ by 2022,” said Vikram Nair, President, Europe, Middle East and Africa (EMEA) of Tech Mahindra.
In October 2019, the company launched a 5G enabled Factory of the Future solution. Nilesh Auti, Global Head Manufacturing Industry unit, Tech Mahindra, said:
“Factory equipment holds a great deal of meaningful data which is key to any successful Industry 4.0 project. Tech Mahindra’s solution in partnership with Cisco, will enable us to leverage this data and empower manufacturers to build factories of the future. As part of our TechMNxt charter we are focused on leveraging 5G technologies to address our customer’s evolving and dynamic needs, and enable them to RISETM.”
Tech Mahindra is also looking for strategic investments and acquisition in companies to further bolster its telecom product and services portfolio. The company says the following about their 5G capabilities and experience:
Tech Mahindra provides range of services that enable enterprises to establish private wireless network to span areas of operations & enable a plethora of IoT use cases. Our services remove inefficiencies related to slow, insufficient wireless connectivity & have a strong roadmap to support growing traffic demands for 5G establishment. From media to medicine we believe 5G is “The NXT of Everything.”
Tech Mahindra ccomplishments listed are these:
- 1M+ carrier grade cellular sites designed, delivered and managed
- Enabling 3 of the first 5 carrier 5G introductions in the world
- Strong Telco partnership/reach (80+ Global Tier 1 Telcos)
- 4 smart cities projects launched, Largest WIFI deployments in the world
- 5 connected vehicles engagements, 40+ Connected factories, 12000+ factory Assets
- 600+ Turbines and 100+ aircrafts connected; 2000+ remote healthcare patients supported
Telecommunications Standards Development Society of India (TSDSI)’s 5G Radio Interface Technology (RIT) has met step 7 of an 8 step process of ITU-R WP5D, thereby paving the way for its inclusion in the IMT-2020.SPECS. That impressive accomplishment was achieved at the ITU-R WP5D virtual meeting #35e which concluded on July 9, 2020. From the WP 5D Technology WG meeting report: “The RIT proposed in IMT-2020/19(Rev.1) (TSDSI) also passed Step 7 as “TSDSI RIT.”
As a penultimate step, the description of the TSDSI technology has been included in the draft IMT-2020 specification document. The TSDSI RIT is specified in Annex III. of the draft IMT-2020.SPECS standard, which is expected to be finalized at the WP5D meetings to be held in October and November 2020. Final approval is expected at the ITU-R SG 5 meeting November 23-24, 2020.
The TSDSI 5G RIT specification was described in a July 5, 2019 IEEE Techblog post. The ITU-R had earlier adopted the Low-Mobility-Large-Cell (LMLC) use case proposed by TSDSI as a mandatory 5G requirement in 2017. This test case addresses the problem of rural coverage by mandating large cell sizes in a rural terrain and scattered areas in developing as well as developed countries. Several countries supported this as they saw a similar need in their jurisdictions as well.
LMLC fulfills the requirements of affordable connectivity in rural, remote and sparsely populated areas. Enhanced cell coverage enabled by this spec, will be of great value in countries and regions that rely heavily on mobile technologies for connectivity but cannot afford dense deployment of base stations due to lack of deep fiber penetration, poor economics and challenges of geographical terrain.
Photo Credit: TSDSI
TSDSI successfully introduced an indigenously developed 5G candidate Radio Interface Technology (RIT), compatible with 3GPP’s 5G NR IMT-2020 RIT submission, at the ITU-R WP5D meeting in July, 2019 (as noted in the above referenced IEEE Techblog post). TSDI’s RIT incorporates India-specific technology enhancements that can enable larger coverage for meeting the LMLC requirements. It exploits a new transmit waveform that increases cell range developed by research institutions in India (IIT Hyderabad, CEWiT and IIT Madras) and supported by several Indian tech companies. It enables low-cost rural coverage and has additional features which enable higher spectrum efficiency and improved latency.
From TSDSI: Acceptance of TSDSI RIT as a 5G radio interface standard, a first for India, catapults India into the elite club of countries with expertise in defining global standards. It is a trailblazer that establishes India’s potential to deliver more such solutions that are appropriate to the specific requirements of the developing world and rely on indigenously developed technologies – Design Local, Deploy Global.
Addendum: Overview of TSDSI RIT
TSDSI RIT is a versatile radio interface that fulfills all the technical performance requirements of IMT 2020 across all the different test environments. This RIT focuses on connecting the next generation of devices and providing services across various sectors. In particular, this RIT focuses on:
1. Enhanced spectral efficiency and broadband access
2. Low latency communication
3. Support millions of IOT devices
4. Power efficiency
5. High speed connectivity
6. Large Coverage (in particular for Rural areas)
7. Support multiple frequency bands including mmWave spectrum
While, the current specifications provide a robust RIT, the specification also provides a framework on which future enhancements can be supported, providing a future-proof technology. In the following sections, we provide a basic description of the RIT. The complete details of the RIT can be found in the specification document IMT-2020/20 (ITU TIES account required for access).
Indian wireless upstart Reliance Jio has developed its own 5G solution “from scratch,” according to Jio Chairman Mukesh Ambani (India’s richest man). The company plans to launch “a world-class 5G service in India…using 100% home grown technologies and solutions,” he said in a statement at the Reliance Industries annual shareholders meeting. “Once Jio’s 5G solution is proven at India-scale, Jio Platforms would be well-positioned to be an exporter of 5G solutions to other telecom operators globally, as a complete managed service,” he added.
–>Please see references 1. and 2. below for video clips of Ambani’s speech.
The company’s equipment is ready for deployment this year, as soon as 5G spectrum is available, Ambani said (more details below). A roll-out will be relatively easy, thanks to its existing all-IP 4G network, according to Ambani.
The development supports the India government’s local production push, to develop home-grown alternatives to technology from China (Huawei, ZTE), Ericsson, Nokia, Samsung, etc. Ambani did not outline the exact components developed, but he said the company would look to export the 5G system to other countries as well.
Nor did he comment on India’s IMT 2020 Low Mobility Large Cell (LMLC) submission from TSDSI which is moving forward as a 5G Radio Interface Technology (RIT) that will be standardized by ITU-R in IMT-2020.SPECS late this year.
The regulatory environment for Jio has been incredibly benign for its entire existence, from being given a special national license to the crippling historical license fees being imposed on its competitors. As a result Jio now sees itself as the world’s first ‘super operator’ and it seems to have the full backing of the Indian state in that ambition.
The Business Standard reports that Jio has applied to the Department of Telecom for trial 5G spectrum. The company is reportedly seeking 800 MHz in the mmWave bands 26 and 24 GHz and 100 MHz in the 3.5 GHz band for field trials of its new network in a few metro areas.
If Jio really does have 5G Radio and Core technology, it will be in competition with global wireless network infrastructure giants, such as Huawei, ZTE, Ericsson, Nokia, and Samsung, which dominate the global wireless telecom market.
According to India Department of Telecom (DOT) sources, Jio has said its 5G network solution is ready and it can start trials immediately after spectrum is allocated. It has also revealed that it took the company three years and a few hundred engineers to turn this dream into reality. DOT sources say that, in a communication on July 17th, Jio made a strong pitch for spectrum in the mmwave band, arguing that countries like the US, South Korea, Japan, and Canada are veering towards preference of the 28- GHZ band for 5G deployment, while others like Australia, the UK, and European countries want to be in the 26- GHZ band.
Jio’s reasoning is that, given its plans to offer its 5G products in the global market, it is essential for it to have trial runs of the technology on these crucial frequency bands. It plans to test and successfully deploy the 5G technology on its own network, after which it can be sold overseas to other wireless telcos.
Moreover, it would like to test the technology in dense urban environments in India. Once it has proved itself there, it’s likely to work well in large big cities overseas.
As a result, Jio has requested that 800 MHZ of spectrum be assigned to it in 26.5–29.5 GHZ and 24.25-27.5 GHZ in the mmWave bands. It has also asked for 100 MHZ in the 3.5- GHZ mid spectrum band.
The government’s upcoming auction process is expected to kick-start by August, but it might be limited to only 4G spectrum. The Telecom Regulatory Authority of India has currently given its recommendation for the base price of spectrum in the 3.5-GHZ band for 5G auctions and not for mmwave bands. The DOT is expected to inform the regulator soon about the pricing of the mmwave bands for auction.
The Jio announcement comes at a time when Chinese telecom gear makers Huawei and ZTE face serious challenges, with numerous countries banning the use of their 5G equipment which they allege is, or can be, used by China to spy on them. Samsung is one player that is overly dependent on Jio as it is Jio’s largest client for 4G telecom gear and had earlier applied to the government to undertake 5G trial runs together. Jio’s 5G technology is based on a ‘virtualised 5G network’, which will ensure the current hardware-dependent networks shift to software-centric platforms.
This poses a challenge to current networks, which are based on proprietary technology, where both the hardware and software have to be bought from the same vendor, who then maintains and upgrades the system, leaving operators with limited flexibility.
The new networks being developed will be built on open platforms, so that operators will have the choice of buying hardware or software separately from different vendors or even building the latter on their own on an open platform. They could also ally with information technology companies to undertake system integration between the hardware and software and run the networks.
Apart from flexibility, this will bring down network costs substantially for 5G. According to cloud-native network software provider Mavenir, the new virtualized networks would lead to a saving of 40 per cent in capital expenditure and 34 per cent in terms of lower operations cost for operators.
Commercial space-tech company Vestaspace Technology will launch 35+ 5G satellites this September for pilot to build 5G speed network connections and IoT functionalities for industries.
Sounds a lot like what Elon Musk’s SpaceX plans to do with its Starlink internet satellites. The satellite constellation will consist of thousands of mass-produced small satellites in low Earth orbit (LEO), working in combination with ground transceivers. Starlink is targeting service in the Northern U.S. and Canada in 2020, rapidly expanding to near global coverage of the populated world by 2021.
Image Credit: SpaceX
In a statement Tuesday, Vestaspace said it will release beta version of satellite constellations pan-India in September and fully-operational version early next year into Low-Earth-Orbit or Geosynchronous Equatorial Orbit.
“The company plans to replace traditional fiber networks with all the satellite constellations and to provide high-speed 5G network connections PAN India with its unmanned Software Data processing,” it said.
The company has tested a live-streamed video of 1080p (Full HD) with less than 34 milliseconds latency with the speed of more than 400 Mbps.
With regards to data privacy and security issues, Vestaspace has put 10 layer firewall that does immediate remediation if any false data is found.
Arun Kumar Sureban, Founder & CEO, Vestaspace Technology said, “To solve the complex system and to provide 5G internet network solutions to the Urban, Rural and unserved regions, we have positioned 8 Ground Stations and 31,000 data receptors all over India. This is made possible with the help of accurate positioning and telemetry related activities.”
The Pune, India-based startup has secured USD 10 million funding from an American investment and advisory firm Next Capital LLC, and has been working with ISRO, NASA and other leading space agencies on various strategic projects.
However, we don’t think these Internet satellites have anything to do with 5G which is defined as a terrestial wireless interface (at least that’s true for IMT 2020).
Revenue and profit growth at Indian telecom operators during the financial year ending March 2021 will slow due to lower data growth and weaker economic activity amid the coronavirus pandemic, according to Fitch Ratings.
Mobile service EBITDA will increase by about 15 percent in fiscal 2021 from 25 percent in fiscal 2020, as the industry will realise the full-year benefit of industry-wide tariff hikes of around 30 percent, effective from December 2019.
India telecom operators’ Q4FY2020 EBITDA growth was driven by tariff hikes and 4G data growth, which will decelerate in FY2021, as lockdowns were only implemented from 24 March 2020, Fitch Ratings reported.
Market leader, Reliance Jio, a subsidiary of Reliance Industries Ltd, reported sequential revenue and EBITDA growth of 6% and 11%, respectively, as ARPU growth was less pronounced, at 2%, to INR 131. This was due to the significant proportion of Jio’s customers being on long-tenor plans, on which tariff hikes will be implemented only in 1QFY21. In addition, sale of incremental Jiophones led to slower growth in ARPU. Its monthly data and voice usage per user was at 11.3GB and 771 minutes, respectively. Jio continued to gain market share at the expense of India’s third-largest telco, Vodafone-Idea Limited, as it added 18 million subscribers to reach a customer base of 388 million, the industry’s highest. We expect Jio’s FY21 mobile revenue to increase by at least 20%, led by higher monthly ARPU of INR147 and subscriber additions of 30 million (FY20: 80 million).
Bharti Airtel’s Indian mobile segment’s EBITDA will improve by 15-20 percent, on lower data growth, as smartphone sales are likely to drop significantly in 1HFY21 as feature-phone users are unable to upgrade to 4G smartphones during the lockdowns.
Airtel will be adding around 15 million new subscribers in fiscal 2021 as compared with the earlier prediction of 30 million, as users are unable to port their numbers during the lockdowns.
The pandemic-led economic slowdown will mostly affect lower-revenue users – those who spend INR 50-100 a month – which could prevent further improvements in monthly average revenue per user (ARPU), Fitch Ratings said.
Bharti Airtel management, headed by India CEO Gopal Vittal, is confident that the pandemic will have limited impact on FY21 EBITDA growth, which it forecasts to be at least 25 percent as compared with 25 percent in FY20, supported by ARPU growth to INR 170-175 a month.
Management says that data growth has increased by 20-25 percent in the short-term as users work from home and upgrade to higher-ARPU plans.
Airtel will generate small positive free cash flow in FY21, as Capex / revenue is likely to decline to around 26-27 percent on lower core Capex, interest costs and the government’s two-year moratorium on the payment of existing spectrum dues, which will defer about $840 million in each of FY21 and FY22.
Airtel has almost completed the shutdown of its 3G network across India and has redirected its 900MHz and 2100MHz spectrum for 4G usage. Telecom sector Capex peaked in 2019, as both Airtel and Jio front-laded Capex to expand 4G coverage and capacity and invested in fibre networks and in-building coverage.
Revenue market share is consolidating fast at Jio and Bharti, with Vodafone Idea rapidly losing market share. Vodafone Idea lost about 131 million subscribers in the last six quarters and is struggling to service its debt due to stagnant EBITDA generation, which is insufficient to cover its interest costs. The telco’s subscriber base is shrinking due to its deteriorating network on limited capex. Vodafone Idea has paid only USD 926 million in adjusted gross revenue dues, against the department’s demand of USD 6 billion, and has not yet reported its 4QFY2020 results.
5G Auction to be Delayed:
Fitch Ratings believes a 5G spectrum auction looks increasingly improbable in 2020 in light of incumbent telcos’ limited financial flexibility, a high base price of USD 7 billion for pan-India 5G spectrum in 3.3GHz-3.6GHz bandwidth and a limited business case for 5G, when 4G penetration is only around 50%. Bharti and Vodafone Idea have publicly stated that they will not participate in 5G auctions at such high prices.
A report in The Economic Times of India claims that the government will go ahead with the auction of additional 4G spectrum as planned, later this year but will defer the 5G spectrum sale until 2021.
Bharti Airtel and Vodafone Idea, who were both hit with multi-billion dollar AGR dues by the country’s Supreme Court last October, have both called for the auction to be delayed, as they battle to rein in expenses.
Sources familiar with the matter told journalists at The Economic Times of India that the country’s Digital Communications Commission had met on Monday to discuss postponing the 5G auction.
“Discussions are on to hold the 5G auctions later as some of the telcos need to buy spectrum but 5G may not be the priority now,” a source told the ET.
Light Reading reports that all the Indian telecom providers (including Reliance Jio, Airtel and Vodafone Idea) have asked the government to lower the high base price for 5G spectrum. Airtel says it will not participate in the auction at the current reserve prices. The Department of Telecommunications has attached a base price of INR4.92 billion ($64.9 million) per MHz to spectrum in the 5G band.
Besides the negative effects of the COVID-19 pandemic, another possible reason for India postponing the sale of 5G spectrum is the deteriorating financial position of the telcos. That makes it unlikely the government would generate decent proceeds from the sale of 5G spectrum at this time. A recent court ruling about fees the telcos owe the government has further harmed their financial health, making it harder for them to participate in the auction.
Equally important is that the 5G ecosystem is far from developed. The lack of “use cases” [1.] for the new technology means telcos are unable to justify the high spectrum costs to investors. This was the main reason Vodafone Idea gave when it pushed for a reduction in fees.
Note 1.: The important 5G use cases of Ultra High Reliability and Ultra Low Latency will not be realized anytime in 2021 as it is only 27% complete at this time in 3GPP Release 16. You can’t implement something which hasn’t been specified yet!
India to Miss “5G Bus”:
Muntazir Abbas wrote in a May 23rd ETTelecom post:
India is set to miss the ‘5G bus‘ following the lack of preparedness, unavailability of sufficient spectrum, absence of encouraging use cases, and uncertainty around radiowaves sale for the next generation of telecom services.
“The Department of Telecommunications (DoT) is yet to form relevant study groups and revise the National Frequency Allocation Plan (NFAP) 2018 to include more bands including mmWave frequencies as a part of 5G roadmap,” an industry executive aware of the developments said.
In the past, Prime Minister Narendra Modi-led government maintained that it “won’t afford to miss 5G bus” like in the case of 2G, 3G, and 4G technologies that were deployed in India way later than many countries.
The executive further said that the quantum of spectrum availability in the 3300 – 3600 Mhz range also remains uncertain, while the department has not sought views on 26 GHz from the regulator despite agreeing to its viability for the commercial launch of fifth-generation or 5G networks.
The India government-backed high-level 5G Forum headed by the Stanford University Professor Emeritus AJ Paulraj anticipated the first 5G commercial launch by 2020, while suggesting that most guidelines on regulatory matters be promulgated by March 2019 to facilitate early 5G deployment. That will clearly not happen!
India government authorities have yet to decide whether the 5G market is open to Chinese vendors Huawei and ZTE. Huawei has been banned from several countries, including Australia and the U.S,, over security concerns. Initially, Chinese vendors were not invited to participate in India’s 5G trials, although this was later changed. Now, India’s government is under immense pressure from the US to ban Huawei.
The current backlash against China over coronavirus, which originated in the Chinese city of Wuhan, makes the decision even harder for India’s government. That lack of clarity may have been the main factor in the postponement of the 5G auction, said Gagandeep Kaur, contributing editor to Light Reading
by MG Arun, India Today
Ten years after the Indian telecom was rattled by the 2G spectrum scam and the Supreme Court cancelled 122 licences issued by the UPA government in 2008, the sector is witnessing another upheaval. This time, the apex court has stepped in to ensure that telcos Bharti Airtel, Vodafone Idea and Tata Teleservices pay up over Rs 1 lakh crore in revenue share the government claims they owe in return for acquiring licences and spectrum. The three companies are widely referred to as the ‘incumbent’ players, since the other major operator, Reliance Jio, entered the market only in 2016. According to the Department of Telecommunications (DoT), which issues the licences, the three incumbents owe the government Rs 35,600 crore, Rs 53,038 crore and about Rs 14,000 crore, respectively.
On February 17, three days after the Supreme Court pulled up telcos for not abiding by its January 16 order to clear the dues, Vodafone Idea made a Rs 2,500 crore part-payment to the DoT, with the assurance that it will pay another Rs 1,000 crore by February 21. Bharti Airtel said it had paid Rs 10,000 crore to the DoT while Tata Teleservices paid Rs 2,197 crore.
While the telcos have sought relief from the hefty payments, Vodafone Idea‘s case is particularly complicated, with the court rejecting its plea that the DoT be directed not to invoke the company’s bank guarantees-reportedly about Rs 2,500 crore-to recover dues. “I hope good sense prevails over the government that if it encashes the guarantees, the banks will pay, but the company will go down,” Vodafone Idea’s counsel Mukul Rohatgi told a TV channel.
Industry observers say if Vodafone Idea shuts down, the consequences will be drastic. “It will be a terrible thing for the economy, the banking system, the telecom industry and its customers, suppliers and digital partners,” says a telecom official, requesting anonymity. “Unlike airlines, where the supply breach caused by the closure of, say, Jet Airways could be filled by other players, in telecom, capacity cannot be replaced, including the enormous physical infrastructure. In such cases, the executive should wield its powers and step in to save the operator.”
The industry expects the government to allow it an extended moratorium to make the payments, to redefine Adjusted Gross Revenue (AGR), or even waive interest and penalties, and to stick to the principal amount to be paid. The incumbents and the DoT have been waging a legal battle for around 15 years. The crisis points to ambiguities in policy, which have not only caused confusion, but also left loopholes for telcos to exploit. The government’s handling of the telecom sector has also come under question. What was a sunrise industry now sees players, except Reliance Jio, battling for survival. It all threatens to end in a duopoly that could send tariffs skyrocketing.
The telecom sector was liberalised under the National Telecom Policy, 1994, paving the way for the entry of private players. For a fixed fee, licences were issued in various categories-unified licence, which allowed a firm to offer both wireless and wireline services; licences to Internet Service Providers (ISPs); and licences to provide passive infrastructure, such as towers and fibre. In 1999, the NDA government gave licensees the option to migrate to the revenue-sharing fee model.
As per the model, telecom operators were to share a percentage of their AGR with the government as annual licence fee and spectrum usage charges. The licence fee was pegged at 8 per cent of AGR while the spectrum usage charges were fixed at 3-5 per cent. According to Clause 19.1 of the Draft Licence Agreement, gross revenue included installation charges, revenue on account of interest, dividend, value-added services and so on. Calculated on this basis, AGR excluded certain charges, such as the Interconnection Usage Charge (IUC) and roaming revenues that are passed on to other operators.
While the DoT says it is following the definition of AGR as per the licence agreement, industry sources claim the definition of AGR in the licence conditions underwent revisions regarding the applicable rates for licence fee and spectrum usage charge. While operators wanted to be charged on the basis of their core business, involving use of the spectrum allotted, the DoT said the definition of AGR includes other items, such as dividend, interest, capital gains on sales of assets and securities and gains from foreign exchange fluctuations. In 2001, the Association of Basic Telecom Operators submitted to the government that non-operational income should not be included while computing AGR. However, in 2002-2003, the DoT demanded revenue share as per the Draft Licence Agreement, following which operators approached the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).
A long-drawn-out legal battle followed. Around the same time, the telcos stopped paying their revenue share on the disputed part of the AGR. Operators argued that taxes and levies in India were among the highest in the world and appealed to the government not to press for payment of AGR-based dues. The industry’s contention is that it pays the government Rs 30 for every Rs 100 earned, in the form of levies and taxes. GST is at 18 per cent, and the industry has been demanding that the licence fee be reduced to 3 per cent, and the Universal Service Obligation Fund (USOF) charge to 3 per cent from the current 5 per cent. USOF was created in 2002 to expand internet and mobile connectivity in rural areas. In August 2019, the Cellular Operators Association of India (COAI) alleged that half the funds raised by USOF between 2002-03 and 2018-19 remained unutilised.
In 2015, the TDSAT ruled that AGR includes all receipts except capital receipts and revenue from non-core sources. But on October 24, 2019, the Supreme Court set aside that order and upheld the DoT’s definition of AGR. The incumbents approached the court for a review, but the plea was rejected on January 16 this year. However, the Supreme Court agreed, on January 21, to take up a modification plea filed by the telcos, seeking to negotiate a ‘sustainable payment schedule’. This followed the Union cabinet’s decision on November 20, 2019, that telcos be given a two-year moratorium on payments.
However, on February 14 this year, the Supreme Court slammed the telcos over unpaid dues and warned of contempt proceedings if they did not pay up by March 17. “The companies have violated the order passed by this court in pith and substance,” said the court. “In spite of the dismissal of the review application, they have not deposited any amount so far.” Following the Supreme Court rap, the DoT asked the telcos to pay the AGR dues by the end of day on February 14.
As per reports, the original disputed amount of about Rs 23,000 crore snowballed to the present figure of close to Rs 1.5 lakh crore as the DoT contended that the entire dues accumulated over the past 15 years be paid with interest and penalty.
The Supreme Court was of the view that telecom players benefited immensely from the DoT’s formula of AGR calculation. In its October 24, 2019, order, the court said the “revenue-sharing package turned out to be very beneficial to the telecom service providers, which is evident from the continuing rise in the gross revenue”. Gross revenues earned by telecom service providers stood at Rs 4,855 crore in 2004, Rs 89,108 crore by 2007, and subsequently touched Rs 2,37,676 crore in 2015, said the court.
SIGNALS TURN RED
“The industry is reeling from the Supreme Court decision on AGR. It has further aggravated the already precarious financial position of operators,” says Rajan Mathews, director general of COAI. “The ball is now firmly in the government’s court to fix the vexatious AGR problem, by either eliminating it altogether or redefining it along the lines recommended by the Telecom Regulatory Authority of India and the industry, as well as reduce the licence fee and spectrum usage charge to 3 per cent and 1 per cent, respectively. We believe AGR is an anachronism in a day when operators have paid for spectrum and licences upfront.”
As of January, TRAI pegs Reliance Jio as the largest telecom player, with 369 million mobile subscribers, followed by Vodafone Idea (336 million) and Bharti Airtel (327 million). ‘The increase in Jio’s subscriber base is largely at the cost of the fall in Vodafone Idea‘s subscriber base,’ says a report by India Ratings and Research. While a Vodafone Idea spokesperson refused to comment, company sources said the board had assessed the company could pay up Rs 3,500 crore without delay, of which Rs 2,500 crore was paid on February 17. Vodafone Idea‘s assessment of its dues to the government is “significantly different” from the government’s claim, the source says. For part payments of dues, the company can dip into its cash reserves without affecting its working capital needs. Also, the Indian subsidiary can ask the parent Vodafone Plc to pitch in with Rs 8,000 crore, the source says. The proposed sale of Indus Towers, a telecom infrastructure firm jointly promoted by the Bharti Group and Vodafone Group, would also help.
In a February 17 letter to member (finance), DoT, Bharti Airtel director-legal Vidyut Gulati said that of the Rs 10,000 crore paid, Rs 9,500 crore was on behalf of Bharti Airtel and Rs 500 crore on behalf of its subsidiary, Bharti Hexacom. ‘We are in the process of completing the self-assessment exercise expeditiously and will duly make the balance payment upon completion of the same, before the next hearing in the Supreme Court,’ says the letter, which india today has seen. While a Bharti Airtel spokesperson declined comment on the AGR matter, a mail sent to Tata Teleservices went unanswered till the time of going to press.
The Supreme Court’s October 2019 directive hit the incumbent telcos hard. The year-to-date losses for Vodafone Idea, Bharti Airtel and Tata Teleservices in FY2019-20 stand at Rs 62,233.8 crore, Rs 26,946 crore and Rs 2,840 crore, respectively. Vodafone Plc has already spent over $17 billion (around Rs 1.2 lakh crore) to buy out Hutch and Essar’s stake in Vodafone Essar between 2007 and 2012, and injected several billions of dollars more to acquire spectrum and build infrastructure. Effective December 1, 2019, Reliance Jio, Vodafone Idea and Bharti Airtel announced tariff hikes, for the first time in five years. According to India Ratings and Research: ‘The average revenue per user (ARPU) reported by telcos has started showing signs of recovery in the last two-three quarters. The recent tariff hikes are likely to support the increase in ARPU over the next few quarters.’
Even if Vodafone Idea tides over the AGR crisis by, say, delayed annual payments over the long term, its weak balance sheet makes it vulnerable, as per an SBI Caps note, to incremental regulatory changes. In a three-player market, that could be a reason for TRAI to go soft on it. ‘But the moment Indian telecom shapes up as a duopoly, the regulator may start perceiving telcos differently. Price hikes, pricing power, spectrum pricing-all…may see the regulator taking a tougher stand,’ the note says. While some analysts foresee a Reliance Jio–Bharti Airtel duopoly and higher tariffs, Vodafone Idea is looking to stay in the fight. “There is hope of some relief in terms of staggered payments [of dues],” says a company official. But the options seem to be running out for the British telco that had entered India betting on its high growth potential.
India’s telecom minister has met with the major mobile network operators and invited them to start testing their 5G services. The government also confirmed that Chinese network infrastructure equipment vendors Huawei and ZTE would be allowed to participate in the trials.
The meeting was chaired by telecom secretary Anshu Prakash and was attended by senior representatives of Bharti Airtel, Vodafone Idea, Reliance Jio and all equipment vendors, including Huawei, reports Live Mint. Indian television channel CNBC-TV18 reported the news first, citing a senior official. The trials will be held in January, according to the official, the channel reported.
India’s department of telecom expects to allocate spectrum soon (we’ve heard that before?) for trials, which should begin in Q1-2020, ahead of plans for a spectrum auction no later than April 2020.
India Telecom Minister Ravi Shankar Prasad said earlier that 5G spectrum for trials would be available to all wireless network equipment (base station) vendors. In particular, he told reporters in India earlier this week:
“5G trials will be done with all vendors and operators. We have taken an in-principle decision to give 5G spectrum for trials.” On being asked specifically about Huawei, Prasad said that at this stage, all vendors are invited.
India Telecom Minister Ravi Shankar Prasad
The Indian government believes the trials, which were originally supposed to be held in 2019, will help in the development of the country’s 5G ecosystem. The Indian telcos will be conducting 5G tests with different vendors: Bharti Airtel plans to conduct trials with Nokia, Huawei and Ericsson, while Vodafone Idea wants to partner with Ericsson and Huawei. Reliance Jio, which currently works primarily with Samsung, has applied to conduct 5G tests with the South Korean vendor.
A senior executive at one vendor said the trials should have begun a year ago and now that global testing is over, it does not make sense to start from scratch in India, especially with the auction of 5G airwaves slated for March-April.
India’s telcos have been asking for clarity from the government regarding the participation of both Chinese vendors in 5G activities. Initially only a handful of vendors, including Cisco, Ericsson, NEC, Nokia and Samsung, received invitations to participate in the 5G trials.
The decision was welcomed by Huawei India in a statement, as well as comments from the Chinese ambassador in India on Twitter. Huawei is already active in the country, where it has deployed 4G networks for Bharti Airtel and Vodafone Idea.
The inclusion in India’s 5G trials is of particular significance for Huawei, which faces trading restrictions in several countries, including Australia, New Zealand and the US, because of security concerns. The US has been lobbying the Indian government to exclude Huawei from the 5G market but, equally, China has been lobbying for Huawei and ZTE to be given equal opportunities in India’s 5G market.
The efforts of the US authorities to restrict Huawei’s business had an impact on the vendor’s sales in 2019, though with expected full-year revenues of almost $122 billion it is still by far the largest supplier of telecoms infrastructure globally and the number two player in the smartphone market.
During the past few years, Chinese vendors have provided crucial support to India’s service providers as they attempted to manage their costs and keep tariffs under control. Chinese network equipment is cheaper than the equivalent offerings from Western rivals, enabling traditional telcos to offer services in a market with one of the lowest average revenue per user (ARPU) figures in the world.
The exclusion of Huawei and ZTE from forthcoming 5G deals would almost certainly result in an increase in capital expenditure by India’s telcos: Sunil Bharti Mittal, the chairman of Bharti Enterprises, the parent company of Airtel, spoke out in support of Huawei during a recent event organized by World Economic Forum, stating that Huawei’s equipment was superior to that of its main European rivals, Ericsson and Nokia.
“Glad to know all players got equal chance to participate in 5G trial in India. A welcome move conducive to initiatives like Digital India,” said Chinese Ambassador Sun Weidong in a social media message.
by CanIndia New Wire Service (edited for accuracy and clarity by Alan J Weissberger)
The long honeymoon for India telecom subscribers has come to an end as all the three private wireless telecom network providers — Vodafone Idea, Bharti Airtel and Jio — on Sunday announced pre-paid tariff plans with 40-50 per cent higher rates. The hike comes after three years and amid the acute financial stress the sector is going through after a Supreme Court ruling on adjusted gross revenue. The hikes, however, come with enhanced data and other benefits.
India is currently the world’s second-largest telecommunications market (China is number 1) with a subscriber base of 1.20 billion and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group (BCG). As of January 2019, India has experienced a 165 per cent growth in app downloads in the past two years.
Reliance Jio, the last one to announce a revised rates on Sunday, said it would raise tariffs by up to 40 per cent. “Jio will be introducing new ‘all-in-one’ plans with unlimited voice and data. These plans will have a fair usage policy for calls to other mobile networks. The new plans will be effective from December 6,” Jio said.
“The new ‘all-in-one’ plans will be priced up to 40 per cent higher, staying true to its promise of being ‘customer-first’, Jio customers will get up to 300 per cent more benefits,” it said.
Airtel’s new rates will be effective from December 3. After December 3, the Rs 129 pack for 28 days with unlimited calling, 300 SMS, and 2GB data would cost Rs 148, it said.
A major hike is witnessed in Airtel’s Rs 998 plan with 336-day validity, unlimited calling, 3,600 SMSs and 12GB data. It would be replaced by a Rs 1,498 plan, marking 50 per cent rise, with 24GB data and 365-day validity. The users of Rs 1,699 plan would have to pay Rs 2,398, which is an increase of 41 per cent. It would continue to offer unlimited calling, 100 SMS and 1.5GB data per day. Airtel had merged Rs 169 and Rs 199 plans for 28 days to offer a Rs 248 plan with same benefits — unlimited calling, 100 SMS and 1.5GB data a day.
The Rs 249 plan, which offered unlimited calls, 100 SMS and 2GB data a day, would now cost Rs 298. The Rs 448 and 499 plans for 82 days would now cost Rs 598 and Rs 698 for 84 days.
“Airtel’s new plans represent tariff increases in the range of 50 paise a day to Rs 2.85 a day and offer generous data and calling benefits. Airtel also provides exclusive benefits as part of the Airtel Thanks platform, which enables access to premium content from Airtel Xstream (10,000 movies, exclusive shows and 400 TV channels), Wynk Music, device protection, anti-virus protection and much more,” it said.
The revised Vodafone Idea tariffs too would come into effect from December 3. It has launched ‘First Recharge Packs’ where the four first recharge packs will cost Rs 97 with Rs 45 talk time, 100MB data and voice calls charged at 1 paisa per second along with 28 days validity. Other plans include Rs 197, Rs 297 and Rs 647. They offer up to 1.5GB data a day and unlimited ‘on-net’ calling for 84 days.
Vodafone Idea announced that the ‘on-net’ voice calls would be billed at 6 paise per minute. The ‘on-net’ voice calls after the provided FUP limit will be charged 6 paise per minute, similar to Reliance Jio. It is also providing bundled ‘on-net’ minutes, whereas Jio will be charging customers for IUC ‘top-up’ vouchers.
In unlimited packs with 28-day validity are — Rs 149 plan with unlimited voice (FUP of 1,000 minutes for off-net calls), 2GB data, 300 SMS; Rs 249 plan with unlimited voice (FUP of 1,000 minutes for off-net calls), 1.5GB data, 100 SMS per day.
The company has removed the All Rounder packs and introduced two Combo Vouchers of Rs 49 and Rs 79 with 28-day validity. It has announced new prepaid plans with 2 days, 28 days, 84 days, 365 days validity, and broadly compared with existing plans of similar nature. However, new plans are costlier up to 42 per cent.
Vodafone Idea had earlier said it would increase tariff in December. The announcement has come in the backdrop of its highest quarterly loss of Rs 50,922 crore.
It’s now expected that the state-run BSNL could also hike tariffs. The government and the Telecom Regulatory Authority of India (TRAI) have made it clear that there will be no floor rate for voice or data and the telcos would have to thrash out pricing among themselves to cover up losses.
The original (unedited) article was first published at:
Danish Khan | ET Telecom (editd and corrected by Alan J Weissberger)
Bharti Airtel and Vodafone Idea Limited are now preparing to launch commercial narrow-band IoT (NB-IoT) service in India in the coming months having brought various partners on board to develop a complete device and sensor ecosystem. Both Indian telcos are in currently in various stages of pilot runs in different circles.
Airtel is now deploying around 20,000 sites in Karnataka and Chennai to conduct NB-IoT trials. “We’ll be going with a pilot in a denser way rather than just a few trial sites..in a couple of months, we will be commercially rolling out,” Ajay Chitkara, Director and CEO, Airtel Business, told ET.
Vodafone Idea Limited, on the other hand, has already conducted commercial pilots in eight cities in India, and is now hoping to win its first commercial NB-IoT deployment deal in the coming weeks.
“We’re looking at winning our first commercial deployments over the next six weeks. So commercially we’re also seeing customers now, wanting to buy that. Once we contract them will go and deploy,” Nick Gliddon, chief enterprise business officer separately told ET.
Gliddon said that all eight pilots were conducted in cities like Kochi, Jaipur, Bengaluru, and Chennai and involved smart meters. “We’ve run a long-term trial with those guys to understand how the network and services work.
Airtel’s Chitkara said that the telco’s IoT services are already growing in the country and NB-IoT technology will help it address the demand. “We have around five and a half million subscribers on our IoT side and the way growth is happening, we need to eventually get into NB-IoT.”
Chitkara added that NB-IoT will offer scale as compared to traditional IoT technologies. “130 million devices need to be connected on meter and that is the reason people say that you can’t run on the existing ecosystem.”
Vodafone is also aiming to expand its NB-IoT in India in the next 12 months to tap specific opportunities in the smart city space along with other applications.
NB-IoT is a new 3GPP spec which will likely be included in IMT 2020. It is designed to broaden the future of IoT connectivity, providing significantly improved and deeper network coverage for communication between machines while lowering power consumption by devices.
Both telcos are taking a partner-led approach building a complete ecosystem including sensors, devices and to bring the overall cost down for devices.
Chitkara said that building applications is a challenge, thereby Airtel is bringing partners on board. “…another issue is with all the sensors and other things there is a cost involved so it’s a chicken and egg story…the cost of those 2G sensors still is cheaper so we are making sure at least this whole ecosystem is build up so that we can bring from some more sites,” he added.
Vodafone Idea has already brought over 25 partners on-board and is working towards doubling this number soon to build new use cases around the new technology. These partners are mainly startups and small and medium enterprises that will bring in hardware and software capabilities to enable new NB-IoT use cases.
Rival Reliance Jio Infocomm had last year launched an NB-IoT network with a commercial network available in Mumbai. It is preparing to foray into enterprise services and may expand its IoT services accordingly.
Jio recently claimed that it is the only telco in India to have the capability and network footprint for a nationwide launch of NB-IoT services. Airtel, however, countered the claim by saying that the company’s pan-India 4G network is also ready to support the technology, along with LTE-M.
Within the enterprise business, IoT is expected to be the growth area going forward, given that the consumer retail business continues to face competitive headwinds. India’s IoT market size is expected to increase to $9 billion by 2020 from $1.3 billion in 2016, according to consultancy firm Deloitte.