1. Infotel/RIL has obtained a pan-India spectrum.
2. Qualcomm has obtained the other slot of spectrum for the top circles of Delhi & Mumbai.
What does this mean for the choice of BWA technology?
**RIL has already indicated a preference for LTE in its press statement “A single 20 MHz TDD spectrum when used with LTE has the potential of providing greater capacity when compared to existing communication infrastructure in the country.”
**Qualcomm had entered the auctions solely to use the winning slots for LTE.
3. If RIL selects LTE, then given the fact that most other BWA operators (that only have scattered spectrum) may need roaming agreements with RIL, this sort of forces LTE on the other operators too. There is a possible tenuous workaround to this roaming strategy, which I will come to later.
4. RIL+Qualcomm blocking both the spectrum slots for Delhi & Mumbai for LTE removes the scope for WiMAX in the two lucrative circles.
5. Qualcomm emerged as a very strategic player by winning the spectrum in Delhi & Mumbai. It blocked access to WiMAX for these important circles.
**Strategically, it selected regions where the 3G spectrum is expected to hit capacity constraints the earliest and would have the earliest business need to move mobile data users to 4G.
6. One can argue that BSNL+MTNL also have a pan-India spectrum and have shown preference for WiMAX. These operators selecting WiMAX can be the best case scenario for the technology. However BSNL+MTNL do not seem to have the money or the inclination to roll-out BWA in a hurry. Given that they are losing money in their existing businesses and their 3G spectrum is significantly underutilized. They are already making noises that they were forced to buy pan-India 3G+BWA spectrum that they did not need in all circles and want back their share of the auction money.
Let us now look at a discerning pattern in how Bharti and Aircel have won their BWA spectrum. These are the only operators to have also won 3G spectrum.
1. If one observes the spectrum allocation table given above, Bharti has won BWA spectrum in 4 circles. It has not won the corresponding 3G spectrum in 3 out of these 4 circles: Maharashtra, West Bengal and Punjab. It is only in Karnataka, where Bharti has got both the BWA and 3G spectrum. Given that
a) Bharti could not win pan-India spectrum in either 3G or 4G
b) Future mobile devices would support both 3G and 4G (BWA)
**the bid pattern shows a defensive effort by Bharti to plug the "holes" in its 3G spectrum with 4G and stitch together a high-data-rate mobile coverage area comprising both 3G & 4G. Its plan would be even more productive if the government allows the operators to use 3G & 4G in the same manner with the same set of services. For example, if regulations permit, voice based services can be used over both technologies, via VoIP.
2. On the contrary, Aircel's bid pattern is driven less by pan-India ambitions and more by a consolidation strategy. It has won 4G spectrum only in circles where it also has 3G spectrum. It has concentrated and consolidated resources on circles where it is or aspires to be a market leader. For example it has won both 3G and 4G bids for Tamil Nadu at a total cost of Rs 3500 crores. It has also won 3G and 4G in Andhra Pradesh for Rs 2500 crores.
3. Given that the cost of 3G and 4G spectrum was so steep that getting pan-India slots was unaffordable, both Bharti and Aircel have been able to party secure their respective business strategies: one as a pan-India operator (Bharti) and one to consolidate its hold on its biggest and best circles (Aircel). Their part success contrasts to the forced withdrawal of the other major 3G players: Reliance, Vodafone, Idea and Tata.
4. Let us look at another interesting point regarding the "high cost" circles of Tamil Nadu, Karnataka, Kolkata and Andhra Pradesh.
**The cost of 4G spectrum in Tamil Nadu (2069 crores) exceeds the cost of 3G spectrum (1465 crores).
**For Karnataka, the cost of 4G spectrum (1543 crores) is almost the same as the cost of 3G spectrum (1580 crores). Same is the case for Kolkata, 4G: 523 crores, 3G: 545 crores.
**For Andhra Pradesh (4G: 1059 crores, 3G: 1373 crores) the 4G and 3G costs are in the same ballpark.
For other "high cost" circles, in general the 4G cost was significantly lower than 3G. So what happened for these 4 circles? An interesting observation is that in all of these 4 circles, both Bharti and Aircel won either the 3G or 4G spectrum. But neither could win both 3G and 4G in all 4 circles. Looking at this I can only speculate that Bharti and Aircel bid each other fiercely in all these 4 circles. While Bharti won the 4G in Karnataka and Kolkata, it lost out Tamil Nadu and Andhra to Aircel. The bid must have been especially challenging in Tamil Nadu, were both Bharti and Aircel have the 3G spectrum and where the 4G spectrum ultimately sold 40% higher than 3G. This is a telling example of what can happen when the government creates artificial scarcity by providing only 2 slots for auction among 11 bidders. If we further consider that one of the bidders (RIL) that has other major businesses and has a rich cash flow, was fully committed to winning a pan-India slot no matter what the cost, this really leaves out only 1 slot open among 10 bidders. Such demand-supply gap is not healthy for any industry.
I would end this post with another observation. The spectrum cost for the entire North-East (including Assam) came to about 50 crores. This is about 1/40 of the spectrum cost of Tamil-Nadu (which has about twice the population of North-East and the highest bid among states). It is also about 1/12 the cost in Gujarat which has a lower population. North-East, Tamil-Nadu and Gujarat have comparable land area. Similarly telecom service areas that have much larger population and area such as Bihar, Madhya-Pradesh (includes Chattisgarh) and West Bengal were sold at a fraction of the cost of Delhi, Mumbai, Tamil-Nadu, Karnataka, Maharashtra and Gujarat. The huge difference in spectrum costs is an evaluation by private industry on how it views business opportunities in these regions. It is also a stark reminder of the failure to ensure regional balances in India's economic growth. Had there been more granularity in the telecom service areas, we would have seen significant regional differences in the spectrum costs of even the most lucrative regions. Many of the separatist and militant movements that scar India today justify their stance in the denial of opportunities to the local populace and the imbalances in economic growth. The hands down to the North-East/East/Central-India in the BWA auction indicates/reinforces the notion of this failure.
So much for the business and governance issues in the BWA and 3G auctions in India. In the next article, I would detail the technical aspects of these technologies. What are the minimum/average/maximum performance benchmarks for 3G and 4G (for example in terms of data-rate and number of subscribers)? How are they distinguished from each other and from the presently available wireless technologies (2G/2.5G)? These are topics that I am more comfortable with and are my bread and butter. I also do not find these discussed widely, in either print or digital media. So I hope to cover this soon.
No comments:
Post a Comment