WhiteBox Mobile Manufacturers Focus on Quality & Sub $200 Models

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WhiteBox SmartPhone ManufacturersMany are still under the impression that whitebox market smartphone are of low quality and are barely usable. The business have started to change their mentality and focus more on quality. During our multiple trips to China in the past 6 months, we’ve witnessed a huge improvement in whitebox smartphone quality. With better economy of scale, prices also have come down very rapidly.

Most consumers are willing to pay a premium for branded products over Chinese brand / whitebox smartphone, especially in the mid to high end segment. However, we believe that in the sub US $200 segment, whitebox makers can offer similar form factor design but much better hardware specifications at lower prices. As such, it’s extremely difficult for branded players to compete with whitebox makers.

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MidSize Players Supporting Voice Tariff Discipline

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A quick analysis of publicly available financials of mid-size players, viz., Tata DoCoMo and Aircel group indicate that they would require to hike prices by 10-15% just to service the Interest Cost. Though the cash burn has been funded by debt so far, the lack of equity financing leaves them with no alternative but to support the new round of price hikes. It is important to note that the tariff hikes led by incumbents (primarily Airtel) in mid-2011 failed partially because of the lack of follow up from challengers, i.e., Tata Docomo, Aircel and even Idea.

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Multiple Recharge of Top-Ups Positive But low value data packs Negative

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Wireless Indian Industry Trends from our recent circle-level retailer sampling and interactions with Operators indicate that tariff increases and smaller players restricting their footprints to fewer circles should add 150bps to QoQ revenue growth rate over normal seasonality.

The frequency of top-ups has been increasing. The mix also has been improving as upselling (to higher denomination vouchers) has
seen some success. In this round of tariff increase, no telco has played spoilsport until date.

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How is 4G LTE Different from GSM ?

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We’d like to draw parallels and compare and show to readers How 4G LTE is Different from GSM. The underlying multiplexing schemes in both 2G (GSM) and LTE appear similar: in both cases, multiple users are handled by ensuring that no two users send messages on the same frequency bucket at the same time (i.e., both technologies use a combination of frequency division and time division).

However, GSM is quite rigid in its resource allocation: a user is assigned one frequency bucket at the start of the session and he gets to send messages within that frequency bucket once in every eight time slots. Further, the allocation is frozen at the beginning of the session and remains fixed throughout the session.

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Tata DoCoMo Mobile Base Tariff Increases by 100%

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Tata DoCoMo under revenue pressure has started following market leader, Airtel. Tata DoCoMo GSM / CDMA credited for launching the Most Disruptive Telecom Tariff ever in the Industry 1 Paise / second has raised the Base Tariff by 100% to 2 Paise / Second. The Rise is Applicable to All Connections being activated on or … Read more

Will Reliance Jio Infocomm & RCom – Ambani Brothers Manipulate Policy for Larger Telecom MarketShare ?

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Reliance Jio Infocomm a 95% subsidiary of Reliance Industries Ltd controlled by Mukesh Ambani and Reliance Communications controlled by Anil Ambani have joined hands at the beginning of FY 2014. Anil is meeting Mukesh every fortnight to discuss co-operation in business. Ambani’s have manipulated Government policies to suit their needs and what are the chances that they may do it again ?

The following chart shows the Spectrum Spread of Reliance in GSM / CDMA / 3G and 4G LTE Bands

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Reliance Jio Infocomm + RCom Network = Easy Time to Market

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Reliance Jio Infocomm announced on April 2, 2013 a telecom infra sharing deal for its telecom venture with Reliance Communications (RCom) of Anil Ambani Group. The deal entails payment of Rs12bn by RJI as indefeasible right to use (IRU) fees for lifetime usage of 120,000 kms of nationwide inter-city optic fibre network owned by RCom. It also gives RCom reciprocal access to RIL’s future fibre network.

It gives some visibility on Reliance Jio’s 4G LTE telecom venture,

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Data a Long Term Game for Telecom Infrastructure Companies

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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

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