Last Week, Reliance Jio Infocomm [RJI] and Reliance communications announced Inter-City Optical Fiber sharing Deal. Reliance Jio Infocomm plans to launch a nationwide LTE network following its spectrum win in mid-2010.
Citigroup analysts Wrote,
Month: April 2013
Data a Long Term Game for Telecom Infrastructure Companies
The present 3G coverage of most telcos even though thin (8% of 2G BTS), is largely via the loading route. At present, telcos are mounting 3G BTS on sites where they already have their 2G BTS and it is not counted as a new tenancy. Telcos pay c8-10% incremental rentals for 3G deployments via the loading route. Separately, given the rising input costs, we believe operators are unlikely to sign up new towers for 3G.
We believe unless smartphone penetration picks up meaningfully, operators will continue the low cost approach for 3G coverage expansion. We believe data revenues will need to cross a threshold
Why Idea Cellular Desperately Needs 900MHz Spectrum ?
900 MHz spectrum remains a major factor along with the incumbency factor for market leadership in various circles. Idea holds 900 MHz spectrum in 9 service areas covering ~48% of national revenue and ~72% of Idea’s revenue. The following Chart Shows Idea Cellular’s Revenue in Circles of 900MHz
Tariff increase – what is different compared to increases in mid-2011?
Indian Mobile operators raised tariffs in June 2011 which led to an increase in RPM in subsequent quarters. However a tariff war and RPM pressure returned and tariff hikes were not sustained. Many Investors questioned us on how the recent industry actions of lower discounting and raising RPM compared to 2011.
Not only had industry financials deteriorated from 2011, there is the pressure of significant regulatory costs faced by all operators. Industry over capacity is getting addressed as new entrants as well as existing operators (like Tata and Aircel) are shutting cell sites/circles selectively.
Baidu Weigou Testing Google MarketPlace / Product Search Like Ads
Chinese Search Giant Baidu reportedly has been testing a web application, Baidu Weigou. As part of the service, Baidu will display product information and prices from e-commerce sites (similar to that of Google Product Search) under the search box, based on the product queries entered by users. Clicking on these products will direct users to a “fast buying” channel on the same search results page. Users are able to place orders by simply leaving their mobile phone number, recipient name and delivery address. Currently only cash on delivery (COD) is supported.
According to our channel checks, the service currently only supports a limited number of products for transaction, such as the iPhone4S, Wu Liang Ye (a famous Chinese liquor brand), Dove Chocolate, etc. Meanwhile, fuzzy search queries (e.g. an input for “iPhone” instead of “iPhone4S”) do not seem to trigger the Weigou feature.
The Rise of Analytics in Computing / IT Services
In recent years we have witnessed a rapid proliferation of data globally. The total size of data center traffic is estimated by Cisco1 to be ~2.6 ZB and expected to reach ~6.6 ZB by 2016 at ~31% CAGR over 2011-16. As per Wipro’s estimates, the amount of big data stored globally is to the extent of ~6,500 petabytes.
With data proliferation, there is a greater need to analyze the data and use it to tweak systems and processes as well as provide real business insights. Worldwide business analytics services revenues have thus grown at ~10% CAGR over 2009-11 in a period where overall IT Services spending has grown at ~5% CAGR.
Cloud Hype was greater than reality
Over the past few years, there was a lot of hype around cloud-based technologies and their benefits. Today, most enterprises have done / continue to do cloud pilot projects, proofs of concept and initial implementations. However clients still must get comfortable with new contract structures and address concerns on security and data privacy.
Cloud broadly encompasses three main opportunities – (1) SaaS – provision of software; (2) PaaS – an application platform; and (3) IaaS – storage and infrastructure. Opportunities also exist for consultants, integrators and aggregators who help clients progress into the cloud and manage a range of services on the cloud.
Reliance Jio Infocomm – Data Only Strategy Reaches Small Market Segment
If Reliance Jio Infocomm launches with a data-only dongle priced at ~Rs5,000 (US$91), it could target the high-end subscribers who currently contribute 5% of industry revenues (and hope to win only the data spend of these customers). The total addressable market for RIL Infotel is restricted to ~US$750 mn upon launch share) not big enough to build a business case considering the US$2.5 bn paid for spectrum by the company in 2010.
Addressable market with a data + voice handset strategy
However, by launching a handset [LTE Capable with CSFB] priced at Rs7,500 (US$136), the addressable market upon launch becomes the subscribers who account for 20% of industry revenues worth US$8 bn (and the company has a chance at capturing the entire spend of these customers, including voice). This compares with ~US$4 bn the company may have to spend on 2G and LTE spectrum
Whats Stopping Reliance Jio Infocomm from Nationwide 4G LTE Launch ?
It is widely believed that Reliance Jio Infocomm will do to data what Reliance Infocomm did to voice a decade ago – democratise the product by taking the price points low enough to have mass appeal. The strategy we have outlined above is seemingly elitist, in that the focus is not on the bottom of the affordability ladder but on the top end.
Apart from the absence of a Robust Network combined with Mukesh Ambani’s ego problems to strike a Passive Infrastructure Sharing Deal with Reliance Communications, we believe that the key hindrance for Reliance Jio Infocomm to launch a truly mass-market strategy is the weak device ecosystem and hence high prices. In voice, the company tried to resolve the problem by offering upfront cash subsidy on device costs. However, we believe
Airtel’s Aggressive India Helps Gain Revenue Market Share
Airtel’s aggressive India mobile strategy, started in Apr-2012, is bearing fruit. On the one hand, the company has managed to bring about discipline in the industry on tariffs and costs, while on the other it has managed to reap rich market share dividends (60% share of incremental industry revenues in the first nine months of … Read more