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India - TELECOMS
Still not connected
Reliance’s stalled broadband plans add to the 3G opportunity.
With the government due to unveil the National Broadband plan, Reliance
Industries’ choice of technology for broadband wireless access (BWA) is still
under wraps and no tower/infrastructure-sharing deal has yet been announced.
We believe that, besides the technology dilemma, affordable handsets remain a
critical factor. Further, Reliance needs a unified services access licence to provide
voice services alongside data. In the midst of the 2G spectrum scam, a new
licence will be difficult for the government to issue. With Reliance’s stalled BWA
plan, Bharti Airtel looks better positioned for the 3G opportunity.
Reliance Industries stalled BWA plans. In 2010, BWA raised Rs387bn
(US$8.4bn) for the government when two pan-India spectrum blocks (22
circles) of 20MHz, each in the 2.3GHz band, were auctioned and US$2.8bn
was paid by public-sector Bharat Sanchar Nigam/Mahanagar Telephone
Nigam (MTNL IB - Rs51.1 - U-PF). Subsequently Reliance Industries (RIL
IB - Rs981.5 - O-PF) purchased a 95% stake in the only pan-India BWA
spectrum winner Infotel. BWA licences are technology-neutral and both
WiMax and LTE can be on the same spectrum however these licences allow
only data services. To provides voice services, Reliance Industries will
require a unified services access licence (USAL) which currently also
entitles a minimum 4.4MHz of 2G spectrum for a fee of
Rs16.5bn/US$366m. In the midst of the 2G spectrum scam, a new USAL
will be difficult for the government to issue.
Dilemma over choice of technology and handsets. Besides the need
for a USAL, BWA rollouts also face the dilemma over the choice of
technology. The choice is adoption of Wimax or LTE or both. LTE is still in
the trial phase and large-scale adoption will take time. Besides, the
handsets/terminal equipment is a significant issue. LTE handsets
irrespective of urban or rural rollout will require subsidies while dongles
are already available across CDMA 1X and now also 3G mobile networks
and tariffs are already competitive. Availability and price of LTE devices will
be critical in determining the rollout of services as well as the adoption and
therefore the BWA opportunity.
Infrastructure requirements for BWA. Considering that Reliance’s BWA
rollouts will not be an overlay to the 2G and 2.5G networks, the
infrastructure requirements will be significant. As per industry BWA will
require more towers (500 subscribers versus >1,000 for GSM per site) and
while Reliance can share towers with any of the six tower companies in
India no deal has been announced yet. Besides, BWA also requires
robust/broad pipe backhaul. We believe it is way too early for LTE in India
and for 4G data revenue opportunity to be comparable with 2-2.5G and
even the upcoming 3G mobile and data opportunity.
National broadband plans will be missed. India’s low 1% broadband
penetration is an exciting opportunity, especially as the 700 million mobilesubscriber base far exceeds the country’s stagnant fixed-line base of 36
million. The government in the coming weeks will outline the new national
broadband plan to connect 160 million homes by 2014 but this is
ambitions with stalled BWA rollouts. Reliance too had outlined the India
broadband opportunity at 100 million subscribers and US$6-7bn revenue
by 2014 and targeted cash breakeven in three years of service rollout. Our
Reliance analyst Somshankar Sinha values the Rs24.5bn equity invested
for the BWA foray through Infotel at 1x PB. Meanwhile, Bharti Airtel
(BHARTI IS - RS340.3 - O-PF) is better positioned for 3G mobile and data
opportunity.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
India - TELECOMS
Still not connected
Reliance’s stalled broadband plans add to the 3G opportunity.
With the government due to unveil the National Broadband plan, Reliance
Industries’ choice of technology for broadband wireless access (BWA) is still
under wraps and no tower/infrastructure-sharing deal has yet been announced.
We believe that, besides the technology dilemma, affordable handsets remain a
critical factor. Further, Reliance needs a unified services access licence to provide
voice services alongside data. In the midst of the 2G spectrum scam, a new
licence will be difficult for the government to issue. With Reliance’s stalled BWA
plan, Bharti Airtel looks better positioned for the 3G opportunity.
Reliance Industries stalled BWA plans. In 2010, BWA raised Rs387bn
(US$8.4bn) for the government when two pan-India spectrum blocks (22
circles) of 20MHz, each in the 2.3GHz band, were auctioned and US$2.8bn
was paid by public-sector Bharat Sanchar Nigam/Mahanagar Telephone
Nigam (MTNL IB - Rs51.1 - U-PF). Subsequently Reliance Industries (RIL
IB - Rs981.5 - O-PF) purchased a 95% stake in the only pan-India BWA
spectrum winner Infotel. BWA licences are technology-neutral and both
WiMax and LTE can be on the same spectrum however these licences allow
only data services. To provides voice services, Reliance Industries will
require a unified services access licence (USAL) which currently also
entitles a minimum 4.4MHz of 2G spectrum for a fee of
Rs16.5bn/US$366m. In the midst of the 2G spectrum scam, a new USAL
will be difficult for the government to issue.
for a USAL, BWA rollouts also face the dilemma over the choice of
technology. The choice is adoption of Wimax or LTE or both. LTE is still in
the trial phase and large-scale adoption will take time. Besides, the
handsets/terminal equipment is a significant issue. LTE handsets
irrespective of urban or rural rollout will require subsidies while dongles
are already available across CDMA 1X and now also 3G mobile networks
and tariffs are already competitive. Availability and price of LTE devices will
be critical in determining the rollout of services as well as the adoption and
therefore the BWA opportunity.
Infrastructure requirements for BWA. Considering that Reliance’s BWA
rollouts will not be an overlay to the 2G and 2.5G networks, the
infrastructure requirements will be significant. As per industry BWA will
require more towers (500 subscribers versus >1,000 for GSM per site) and
while Reliance can share towers with any of the six tower companies in
India no deal has been announced yet. Besides, BWA also requires
robust/broad pipe backhaul. We believe it is way too early for LTE in India
and for 4G data revenue opportunity to be comparable with 2-2.5G and
even the upcoming 3G mobile and data opportunity.
National broadband plans will be missed. India’s low 1% broadband
penetration is an exciting opportunity, especially as the 700 million mobilesubscriber base far exceeds the country’s stagnant fixed-line base of 36
million. The government in the coming weeks will outline the new national
broadband plan to connect 160 million homes by 2014 but this is
ambitions with stalled BWA rollouts. Reliance too had outlined the India
broadband opportunity at 100 million subscribers and US$6-7bn revenue
by 2014 and targeted cash breakeven in three years of service rollout. Our
Reliance analyst Somshankar Sinha values the Rs24.5bn equity invested
for the BWA foray through Infotel at 1x PB. Meanwhile, Bharti Airtel
(BHARTI IS - RS340.3 - O-PF) is better positioned for 3G mobile and data
opportunity.
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