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3G / HSPA / EVDO / Demand for 900Mhz Spectrum Auction - Day 1

« on: March 05, 2015, 11:10:20 AM »

As expected, despite high reserve prices, 900MHz spectrum is seeing strong demand with price escalation ranging from 0-61%, with average price escalation of 29.8%. This has resulted in 26.2% and 30.9% escalation in spectrum renewal cost for Bharti and Idea to INR77.8bn and INR164.8bn, respectively, for 5MHz spectrum in each of the circle. The cost replenishment of entire spectrum has gone up by 24.9% and 29.8% to INR115.9bn and INR218.9bn, respectively. For 900MHz spectrum, there is still excess demand in 5 circles. Gujarat and UP (West), must-win circles for Idea, witnessed price escalation of 41.1% and 61.0%, respectively. Price for the Rajasthan circle, a must-win for Bharti, escalated by 21.5%.

2100Mhz Spectrum Demand
For 2100MHz spectrum too, there was only limited demand with no takers in four circles (Andhra Pradesh, Delhi, Karnataka and Mumbai), takers at reserve prices in 5 circles (Gujarat, Haryana, Maharashtra, Tamil Nadu, UP (West)), and 5% to 9.2% escalation in 8 circles. In 800MHz spectrum, there were buyers in 9 out of 20 circles, with 9.3% price escalation in the Madhya Pradesh circle.

782

Web 2.0 / Google Won't challenge JustDial in Local Search

« on: March 04, 2015, 09:01:17 PM »

Management believes that Google is unlikely to be a challenger in local search, given 1) content of local listings is difficult to acquire and 2) monetization will be difficult without feet on the street. A similar experience has been seen in US where companies like Yelp have done well despite Googles' presence.

Just Dial believes that a single app capable of handling multiple services over time is superior to multiple apps. It claims that while competition is high across internet segments, the company is unlikely to undertake aggressive marketing techniques to either increase the number of app downloads or encourage usage. High competition has led to an increase in employee cost.

Retention rate has remained at 55-60%; the company remains comfortable with this level. Some 18-20% of the customers don't renew on account of the high mortality rate in the SME segment.

Daily traffic is 1.6m. Mobile remains the largest proportion (~40%), PC is at ~35% and 25% traffic is on voice. Top 10 cities contribute 70% of the traffic, and 10k apps are downloaded daily. It handles 4k reverse auction queries, 2k doctor appointments and 450 table bookings.

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Smart Connected Devices / HTC Vive (the VR headset) and Grip (the smart wristband)

« on: March 04, 2015, 10:51:10 AM »

At the MWC2015, HTC's wearable strategy was unveiled, find a good partner for niche products. This is a sense-making strategy, given it is a latecomer with less resource. HTC tied-up with Valve, a leading online game platform, and released HTC Vive, a betaversion of VR (virtual reality) headset, for third-party game developers.

The consumer version is slated for launch in late 2015. HTC Vive will detect users head movements to provide a 360-degree view of the vision field, with the help of multiple built-in sensors. Also, HTC teamed up with Under Armor, a leading sportswear brand to launch HTC Grip, a GPS-enabled smart wristband (retailed at USD199) for fitness monitoring (via UA Record app) and message/task alerts. This rugged, waterproof device works with both iOS and Android OS devices

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3G / HSPA / EVDO / Why TRAI Proposes Reduction in Ceiling Tariff for National Roaming ?

« on: March 03, 2015, 03:20:36 PM »

TRAI (Telecom Regulatory Authority of India) has issued a draft amendment to reduce the ceiling tariff for national roaming services. TRAI has proposed to reduce the ceiling on national roaming voice tariff by ~35% and national roaming SMS by ~80%. Incumbents' tariff plans suggest the current roaming tariffs are largely priced at existing ceiling rates; however, special tariff vouchers with discounts on roaming minutes are available.

TRAI is of the view that the reduction in ceiling tariff will result in an increase in roaming outgoing as well as incoming minutes. TRAI had last cut the ceiling on incoming roaming minutes by 25% (Rs 1/min to Rs 0.75/min) in 2013. Since then, incoming roaming minutes per outroamer per month has increased by 26%; however, outgoing minutes per outroamer per month has been unchanged.

Currently, mobile roaming revenues constitute ~9% of overall wireless revenues for the telecom operators. Reduction in the national roaming ceiling tariff would imply ~3% revenue impact and ~5% EBITDA impact for operators, but this could be partly offset by an increase in roaming minutes.

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3G / HSPA / EVDO / Why Airtel Must Complete 3G Footprint in Current Auction ?

« on: March 02, 2015, 11:06:25 AM »

Data pricing will come down when Reliance Jio launches services and Intra?circle 3G roaming arrangements will lead to significant losses. This leads to a must?have 3G scenario for Airtel in remaining 9 circles. At reserve price Airtel will need Rs 51.5bn to complete pan?India 3G foot print on 2100MHz except Punjab. In Punjab 2100MHz is not available but 3 blocks of 900MHz are coming up for auction and in Bharti could acquire even 2 blocks (one for 2G and one for 3G) to complete its data footprint.

Airtel has 30,945 eligibility points which is more than sufficient to renew 900MHz spectrum, complete pan?India 3G foot print and even more.

Maharashtra and Gujarat are two critical large circles for Bharti where it does not have 900MHz or 2100MHz spectrum. In all likelihood it will buy 2100MHz in Gujarat and Maharashtra but it might also try for 900MHz which could dislodge Idea from its position of strength in these circles.

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3G / HSPA / EVDO / What is Uninor / Telenor's Cluster Strategy ?

« on: February 27, 2015, 09:34:22 PM »

The cluster strategy has either been introduced or is being introduced across all of Telenor's Asian operations. The strategy was developed - by necessity (is the mother of all inventions) - in India, where Telenor's brand Uninor has focused its efforts on the ground, given the significant competitive intensity of the market and the significant differences between the demographics and financial capacity of its customers.

The idea is to put together all the elements of decision-making and separate parts of the business (distribution, network, etc) at a cluster rather than a nationwide level. We discuss the strategy in more detail for Grameenphone (GP), as we see the benefits in Bangladesh as typical of what could be achieved across the rest of Telenor's Asian footprint over time.

India remains challenged as Telenor needs to build scale and acquire more spectrum. On a standalone basis Telenor India may not lack scale in the circles where it is already present in the medium term, but we think it will need to come up with a strategy to both consolidate the market and increase its spectrum holdings in order to effectively compete in data.

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SmartPhones & Apps / Why Alibaba Invest in Meizu SmartPhones ?

« on: February 27, 2015, 09:14:00 PM »

Alibaba has recently invested in Meizu. The company is comparable to Xiaomi, in that both brands build competitive advantages via the integration of hardware and software. Alibaba Group owns some of China?s top-ranked mobile apps across map services, payment, mobile search, mobile browser, video, etc. The strong portfolio complements Meizu?s hardware strategy and will support competitive user experience.

Management reiterates the strategy to broaden the consumption categories of younger users. Consumers in lower tier cities,
despite their lower disposable income, tend to spend a greater proportion of their income online since the physical infrastructure is poor. Focus of category expansion includes online-to-offline and healthcare products.

Through Aliexpress, Alibaba is tapping into the expanding consumer markets in Brazil and Russia. International growth, however, will take time, as Alibaba also needs to work with their governments to balance imports/exports for healthy current accounts. Management did not rule out acquisition strategies to help with cross-border expansion.

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Smart Connected Devices / Why Americans Went Shopping on Desktop for Valentines Day ?

« on: February 27, 2015, 04:57:33 PM »

Although the gifts of lingerie, jewelry, and chocolates are likely to remain unchanged, the method in which these gifts are purchased is quickly shifting. Consistent with U.S. commerce trends, Valentine?s Day is increasingly becoming an online-shopping holiday for U.S. lovebirds.

With approximately 29% of couples purchasing gifts online, Valentine?s Day (and the weeks leading up to it) has become an important event for online retailers. Even individuals shopping offline are using online sources to complement their off-line buying, with the most popular reasons being: 1) price comparison; 2) product reviews; and 3) finding coupons. Given the last minute nature of many Valentine?s Day?s purchases, we have seen Amazon try to grab share by offering Free One-Day Shipping on select items.

However, one of the more interesting stats of the holiday is the high concentration of purchases that are taking place on the Desktop / Laptop - 75% Valentine?s Day highlights the key role that the desktop continues to play in U.S. e-commerce.

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Web 2.0 / What does Naspers own in India?

« on: February 27, 2015, 04:48:01 PM »

Naspers' investment  is a leading South African and emerging market media holding conglomerate with a diversified portfolio
of media and internet holdings.

Naspers Investments in India include c18% of Flipkart (a horizontal/broad-based B2C ecommerce site), c80% of Ibibo / RedBus (online bus and hotel bookings), and c100% of OLX India (online classifieds). We think that RedBus has a compelling market position(better gross margins, online travel accounts for most of e-commerce spend today, less direct/severe competition), although the sheer size of Flipkart and its market opportunity could capture investor mindshare and headlines.

India is a nascent e-commerce market with large potential (cUS$86bn in 2018) but is fraught with risk in terms of execution, funding, and competitors. ECommerce enjoys improving drivers (internet access, GDP per capita growth, and consumer experience).

What are Competitive advantage in e-commerce ?
First mover advantage (or ?first to scale? advantage) is huge: Brandawareness matters in e-commerce and attempts to acquire customers inorganically against scaled businesses with strong brands and high levels of organic traffic could be extremely costly and may not be successful.

Localization: Another key reason local companies win vs. larger international players is their ability to tailor service and product offerings to local markets

Quality of management: In consumer internet, the team usually matters most at the formation phase of a market. Better management teams should be able to out-execute the competition.

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Technology / Digital Advertising - Google vs Facebook

« on: February 27, 2015, 04:44:07 PM »

Programmatic advertising, adtech, RTB (real-time bidding), ad exchanges, and ad automation ? but at the end of the day they all relate to the use of software-based platforms to automate the buying and selling of advertising. Google is far and away the programmatic leader in online advertising. As a result of savvy acquisitions (e.g., Admeld, Invite Media, DoubleClick, etc.) and internal product development, Google today has leading solutions for both the buy- and sell-sides of the digital ad marketplace, and the scale and breadth of offerings to address most needs in the market.

For Google's adtech business, the key questions investors are asking include: 1) How much of a threat does Facebook and its
new initiatives/acquisitions such as Atlas, FAN (Facebook Audience Network) and LiveRail represent for Google?; and 2) How is Google evolving its adtech business as the market moves from a predominantly desktop- and cookie-based medium to more of a mobile Internet- and mobile app-based medium?

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SmartPhones & Apps / How Lenovo Plans to Repliace PC Success in SmartPhones ?

« on: February 27, 2015, 04:37:44 PM »

Lenovo SmartPhone Strategy volume increase + mix improvement + cost reduction

After Moto's recent come-back to the China market, Lenovo plans to continue growing the Moto business by rolling out to more countries such as India. In terms of market position, Lenovo/Moto intends to avoid competing with Apple and Samsung in the high-end market. On the other hand, it will target the US$200-300 price band where LGE, HTC, and local leaders (e.g., Karbonn in India and Advan in Indonesia) are the major competitors. Lenovo believes that it can replicate the success in PC by growing the smartphone volume first then reach breakeven in 3-5 quarters. Longer term, Lenovo group targets mid-to-high-teens market share for smartphone with 5- 6% OP margin.

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Technology / Success factors for Digital Opportunity

« on: February 27, 2015, 02:39:38 PM »

TCS CEO Chandra highlighted: (a) a strong ecosystem of partnerships with startups, (b) a digital team in each industry unit and (c) development of internal tools / platforms, as company's focus parameters to tap the digital opportunity.

Capgemini group CEO Paul highlighted a big shortfall in new skillsets like data scientists, which can potentially become a source of competitive advantage for large-scale IT services firms. Industry consultants highlighted reskilling of existing employees as a
key success factor, with McKinsey estimating that as much as 50% of the existing workforce may need to be shifted to newer technologies in the next few years.

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3G / HSPA / EVDO / Why Telcos will not Bid for 2100 MHz in 2015 Auction ?

« on: February 25, 2015, 05:29:48 PM »

In our view, telcos would acquire 2100 MHz spectrum to fill in their coverage gaps as no operator has pan India 3G spectrum. With the exception of Vodafone, we see less possibility of telcos looking to acquire 10 MHz of 3G spectrum in a circle.

Given that the defense is looking to free 3 bands of 2100 MHz (15 MHz) in coming months, we believe that telcos would be in better position to acquire 2100 MHz in the next auction round where we would see adequate 2100 MHz supply. Furthermore, as winning
price in this auction would be likely taken as reserve price for the next round, it would make sense for telcos to less aggressive in this auction. We note that on this round, spectrum in only 17 circles (and not pan India is being auctioned).

The risk which top 3 telcos face of not acquiring 3G spectrum in this round is that if some other telco acquires 3G in 17 circles then it would alter the competitive environment in the market. So to avoid such a scenario, existing telcos may look to acquire 2100
MHz in this round.

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4G / LTE / 800 MHz LTE: Is it worth the gamble?

« on: February 25, 2015, 05:26:35 PM »

Government is looking to auction the unsold 800 MHz CDMA spectrum. In our view, the reserve price of this spectrum is not cheap. As the contiguous 800 MHz spectrum could be used for LTE, we expect some telcos to bid for this. However contiguous spectrum is only present in 4 circles ? Mumbai, MP, North East and Assam. Amongst all telcos, we believe Bharti/R-Jio may likely look to acquire some 800 MHz.

In our view, telcos may think of bidding for non-contiguous spectrum if they could realign that spectrum post auctions and make it contiguous. We consider this as a risky move and remain unsure if telcos may consider this strategy. Furthermore, after government
announces spectrum trading/leasing agreements, telcos may look to lease the 800 MHz spectrum from existing CDMA telcos in India

In our view, limited availability of 800 MHz LTE smartphones could be a deterrent for telcos to bid aggressively

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SmartPhones & Apps / Which Analytics to use for Mobile Apps ?

« on: February 25, 2015, 05:16:38 PM »

Out Engineers have tested the Following Mobile Apps and Endorse the Analytics Platforms as Following,

Applicasa
Ad4Perf
App Annie
iMobiTracking
UmberSystems
AppViz
ByteMobile
ATInternet
Flurry
Pre-Emptive
Distimo
Bango

We internally use the following App developer Tools,
Facebook/Parse, Xcode, Appery.io, Mobile Roadie, TheAppBuilder, Good Barbert