Free roaming in India – Full of hidden Opportunities

Post NTP-12 policy approval, there are round of assessments regarding the impact of One License-One Geography on the potential revenue stream of mobile operators and its spill overs on the ecosystem players. Regulators are pushing to the limit to make sure that the intended policy comes into force by March 2013 which seems little difficult. The GSM association is raising concerns about the impact on revenue and job losses. One of the CDMA operator welcome the move and sees opportunities around it.

I see huge benefits for Telecom industry ecosystem players’ barring the OEM’s involved in roaming related product or service offerings.

According to TRAI documents, the GSM and CDMA operators are generating 8.5% and 3.9% roaming revenue out of total mobility revenue and it is decreasing every quarter. On a consolidated basis, roaming revenue contribute around 7% of the total mobility revenue which translate to $2.25Bn. At high level, it looks like that it would have major impact on mobile operator revenue stream, EBITA and EBIT level. It is true that it would impact OEM’s offering roaming product or services to mobile operators on network utilization and revenue share model.

According to reports, around 10% of the total mobile subscriber base contributes to roaming revenue. It is also noteworthy that there are around 71 Mn subscribers carry more than one SIM’s. The voice usage pattern of frequent travellers in India is to use local SIM to bypass high roaming charges.

In the recent quarter, mobile operators raised tariff by 20% in some circles. They also indicated that the cost structures of offered triple play services are still very high and would be forced to increase tariff in coming quarters to be able to sustain.

In case of free national roaming under one license, one geography regime, it is widely expected that mobile operators is going to increase the tariff again. The recent tariff front initiatives by mobile operators would be beneficiary to wireless ecosystem players

The tariff would be raised for on the pretext of roaming charging abolishment and would be applicable to all user bases. The tariff uniformity across service geography is going to be positive for mobile operators as against current scenario of different price point for different circle based on the user paying capacity.

In my point of view, Metro applicable voice price point would be enforced across the service geography. It is going to increase voice realised revenue per minute for most of the mobile operators. The network MoU per subscriber is going to witness healthy growth as it is going to remove the user mental block of different tariff points.

The price points for data and MVAS would be kept same across service geography. It would have direct positive impact on MVAS ARPU. The MVAS APRU is going to increase from current $1.98 per active subscribers. The negative growth factor inflicted due to MVAS regulation might see a reversal with rise in MVAS price points even with reduced level of active MVAS userbase. It is also expected that carriage charges go down drastically as the carriage cost would be based on bandwidth centric rather than content centric as per the NTP-12. It will have direct positive impact on content price points and subsequently usage.  On higher realisation of revenue the revenue realization of MVAS provider is going to be higher. It would enable higher data, MVAS user adoption, usage.

On the data adoption level, it is widely expected that license service area would carry same tariff points and would trigger huge growth in data segment, revenue realization and higher share of data revenue out of total mobility revenue.

The most probable above mentioned dynamics is going to trigger higher revenue realization potential across userbase and technology upgrade from segregated service delivery to centralized service delivery mechanism. It would create millions of $ opportunity for technology enabler for network upgrade.

In my point of view, the upcoming revenue opportunity through one license-one geography across services would be much higher than the lost revenue from abolishment of roaming revenue. The government is going to get the higher revenue realization through multiple charges and tax which accounts for 35% of Gross revenue.

The struggling MVS ecosystem players are going to experience growth moving forward.

In conclusion, it is very good opportunity for mobile operators to mitigate any tariff wars and increase revenue across triple play service and products. The clarity on Unified licensing regime is going to define and refine wireless ecosystem segment. It is going to be positive EBITA contributory for wireless sector. It would be interesting to see how Tier2/tier3 mobile operators position themselves given the attached legal, financial issues with them. The challenging regulatory directives can be easily played out to create business opposition. We just need an eye to catch it.

One Nation –One License -Free Roaming Policy offer India Full MNP vision achievement

In approved NTP 12 document, the Indian government clearly stated long term vision for telecom sector - to exploit the already built foundation to create unprecedented communication reach across Indian geographies. It also set very aggressive targets on teledensity, potential network deployments to serve and offer Indian people very cost effective communications services.

I have already highlighted in my earlier blog posts, MNPRegulation – Regulator’s Vision Verses Reality and UnrealisticNational Telecom Policy vision to achieve 70% Teledensity by 2017 & 100% by2020, the current pattern of broadband and logical challenges in achieving the set goal by the government. But the most interesting vision is to

1. Strive to create One Nation - One License across services and service areas.
2. Achieve One Nation - Full Mobile Number Portability and work towards One Nation -Free Roaming.

The above mentioned clause took telecommunication service providers by surprise and it is even more surprising when there was lack of visibility on the licensing issues.

Currently, Two MNPO’s are managing dipping database and service providers in the respective zones and are integrating their networks through centralized database development to get the real time update.

In a current scenario, the mobile user can only make donor to receipt mobile operator switch within their current service geography or circle.

Is there a need of “Full MNP” when one license across services and service area is going to be implemented?

In a scenario of national roaming abolishment; Intra circle roaming would be abolished and all operator level switch would not be limited to specific circle level. Once intra circle level roaming under one license regime comes into force, it would automatically enable ported out user free movement and flexibility of keeping same MSISDN across service geography. It would automatically offer full MNP across recipient’s mobile operators’ service geographies.

The mobile operators would be forced to pay carriage fee in order to correctly connect and deliver voice call and SMS respectively. On the capex and opex front, the Mobile Operator’s, International Long Distance Operator’s would be forced to remodel centralized ported user database, SMS aggregation platform as well as realign their service logic and business logic in order to correctly redirect voice and SMS traffic. I have not seen any updated regulatory document about the changes required to be done on the dipping database update side.

Even more surprising that regulator are in consultation with stakeholders, post deciding on the policy without zeroing in on the licensing, potential solutioning impact on the user and network performance and cost attached with it.

In my point of view, free roaming would remove the need of Full MNP. The existing mechanism of limited MNP would automatically be extended to Full MNP. The regulators may opt for the clear specifications defining all the raised concerned points by the stakeholders to reduce the revenue loss fear and associated cost. The consultation regarding the licenses and associated cost, post policy approval is bit surprising. I must stress that there are multiple hidden business opportunities for ecosystem stakeholders out of the unwarranted challenges around Full MNP and free roaming.

Unrealistic National Telecom Policy vision to achieve 70% Teledensity by 2017 & 100% by 2020

In June 2012, Indian Telecom ministry came out with National Telecom Policy to steer static to dynamic policy transition. The new policy goal is to achieve seamless availability, reachability, scalability, security and affordability across consumer and prosumer base through adoption of new network, technology and management. According to floated policy document, the ministry vision of achieving 70% and 100% rural teledensity by FY2017 & FY2020 looks too aggressive given multiple macro and micro environment of India.

In the past one year, Indian Mobile Operators are experiencing fall in net subscriber addition and current mobile subscriber base is 890 Mn with 39% rural teledensity which translate 333 Mn rural subscribers against a rural population of 858.37. The said teledensity is achieved through co-ordinated positioning of heavy advertisement, lowest tariff, Low device cost (starts from $15) and took 12 years post further liberalization in Telecom sector.

The ministry vision achievement looks bleak due to contrary policy movement w.r.t 2001 to 2004 era. Now with higher spectrum auction price (Upcoming), license fee, roaming policy, low tariff, ballooned debt situation, one time spectrum fee, low adoption of VAS services, slow growth of 3G subscriber base and competitive environment are impacting negatively to Mobile operator revenue, operational cost, interest outgo. These factors in turn forced Mobile operator to raise tariff to be viable and maintain minimum level of Capex to maintain the agreed quality of service set by the regulators.

Based on eagle eye calculation, the mobile operator needs to add 290 & 585.32 subscribers to achieve rural teledensity vision. The 80% and 176% subscriber growth in rural sector in next 5 & 8 years respectively looks extremely difficult given the World Bank statistics of poverty level in India by 2020 with 268 million lives under $1.25 per day.

In conclusion, given the current telecom sector environment with cost of offered service increasing beyond control would impact further rise in tariff and in turn impact rural subscriber addition. In order to speed up rural subscriber teledensity government may opt for free mobile phone scheme similar to free security bill. Even though, it looks unrealistic due to the low literacy level with below poverty line.