1. Spectrum Auctions Will Witness Fierce Competition
  • There is expected to be fierce bidding and competition for the upcoming spectrum auctions starting February 25th
  • Carriers are expected to bid aggressively for 900 MHz as most of the spectrum being auctioned in this band is for license extension and incumbent carriers will want to retain their existing spectrum
  • 800 MHz and 1800 MHz bands are conducive for both voice and data services, and different carriers are expected to bid for this spectrum basis their individual service offering strategies
  • As per Convergence Catalyst estimates, the maximum number of subscribers that can be serviced with existing 3G spectrum (4 blocks of 5 MHz spectrum in 2100 MHz band, among all carriers), with a dedicated 1 Mbps throughput, is 100 million. Of this capacity, over 50 million subscribers are already using 3G services in India. If the one block (5 MHz) of 2100 MHz band will be auctioned as the government intends, then there will be aggressive bidding for garnering that spectrum
  • While all other carriers are looking at multiple ways such as assets sales, bond issues, securing debt financing, etc to fund the spectrum auctions, Vodafone is one carrier that is cash rich from the Verizon stake sale in September 2013, and is relatively well positioned for the upcoming spectrum auctions in India
2. 2015 will be the Year of Conflict: Online Vs Offline Distribution, Carriers Vs OTT Players
  • 2014 witnessed smartphones be launched and exclusively sold on online market places and e-commerce sites in India
  • Following the success of Motorola and Xiaomi, currently over 35 device models from various brands are sold exclusively on multiple e-commerce sites… creating a conflict between OEMs’ online and offline distribution channels
  • 2014 also witnessed many Messaging apps and other media-based OTT apps and services compete with carriers’ services. Some of these apps also offer IP-based voice calling, targeting the core service and revenue generator for Indian carriers
  • These rifts are expected to continue and grow wider in 2015
  • Currently, both these conflicts are global phenomena, and not just specific to Indian market. However, there doesn’t exist any case study of successful resolution of these conflicts globally, which could be potentially emulated by Indian players
  • Moreover, Indian mobile industry, unlike most global markets is an open-market industry, which encourages intense competitive dynamics. And such conflicts will hurt Indian incumbent players more and there exists an urgent need for Indian players to find workable solutions faster, as compared to some of the carrier-controlled markets
3. 4G LTE Services Will Not Reach Mass Market in 2015
  • Currently, there exist multiple structural, technological, financial and demand-side challenges for launch and growth of 4G LTE services in India
  • The current 2300 MHz band allocated for 4G LTE services in India has issue of in-room penetration, and the number of BTSs to be deployed for coverage is also high (compared to same area coverage in a lower band). Also, robust backhaul network to transmit the 4G LTE traffic (in the form of optic fiber networks) is also inadequate in India, across all access network layers
  • India is one of the only two countries in which TD-LTE based networks in 2300 MHz band are being commissioned globally, which means Indian players also do not have the advantage of global scale of economies to drive down the network equipment and device costs
  • All these factors will ensure delayed reach and slow adoption curve for LTE service in India. On the demand side, even among early adopters the LTE adoption rate is slow. Bharti Airtel launched 4G LTE services in Bangalore (a city with significantly high share of technology-savvy population in India) in May 2012, and in last 20 months the number of LTE subscriber additions on Airtel’s network in Bangalore have been less than 1/8th the number of 3G subscriber additions (in the same period)
4. Deployment of Public WiFi Hotspots and WiFi Offloading to Begin in 2015
  • In 2015, Indian telecom carriers are expected to start rolling out WiFi hotspots in urban, high-density areas such as Colleges, Hospitals, Malls, Coffee Shops, etc
  • These WiFi hotspots are expected to balance the traffic load in these high-density areas and supplement carriers’ cellular data networks. In many ways India is nothing less than the textbook case for Wi-Fi: Very high subscriber density in the cities, a presumed pent-up demand for data connectivity, and very little 3G spectrum to work with
  • Four years ago, in early 2011, Aircel in partnership with Spectranet experimented with deploying 50,000 WiFi hotspots across various public locations. However, that project received discouraging adoption, primarily due to inadequate consumer education and lack of sufficient WiFi-enabled handheld devices. But, now in 2015, both these barriers are sufficiently overcome and the consumer and market is ripe for WiFi hotspots deployment. And, some leading carriers are expected to initiate projects in this domain
5. Various Value Chain Players to Start Focusing on Internet of Things (IoT) and Connected Devices
  • Many telecom carriers in India have had in-house teams focusing on M2M business for the last few years. But, they have been small, niche teams and got little attention, primarily due to their insignificant contribution to the overall carrier revenues
  • This year, as the IoT ecosystem begins to grow globally, various Indian telecom value chain players including device OEMs, carriers, network equipment players, system integrators, etc., will start focusing on and launching IoT specific pilot projects and business models
6. Alternate Mobile Apps Distribution Channels to Grow
  • Although there are close to 150 million smartphones in use in India, and over 5 million are being sold every month, the adoption and usage of smartphone apps is very low in India
  • Mass market Indian consumers are still not evolved to understand the value proposition and the power of apps-enabled smartphones
  • Many ecosystem players are beginning to distribute smartphone apps through alternate channels (apart from App stores). While device OEMs are looking at bundling the apps, some companies are distributing them preloaded on memory cards through physical retail outlets
  • These alternate smartphone app distribution channels are expected to grow in 2015, thereby educating the consumer and evolving his device usage behavior
7. OEMs Will Start Experimenting with Services Revenues
  • Although the primary objective of bundling apps is to strengthen the value proposition of their device offerings, differentiation and curb churn, some OEMs will also experiment with garnering revenues from apps bundling through multiple models including revenue share, per-device embed price, etc
8. Usability and User Interface Will Be A Key Focus Area for Smartphone Players in India
  • With PC installed base at ~85 million and internet user base over 250 million, mobile is already the primary mode of internet access to a large number of Indians. According to TRAI (Telecom Regulatory Authority of India) estimates, there are over 190 million mobile internet users in the country
  • As the proliferation of smartphones and mobile internet increases, the handheld mobile device will become the first computing device for mass market consumers in India. And, the need for handheld device User Interface and User Experience to be intuitive, natural and different (from desktops & laptops) is imperative
  • Last year, we’ve witnessed early signs of unique and differentiated UI-based mobile products (devices and apps) being introduced in India – Gesture controls on devices, Blink selfie, Google ensuring voice-based command input reach mass market levels through Android One, etc. There are many companies working on these and other usability features such as Handwriting Recognition (as an input mechanism), Image/Face Recognition (as a natural extension/security feature), etc
  • In 2015, there will be increased focus on User Interface by OEMs, App Developers and Media companies catering to the Smartphone market in India
9. Increased Focus on Regional Languages
  • With over 250 million active users, internet user base has already surpassed the English speaking population in India (~150 million). And, soon even smartphones are expected to proliferate beyond urban India
  • The need for Indian local languages based digital content for consumption (and usability) is critical to drive increased adoption and usage of various mobile products and services, and also enhanced consumer education
  • This need is already identified by the industry, and we’ve already witnessed the formation “Indian Language Internet Alliance” (a consortium formed by 18 industry players to drive Indian regional language based digital content), and launch of ‘SwiftKey’ keyboard with support for 12 Indian languages for Android devices
  • 2015 will witness increased focus on Indic language based content and solutions by various value chain players including Media companies, Device OEMs, Carriers, App Developers, E-Commerce players, etc
10. Internet Companies Will Play A Key Role in Next Phase of Indian Telecom Industry Evolution
  • With increasing proliferation of smartphones and mobile internet, companies such as Google, Facebook, Flipkart, Amazon, etc., are playing a key role in the product and service offerings, business models and go-to-market strategies of various key players in the telecom industry in India
  • Google and Facebook becoming members of COAI (Cellular Operators Association of India) to impact policy, especially on Net Neutrality, Google’s partnership with carriers such as Airtel for enabling faster YouTube access on mobile phones, free app downloads on Android One phones, etc are examples of initiatives and partnerships driven primarily by internet players
  • One key commonality between Manu Jain of Xiaomi, Vikas Agarwal of OnePlus, Amarinder S Dhariwal of Micromax YU and Anand Chandrasekaran of Bharti Airtel (apart from all of them being the Indian CXOs of prominent mobile companies) is that all these executives have successfully launched and run Internet-based products and businesses, before their current roles. Currently, we are witnessing the introduction of new breed of business decision makers into the Indian mobile industry
  • The first wave of Indian mobile industry was driven by FMCG (Fast Moving Consumer Goods) personnel. Key executives from HUL, P&G, Pepsi, etc., had joined the mobile industry and infused the much needed consumer-centric focus and approach to a technology-heavy, inward-looking industry. Going forward, as smartphones (also powerful Mobile Computers) become prevalent, key personnel from the Internet world, who can build over the existing consumer-centric approach through essential understanding of digital products and services, use of Internet as an effective distribution and marketing platform, ability to manage scale and most importantly, understand and leverage ‘Network Effects’ will play a key role in the evolution of smartphone-centric mobile industry growth in India