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India 4G and Cellular Market

Analysis and Forecasts, 2010-2015


4th Edition

September 2010

By Sridhar T Pai
and
Adlane Fellah

India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition

Table of Contents

EXECUTIVE SUMMARY ....................................................................................... 10

OVERVIEW OF INDIAS TELECOM MARKET ..................................................... 10


2.1

BACKGROUND ................................................................................................. 19

2.2

STATE OF THE TELECOM MARKET ..................................................................... 20

2.2.1

Top Trends in Indian Telecom in 2009-10 .................................................. 20

2.2.2

Top Regulatory Announcements that made an impact in 2009-10 ............. 21

2.2.3

Key Industry Milestones: ............................................................................ 21

2.3
3

TELECOM MARKET STRUCTURE IN INDIA ........................................................... 22

INTERNET MARKET IN INDIA ............................................................................. 24


3.1

BACKGROUND ................................................................................................. 24

3.1.1
3.2

INTERNET ACCESS: SHIFTING PATTERNS .......................................................... 25

3.2.1
4

Broadband Revenue .................................................................................. 26

BROADBAND INFRASTRUCTURE FIBER & TOWER ..................................... 28


4.1

Current ISP market Shares ........................................................................ 24

TOWERS ......................................................................................................... 30

4.1.1

Bharti Infratel ............................................................................................. 30

4.1.2

Indus Towers ............................................................................................. 32

4.1.3

Reliance Infratel & GTL .............................................................................. 33

DRIVERS FOR BROADBAND WIRELESS ACCESS ........................................... 37


5.1

DEVICES: SMART PHONES ............................................................................... 37

5.2

WI-FI HOTSPOT AVAILABILITY ........................................................................... 38

5.3

WIRELESS DATA ACCESS THROUGH 2.5G / EVDO DATA CARDS ........................ 39

5.4

WIMAX ON LICENSED AND UNLICENSED BANDS ................................................ 39

5.5

OPPORTUNITIES FOR 3G/ BWA / LTE IN INDIA................................................... 40

5.5.1

State Data Center ...................................................................................... 40

SDCs Functionalities: ........................................................................................... 40


Some of the key functionalities of SDC are ............................................................ 40
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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition
5.5.2

E-Learning: ................................................................................................ 41

5.5.3

State Wide Area Networks (SWAN) Project ............................................... 42

5.5.4

Opportunities from changing Socio-economic factors................................. 42

5.6

CHALLENGES FOR GROWTH OF W IMAX INDUSTRY IN INDIA ................................ 43

5.6.1
6

REGULATORY ENVIRONMENT: GOVERNMENT AGENCIES ........................... 45


6.1

TRAI TELECOM REGULATORY AUTHORITY OF INDIA ........................................ 45

6.2

DOT DEPARTMENT OF TELECOMMUNICATION ................................................. 45

6.3

WPC W IRELESS PLANNING AND COORDINATION WING ................................... 45

6.4

TEC TELECOMMUNICATIONS ENGINEERING CENTRE....................................... 46

SPECTRUM .......................................................................................................... 47
7.1

3G/ BWA SPECTRUM AUCTION DETAILS ........................................................... 47

7.1.1

Details of 3G Spectrum Auctioned ............................................................. 48

7.1.2

Details of BWA Spectrum Auctioned .......................................................... 51

7.1.3

Frequencies Allocated to MTNL / BSNL for 3G and WiMAX....................... 53

7.2

TRAI BWA / 3G SPECTRUM AUCTION RESULTS ................................................ 54

7.2.1

Spectrum Pricing for 3G/ BWA Licensees ................................................. 58

7.2.2

3.3GHz band and its usage in India ........................................................... 58

7.2.3

3G/ BWA Spectrum fee and financial impact on operators ......................... 60

7.3

Domestic PC Penetration, Income Levels, and Literacy ............................. 44

ANALYSIS ........................................................................................................ 63

7.3.1

LTE and Impact on BWA Opportunities in India ......................................... 63

7.3.2

Spectrum Expectations and Actual Government Earnings ......................... 68

SERVICE PROVIDER ANALYSIS ........................................................................ 69


8.1

MOBILE BROADBAND ....................................................................................... 69

8.1.1

Aircel .......................................................................................................... 69

8.1.2

Bharti ......................................................................................................... 72

8.1.3

BSNL ......................................................................................................... 76

8.1.4

MTNL ......................................................................................................... 83

8.1.5

IDEA Cellular ............................................................................................. 84

8.1.6

Reliance ADA owned Reliance Communications: ...................................... 87

8.1.7

Tata Communications ................................................................................ 92

8.2

BWA LICENSEES AND SPECTRUM WINNERS ...................................................... 95

8.2.1

Augere ....................................................................................................... 95

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition
8.2.2

Qualcomm ................................................................................................. 96

8.2.3

Reliance Industries Limited ........................................................................ 97

8.2.4

Tikona ........................................................................................................ 98

8.3

BWA SERVICE PROVIDER: RESTRICTED OR UNLICENSED BAND.......................... 99

8.3.1

MetaMAX ................................................................................................... 99

8.3.2

Zylog .......................................................................................................... 99

8.3.3

O-Zone ...................................................................................................... 99

BWA/WIMAX EQUIPMENT VENDOR ANALYSIS.............................................. 100


9.1

ALVARION ..................................................................................................... 100

9.2

AVIAT............................................................................................................ 100

9.3

HUAWEI ........................................................................................................ 101

9.4

GEMINI POINTRED ...................................................................................... 101

9.5

INTEL AND W IMAX FORUM INDIA CHAPTER ..................................................... 102

9.6

MOTOROLA ................................................................................................... 103

9.7

SAMSUNG ..................................................................................................... 104

9.8

SLOKA .......................................................................................................... 104

10

POLICY

RECOMMENDATIONS

FOR

CREATING

INDIA

BROADBAND

ECONOMY ................................................................................................................. 105


11

MARKET FORECAST 2010 - 2015 ..................................................................... 107

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition

LIST OF EXHIBITS
Exhibit 1: India Wireless Trends: Subscribers & Teledensity (2000-10) ......................... 15
Exhibit 2: India Fixed Wire-line Trends: Subscriber & Teledensity (2000-10) ................. 15
Exhibit 3: Indian Tele-density % (1997-2010) ................................................................ 16
Exhibit 4: Cellular (GSM, CDMA) ARPU in INR (2001-09) ............................................. 17
Exhibit 5: Tonse Analysis: Circle-wise Cellular Subscribers and Penetration rate .......... 19
Exhibit 6: India Telecom Operators (A-R) 2G, 3G, BWA Operations, Stake Holders
Tonse Analysis .............................................................................................................. 22
Exhibit 7: India Telecom Operators (S-V) 2G, 3G, BWA Operations and Stake HoldersTonse Analysis .............................................................................................................. 23
Exhibit 8: Top ISP Players Market Share & Subscribers (Dec09) ................................. 24
Exhibit 9: Broadband Access Technology by Market Share (Dec08 & 09) .................... 25
Exhibit 10: Operator Wise Broadband Subscribers in Mil (2008-09) .............................. 26
Exhibit 11: Top Players Broadband Revenue in USD Mn (2008-09) .............................. 27
Exhibit 12: Bharti Infratel Towers & Sharing Factor (Q1 09 Q4 10) ............................. 31
Exhibit 14: Indus Towers & Sharing Factor (Q1 10 Q4 10) ......................................... 32
Exhibit 13: Indus Major Stake Holders ........................................................................... 32
Exhibit 15: No. Of Towers in 2009-10 & Projections for FY 2010-11(Reliance Equities
EST.) ............................................................................................................................. 36
Exhibit 16 : Yearly Desktop and Notebook sales (2003-10) ........................................... 44
Exhibit 17: Telecom Operators 3G and BWA Auction Winners (* Excludes STEL) ........ 55
Exhibit 18: Telecom Operators winning 3G Spectrum fee and Frequency allotted circle
wise ............................................................................................................................... 56
Exhibit 19: Telecom Operators winning BWA Spectrum fee and Frequency allotted circle
wise ............................................................................................................................... 57
Exhibit 20: Aircel Corporate Structure ........................................................................... 69
Exhibit 21: Airtel Corporate Structure ............................................................................ 72
Exhibit 22: EDGE/ 3G Devices supported on Airtel........................................................ 72
Exhibit 23: Bharti Wireless Data Tariff Plans ................................................................. 73
Exhibit 24: Bharti Airtel Cellular ARPU & RPM in INR (Q3 08-Q4 10) ............................ 73
Exhibit 25: Idea Cellular Revenue (USD Mn) and RPM (INR): Q4 09- Q4 10 ................ 85
Exhibit 26: Reliance Communications Corporate Structure ........................................... 87
Exhibit 27: RCOM Cellular ARPU & RPM in INR (Q3 09- Q4 09) .................................. 89
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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition
Exhibit 28 : PC ( Desktop & Laptop ) shipment forecast, through 2015 ....................... 107
Exhibit 29 : Cellular Total subscriber forecast, through 2015 ....................................... 107
Exhibit 30 : Cellular GSM subscriber base forecast, through 2015 .............................. 108
Exhibit 31 : 2G / EDGE Data Card User forecast through 2012 ................................... 108
Exhibit 32 : 3G Cellular Data Modem forecast, through 2015 ...................................... 109
Exhibit 33 : Cellular 3G- WCDMA / EVDO forecast, through 2015............................... 109
Exhibit 34 : Total Cellular CDMA Subscriber forecast, through 2015 ........................... 110
Exhibit 35 : Broadband Subscriber forecast, through 2015 .......................................... 110
Exhibit 36 : All India Wi-Fi + Unlicensed BWA+2.3GHz+3.3GHz Subscribers forecast,
through 2015 ............................................................................................................... 111
Exhibit 37: BWA Unlicensed Band (2.4GHz+5.8GHz) Subscriber forecast, through 2015
.................................................................................................................................... 111
Exhibit 38 : WiMAX 2.3GHz Subscriber forecast, through 2015 .................................. 112
Exhibit 39 : WiMAX 3.3 GHz Subscriber Forecast, through 2015 ................................ 112
Exhibit 40 : TD-LTE 2.3GHz Subscriber Forecast, through 2015 ................................. 113
Exhibit 41 : Total BWA including LTE Subscriber Forecast, through 2015 ................... 113
Exhibit 42: BWA BTS India Sales forecast, through 2015 ........................................... 114
Exhibit 43: BWA / WiMAX sectors forecast, through 2015 ........................................... 114
Exhibit 44: Standalone CPE Price Forecast, through 2015 .......................................... 115
Exhibit 45: Mobile CPE Device Price Forecast, through 2015 ..................................... 115
Exhibit 46: Retail BWA Subscriber Forecast, through 2015 ......................................... 116
Exhibit 47: Enterprise BWA subscriber forecast, through 2015 ................................... 116
Exhibit 48: BWA Base Station Equipment Market Size Forecast, through 2015 .......... 117

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition

LIST OF TABLES
Table 1: Internet Sector Updates (Dec09) .................................................................... 18
Table 2: Bulk Fiber Capacity in India ............................................................................. 29
Table 3: Infrastructure Sharing Deals (2009-10) ............................................................ 35
Table 4: Details of 3G spectrum Auctioned for Metros & A Circles ................................ 48
Table 5: Details of 3G spectrum Auctioned for B Circles ............................................... 49
Table 6: Details of 3G spectrum Auctioned for C Circles ............................................... 50
Table 7: Details of BWA spectrum Auctioned for Metros, A & B Circles......................... 51
Table 8: Details of BWA spectrum Auctioned for C Circle ............................................. 52
Table 9: Frequencies allotted to BSNL/MTNL circle wise for 3G & BWA ....................... 53
Table 10: Revised Spectrum Slab rates for 2G+3G spectrum holders ........................... 58
Table 11: Spectrum Assignments in 3.3-3.4 GHz Band ................................................. 59
Table 12: Aircel 2G, 3G and BWA Licensing ................................................................. 70
Table 13: Aircel WiMAX Network Rollout Details ........................................................... 71
Table 14: Bharti WiMAX Network Rollout Details .......................................................... 74
Table 15: Airtel 2G, 3G and BWA Licensing .................................................................. 75
Table 16: BSNL WiMAX Franchisee Winner Details ...................................................... 81
Table 17: BSNL/ MTNL 2G, 3G and BWA Licensing ..................................................... 83
Table 18: Idea Cellular 2G, 3G Licensing ...................................................................... 86
Table 19: RCOM 2G, 3G Licensing ............................................................................... 90
Table 20: TATA 2G, 3G Licensing ................................................................................. 94

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition

1 Executive Summary
India is clearly sitting on the cusp of the next great telecom revolution: broadband. With a current
penetration level of less than 1%, the nation eyes a potential 10% penetration over the next five
years. The biggest indicator of the fact that the wheels of broadband have been irrevocably set in
motion is the long overdue auction for 3G and BWA spectrum which finally completed in June
2010. The government laughed its way to the bank as it surprised itself with an unexpected US$
23.5 billion in license fees after successfully auctioning 3G and 4G spectrum airwaves.
Spectrum-starved Indian carriers bid aggressively at the 3G auctions to circumvent spectrum
shortfalls and to have a chance to start cashing in on the growing data-driven 3G and 4G
business opportunities.

While no single operator won a pan-India 3G license in the summer 2010 auction, seven
operators won licenses for select 3G circles. Reliance Industries won a pan-India BWA license
through its acquisition of Infotel and six other companies won select BWA circles. BSNL and
MTNL, the two government owned companies, were awarded pan-India 3G and BWA license
early 2009 on the condition that they match the winning bid when the licenses were awarded.
This was certainly not the best thing for the incumbents as the auctions sent spectrum prices
soaring, forcing MTNL to empty its cash reserves to acquire 3G licenses, and causing BSNL to
post losses for the 2010 financial year.

BWA licensing turned out more surprises than just the return of Reliance Industries; it also
brought Qualcomm to the forefront of the technology battle for BWA supremacy, as it acquired
BWA licenses in Mumbai and Delhi. Unlike Intel, Qualcomm took a pro-active stance with an
upfront investment of US$ 1billion to insure its relevance in Indias next telecom growth engine:
broadband access.

Thus far, India has had virtually no broadband wireless market worth mentioning (except for a
3.3GHz licensed band and unlicensed 5.8GHz / 2.4GHz band). Thus the 9.2 million broadband
subscribers (as at June 2010) were largely driven by incumbent ADSL services, with about 0.9
million data-card service customers (2G and EVDO users from Reliance, Tata and MTS). For a
country with 620 million cellular users, a broadband penetration of less than 1% is cause for
concern and hence and a huge opportunity.

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition
Although spectrum auctions were delayed by more than two years, perhaps now the market is
better prepared than ever before to take on the broadband opportunity. With an install base of
over 75 million PCs, and a notebook volume growing at about 22-25% annually, more households
and businesses are going to be computer and Internet enabled than ever. Even more exciting is
that this data revolution may be different for other reasons: the dominant Internet access device
will not even be a computer, but rather a smartphone or other mobile internet devices.

Devices, Demographics and Data Drivers:


A dramatic increase in device features, accompanied by a steep drop in prices, suddenly appears
to be creating a large, captive, IP-enabled user base. Well-funded, unknown players like
Micromax, Karbonn, Lemon and Zen captured about 11% handset market share in the last 12
months. Blackberry-like smartphones, QWERTY keypad and Wi-Fi enabled devices are flooding
the market creating a captive IP-enabled community faster than expected. 3G devices are
expected to be in the $100 price bracket.

A young and vibrant population has driven India to be one of the fastest growing markets
worldwide for social networking applications such as Facebook, Orkut, and Mig33. This
generation will demand mobile broadband access with higher speeds while on the move. Indias
SME (small and medium enterprise) sector is not far behind, with ARPU from US$ 65 upwards,
making it a fast growing business sector especially in non-metro areas.

With the Indian government clearly emphasizing the importance of a national broadband
infrastructure, including several IT-based initiatives to extend rural education and health programs
to reduce the social divide, we expect government agencies to subscribe to broadband services
and consume more bandwidth over the years.

Managing large cellular subscriber businesses is not a new challenge for a dozen Indian
operators who have found the most innovative means of keeping costs low, outsourcing non-core
functions including networks, leasing tower infrastructure, sharing cell-site real estate and
managing energy limitations. At the same time, building capacity in a market that is still adding in
excess of 15 million 2G subscribers a month, and increasing coverage to 600,000 villages where
national ARPU averages US$ 3, is perhaps not for the faint hearted. Still, broadband penetration
hovers under 1% and there is a huge perceived opportunity.

While the nation struggles with runaway inflation, over a quarter of the population still living on
less than a dollar a day, and a yawning divide in the cities that threatens to explode, the
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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition
government is hoping that a broadband revolution will distribute prosperity more equitably, shrink
the digital divide and empower a rural economy that could leapfrog to the next level.

Select Key Findings:

The Indian market has the potential to reach 95 million broadband subscribers by 2015,
largely driven by 3G WCDMA/EVDO and BWA which will constitute 80% of the pie. We
expect that about 40 million 3G data users (USB dongles, 3G data card / modem) will be
driving the mobile broadband revolution by 2015.

We believe that TD-LTE will initially struggle to gain a foothold and will not ship
commercially in India until 2013. After that, TD-LTE technology penetration will increase
rapidly depending on the richness of the eco-system of vendors, device firms, IP
licensing and pricing policies adoption, and operator device bundling, to an estimated 4.9
million subscribers by 2015.

Considering the latent demand for broadband in the country, we expect that operators will
adopt a WiMAX now, TD-LTE later type of approach to kick start network roll outs. We
estimate that the WiMAX 802.16e user base will grow to about 28.5 million by 2015. Still,
this base could potentially migrate to TD-LTE if the latter offers compelling economics
and feature performance to operators as well as users.

We observe that in the last 12 months, BSNL has been the biggest investor in WiMAX
infrastructure [802.16e] in India while Tata and Reliance have not expanded their WiMAX
base [3.3GHz] since Jan/ Feb 2009. Our estimate is that the total Indian BWA
accumulated subscriber base including unlicensed and fixed wireless is about 0.6 million,
with BSNL alone accounting for about 0.2 million subscribers.

Our estimate is that cumulatively over 500,000 BWA base station sectors will be
deployed by Indian BWA operators by 2015. During this process over the next five years,
infrastructure vendors have an opportunity to sell over US$ 1.5 billion worth of BWA BTS
equipment.

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition

We estimate the current data card market in India to be about 0.9 million users This
window will continue to expand until 3G data card / modem services kick-in (expected
sometime Jan Feb 2011), after which the 2G data card market will quickly perish making
way for high speed data services.

In-building coverage and RF optimization, shortage of a trained RF work force, crammed


tower space, and power supply shortfalls will plague the industry within urban complexes
and central business districts.

We caution that the market potential for over 95 million broadband consumers is dependent on
the creation of a rich, vibrant applications industry in the country. The entry of low-cost, high
feature devices and availability of sub-US$100 3G devices eliminates concerns about device
barriers. Passive infrastructure sharing (and possibly active infrastructure sharing sometime by
2011), risk-reward sharing modes of network outsourcing and managed services will result in
partnerships that will enable high-quality broadband service delivery. However, adequate
numbers of business / enterprise and commercial applications targeting vertical and government
sectors must also be developed and deployed quickly in order to entice users to rapidly adopt
premium ARPU 3G services and avoid the revenue shortages experienced with existing 2G
subscribers who generated limited data activity due to poor QoE (quality of experience] and lack
of rich content applications.

Apart from wireless broadband technologies discussed in detail throughout this report, there will
be a range of wire-line broadband technologies such as cable and FTTX / optical technologies
that will contribute to the estimated 96 million broadband subscribers. Some of these
technologies are dependent on government approvals of ambitious fiber optic projects which are
being discussed.

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Edition

Questions answered by this report:

What is the current broadband market landscape in India?

What is the current regulatory framework for wireless broadband in India?

What is the spectrum situation amongst the operators and what are their spectrum
assets?

What are the demand drivers for wireless broadband?

What RAN technology options are under consideration?

What is the current status of the 3G license winners and what are the circles where they
have acquired 3G licenses?

What are the financial commitments from the newly acquired spectrum and how do they
expect to recover investments?

What are the concerns for equipment vendors and operators in terms of BWA technology
options? What commitments and road-maps are operators expecting from vendors?

What is the technology play for BWA licensees?

Which BWA licensee will deploy WiMAX now? Which will wait for TD-LTE solutions?

What are the 4G strategies and roadmaps of Indian operators?

What category of devices will predominantly dominate the market?

What is the opportunity for base station manufacturers over the next 5 years in India?

What is the scenario for shared network operations? How is the passive infrastructure
shaping up?

What are other common operator practices in India: managed services and network
outsourcing?

What should the Indian regulators and policy makers consider from this point onward to
enable rapid growth of the broadband sector?

How should regulators ensure that the missteps of 2G scenarios do not repeat in the 3G /
BWA services sector?

And much more!

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