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We attended Ericsson’s India Telecoms Analyst Day on Friday. Key
takeaways include:
• Data trends: feature-phone->smartphone->dongles: The incremental
average data usage on smartphone vs. a featurephone is 10x (100-
500MB/month) while on a dongle is 100x (1-5GB/month) according to
Ericsson (Analyst: Rod Hall). The assumption for India is sub-
250MB/month. Also smartphones add 3x signaling traffic. In India, the
limited wireless network makes is difficult to reduce access network stress
via off-loading traffic to a WiFi/femtocell network.
• India’s 5MHz of 3G spectrum: Ericsson stated that a sub-set of the 5MHz
of 3G spectrum of India will be used for voice linked with data users i.e. the
high-end / enterprise subs. We believe this may be true is some circles but in
others where network pressures are high, the 3G spectrum will be required
more for voice. Incremental ARPU indications are for $8 (~INR360) which
is promising in our view. Ericsson highlighted its access solution can cater
to legacy voice, R99 data, HSPA, and MIMO all on one 5MHz carrier.
• Backhaul: wireless may suffice but upgrades required: Fibre backhaul in
India is only about 10% of the total with microwave still being the
predominant medium. Management expects Indian telcos to use microwave
initially and watch data usage growth before investing in fibre. However,
upgrades of microwave backhaul are likely to be required.
• 3G/BWA to target same market; TD-LTE devices in H2 2011:
Interesting to us were management comments that 3G and BWA are
expected to compete for the same consumer data market with LTE offering
higher efficiency and lower latency. We continue to believe that the threat
from Reliance Industries (Analyst: Pradeep Mirchandani) on data to the 3G
telcos should not be underestimated. TD-LTE dongles are expected in H2
2011 with smartphones following later. Ericsson conducted successful TDLTE trials in India with RIL achieving a downlink speed of 80 Mbps and
Qualcomm (Analyst: Rod Hall) at 40Mbps. Management highlighted that
95% of access and 100% of core network is common between FDD and
TDD versions of LTE providing the latter larger scalability and efficiency.
• Managed services: We took away that opex savings for India telcos from
managed services are much below the global average of 20-25% as wage
costs for an Indian telco and Ericsson would be the same. These savings can
increase as service providers move to 3G/4G. The need for managed
services and shared capacity in Africa was highlighted given that passive
sharing is still emerging and rural rollout costs are high. However, the
challenges from centralized control across African countries were also
highlighted with multiple cultures, regulations and unions cited. We expect
some sensitivities to exist with regard to outsourcing customer data
management from the various countries in Africa.
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