As can be seen in the graph below, sales to emerging markets like China, India, Indoesia, Brazil etc is what is and will drive Ericsson’s telecom equipment business globally.

The equipment suppliers are already aware of the tectonic shift in the structure of global telecom business that is inexorably moving to emerging markets especially in Asia. It is time that consulting firms and equity analysts also smell the coffee…

Source: Ericsson Annual Report 2006

BSNL confirms Ericsson, Nokia Siemens to get $4.5b deal

NYT: “The driving reason we’re doing this is that there are not enough broadband options for consumers,” said Adam Kovacevich, a spokesman for Google’s policy office in Washington. “In general, it’s the belief of a lot of people in the company that spectrum is allocated in an inefficient manner.”

“In their proposal, Google executives argue that by permitting companies to resell the airwaves in a real-time auction would make it possible to greatly improve spectrum use and simultaneously create a robust market for innovative digital services. For instance, a company could resell its spectrum on an as-needed basis to other providers, the executives said in their formal proposal to the federal agency.”

Reed Hunt, the former FCC chief, is now heading a consortium that will bid for new spectrum that the FCC will put up for auction in 2009. He endorses Google’s proposal:

“We propose that one quarter of the capacity of the network that uses this spectrum must be sold not in a long-term service contract but instead in ongoing open auctions to any and all comers.”

The proposal is for the wholesale auction of spectrum. However, in the future such a system might require that advanced computing technology be built into wireless handsets and computers to automate the auction bidding process and permit it to take place without users noticing. The Google proposal states that such a system would reduce retail prices for wireless spectrum and extend Internet access into rural areas not now served by existing providers.

The full article is available in the New York Times.

Hindu Businessline 

ICICI Bank is gearing to conduct a test run next month. The bank
has tied up with Airtel and mChek for the purpose, said Mr Sachin
Khandelwal, Head – Cards Product Group of ICICI Bank.

“A virtual card will be created on the phone through which an individual can carry out complete banking transactions.”

Mr Khandelwal said all a customer had to do was to give his mobile number and the payment to be made to the merchant.

The merchant will furnish the information given via his mobile
to mChek, a mobile payment platform, which in turn will channel it to
the bank for authorising the transaction, before which mChek will seek
customer authorisation (PIN entered authorisation) to carry forward the
transaction.

Once cleared by the customer, the confirmation will be sent to
the customer again and the merchant to enable him to receive payment
from the bank.

Consumers would want it just for the convenience it offered, said Mr Khandelwal.

In his presentation titled Backbone of convergence: Getting the foundation right, Divakar argued that without sufficient “big pipes” (domestic and international backbone) the potential of convergence and NGN services will not be realized. Indonesia’s inadequate international backbone infrastructure and high prices have acted as a bottleneck to the development of the Internet in the country. For example, Indonesia’s international private leased line circuit (IPLC) to Singapore costs 21 times the price of equivalent service from India based on route kilometers. Divakar contented that the Government’s plan of licensing one additional international operator will neither stimulate international gateway infrastructure nor bring down international bandwidth prices sufficiently.

His policy recommendation was that Indonesia’s international gateway needed to be fully liberalized. It is a win-win for the Government that gains increased revenue from grey market traffic that comes into the legal channel, more international infrastructure gets built and more cables land into the country improving redundancy and resiliency of the network to outages (a la Taiwan earthquake of Dec 26, 2006), it lowers Internet connectivity and IDD prices for consumers and most operators gain from improved international access and lower wholesale prices.
About a week after the Summit, DGPOSTEL, one of two ICT regulatory bodies in Indonesia, proposed an amendment to Article 35 of Regulation 20 that would allow domestic leased line providers to connect directly to an international cable or set-up its own landing stations to land cables to provide international private leased circuits. Voice is excluded from this service for which one needs to have an IDD license. This amendment is targeted for international data connectivity to bring down international bandwidth charges. There are about four to five domestic leased line providers who can take advantage of this amendment.

Currently there is a duopoly (PT Telkom and PT Indosat) in the IPLC market. This amendment falls short of full liberalization of Indonesia’s IGW but may be a baby step towards reducing the outrageously high bandwidth prices in Indonesia.

Before mobile phone were introduced or coverage was available in Kerala, fishermen would generally return to their “home” markets with their catch. Oversupply meant that fish had to be routinely dumped into the sea to keep prices stable even if (unknown to the fishermen) there were markets 10kms away were fish were in greater demand. Mobile phones enabled price information from other markets to be available while the fishermen was still at sea. The fishermen would divert his boat to the market that offered the highest price for his catch. After mobile phones were introduced, the practice of “dumping” fish overboard stopped; fishermen’s profit rose by 8% and consumer prices fell on average by 4%; the “law of one price” came into effect where single rate for sardine was obtained along the coast.

The Economist has a good write-up. A presentation by the author of the study.

I think more such microeconomic studies will make a stronger case for ICT’s impact on development compared to what has been attempted so far.

TM doubles international budget

Telekom Malaysia (TM) has earmarked to spend MYR8 billion (US$2.3 billion) this year expanding its international mobile businesses in Indonesia, Sri Lanka and Bangladesh, which is considerably more than the MYR2.8 billion it spent on its overseas units last year. TM chief executive Datuk Abdul Wahid Omar said TM’s foreign operations are expected to make 30% of group revenue this year, compared with 25% in 2006. However, the group is planning to trim its 87% stake in Sri Lankan mobile operator Dialog Telekom to not less than 80%, Wahid is quoted as saying. He said the group has been approached by several local and international investors to sell shares in Dialog.

President SB Yudhoyono’s government came to power on the promise of eradicating corruption and the “deal culture” that has plagued Indonesia throughout much of its existence. Initially the government promised leased-cost subsidy auction and other open transparent methods for rolling out backbone infrastructure in the country. Now a sudden announcement in the media informs us that licenses for the Palapa Ring project have been granted.

The Palapa Ring has been a “dream” project of the Indonesian government even before the financial crisis of 1997. Before the crisis it was planning on funding it with government funds. Post the financial crisis and faced with empty coffers, the Government has been pressuring telecom operators in Indonesia to use their resources to realize the Government’s dream. The enthusiasm of PT Telkom to participate in the Palapa Ring Project (in news story below) is ironic considering that it had decades to build backbone infrastructure in the country when it was the monopoly provider of domestic fixed line services and it built little. I wouldn’t be surprised if the threat of regulatory retribution hung like Damocles’s sword over Indonesian operators when they decided to participate in the Palapa Ring consortium.

Least-cost subsidy auction would have been a more transparent way of eliciting participation of Indonesian operators in the Palapa Ring Project. In those islands/regions that are commercially viable, backbones would be deployed by private  sector without any government support. In islands/regions that are sparsely populated and where landing submarine cable may not be commercially viable,least cost subsidy auction would have provided the necessary subsidy to make it worthwhile for private sector to participate in infrastructure roll-out.

Although the sum of $1.5 billion is being bandied around as the total cost of the project the consortium has yet to commit to the backbone map that DGPOSTEL and the Indonesian government has been promoting. The map as can be seen below has submarine cables landing every few kilometers as they garland the various islands. The highest cost-component of a submarine cable system are the cable landing stations.The proposed design is not cost-efficient. It would make more sense to land a submarine cable at couple of points in an island and use terrestrial fiber optic or microwave to connect the rest of the island.

Indonesian group will build US$1.5 billion Palapa network

JAKARTA, May 10 (Reuters) – Seven Indonesian companies will join forces to build a $1.5-billion 34,000 km (21,100 mile) fibre optic cable network in the country aimed at improving telecommunication infrastructure, a government official said.

Indonesia’s director general for post and telecommunication at the communication and information ministry, Basuki Yusuf Iskandar, said the group will meet next Wednesday to discuss how to implement and finance the Palapa Ring Project.

“Seven companies have obtained the licence for the Palapa Ring,” Iskandar told reporters late on Wednesday. He said PT Telekomuniasi Indonesia Tbk, PT Indosat Tbk, PT Excelcomindo Pratama Tbk, and PT Bakrie Telecom Tbk were among the seven in the consortium.

The Palapa Ring is part of the government’s effort to refurbish the country’s ailing infrastructure to spur economic growth in the world’s fourth most populous nation. Its completion will open up telecommunication access to eastern
part of Indonesia, the less developed area of the sprawling tropical nation.

Telkom’s president director, Rinaldi Firmansyah, said the company will become the majority contributor to the project and lead the group as it would use most of the telecommunication traffic through the network.

“We are still calculating the numbers, but all this time we are accounted for about 50 percent of the country’s
telecommunication traffic, so we are likely to invest about 50 percent of the project (cost),” Firmansyah told reporters.

“Financially we are ready,” he said, adding that the company’s involvement was aimed at strengthening its network in the eastern part of Indonesia.

Separately, Excelcom’s president director, Hasnul Suhaimi, said the company’s contribution to the project would be around 10 percent of the total value of the investment. He said the fibre optic network could help lower the telecommunication costs from the current system that incorporates satellites.

New Delhi April 17 Telephone subscriber base of the wire-line and wireless services together reached 189.92 million in the quarter ending December 2006 from 170.02 million on September 30, 2006, showing an increase of 11.7 per cent during the quarter. However, the blended ARPU (Average Revenue Per User) per month for GSM services has declined by 6.2 per cent from Rs 377 in the quarter ended September 2006 to Rs 316 in the quarter ended December ’06, according to performance indicator report released by the telecom regulator.

More at Hindu Businessline

Previous discussion is archived in the following threads:

• Standardizing Sinhala for IT Part 5

• Standardizing Sinhala for IT Part 4

• Standardizing Sinhala for IT Part 3

• Standardizing Sinhala for IT Part 2

• Questioning ICT Myths

What is the number of operators needed in the mobile market to trigger price competition? This question has been posed by regulators and others and there seems to be no definitive answers. What is certain is that by increasing the number of players it becomes harder for operators to collude. In Indonesia, the mobile market is highly concentrated with Telkomsel having more than half the subscriber base and a significantly larger share of revenues. The HHI for Indonesia’s mobile market is 5082, confirming that it is a highly concentrated market.

Hutch is a new entrant with significant experience in other emerging markets and comes in with deep pockets, especially after selling its India stake to Vodafone for more than $11 billion. Hutch is starting with 0 subscribers in Indonesia and is most likely to be the “disruptive” competitor by actively raiding the customer base of existing operators by offering lower prices and innovative service offerings.

Telecoms war hots up as ‘Hutch’ joins the fray

Andi Haswidi, The Jakarta Post, Jakarta April 6, 2007

With the services on offer mostly the same, the tight competition in Indonesia’s crowded wireless telecoms market has led to a no-holds-barred price war and massive ad spending. This month, the war is about to get even fiercer with the established operators set to react to the arrival of upstart Hutchison Charoen Pokphand Telecom (HCPT), dubbed “Hutch” in the business[.. ]

Local calls to other “3″ users cost Rp 150 (1.6 U.S. cent) per minute, while calls to other operators cost Rp 1,000 per minute. The new kid on the block is also running a “buy one, get three” promotion, meaning that if you buy Rp 10,000-worth of prepaid credit, you can make Rp 30,000-worth of calls. This promo means that a one-minute local call only costs Rp 50, which is the same price as a one-minute call from Esia, the CDMA operation of Bakrie Telecom

Telecoms war hots up as ‘Hutch’ joins the fray

Andi Haswidi, The Jakarta Post, Jakarta, April 6, 2007

With the services on offer mostly the same, the tight competition in Indonesia’s crowded wireless telecoms market has led to a no-holds-barred price war and massive ad spending.

This month, the war is about to get even fiercer with the established operators set to react to the arrival of upstart Hutchison Charoen Pokphand Telecom (HCPT), dubbed “Hutch” in the business.

HCPT is a subsidiary of Hong Kong-based global cellular giant Hutchison Telecommunications International (HTIL) and Thai agroindustry group Charoen Pokphand.

Through its GSM-based “3″ brand, HCPT offers wireless access throughout Java, to be followed soon by other areas, with promo tariffs so cheap that they make a mockery of the generally accepted price distinction between GSM and fixed wireless CDMA — CDMA has to date been cheaper due to its coverage limitations.

Local calls to other “3″ users cost Rp 150 (1.6 U.S. cent) per minute, while calls to other operators cost Rp 1,000 per minute.

The new kid on the block is also running a “buy one, get three” promotion, meaning that if you buy Rp 10,000-worth of prepaid credit, you can make Rp 30,000-worth of calls.

This promo means that a one-minute local call only costs Rp 50, which is the same price as a one-minute call from Esia, the CDMA operation of Bakrie Telecom.

Hutchison has also been spending big on advertising, including running full-page color ads in the country’s largest daily, Kompas, every day since the launch of “3″ on March 29.

The other operators have hit back by running similar ads and promos. For example, Indosat’s Mentari is offering a promo price of Rp 50 per 30 seconds until Aug. 31, while Excelcomindo’s XL Bebas is offering a flat rate of Rp 25 per second for all calls, Rp 40,000 in free credit upon SIM card activation, and 50 percent discounts on credit top-ups.

On its initial startup, Hutchison has so far invested $400 million, said president Rajiv Sawney during the launch of 3 on March 29, and said he expected the figure to increase to about $1 billion next year.

“Analysts are predicting some 30 million new subscribers in Indonesia in the coming years. We believe we can secure a good share of that market,” Sawney told the press during the launch ceremony.

At present, Telkomsel leads Indonesia’s mobile market, with some 35 million subscribers, followed by Indosat with 16 million and Excelcomindo with 9 million.

Telkomsel, with its pre-paid product Simpati, charges Rp 1,500 per 30 seconds during peak hours and Rp 300 during off-peak hours, while its other product, As, costs Rp 1,500 per minute during peak hours and Rp 300 per minute during off-peak hours.

For advertising in all media, Telkomsel was the biggest spender in 2005 on Rp 93 billion, followed by Rp 223 billion in 2006, and is expected to fork out even more this year as competition increases, according to a survey by AC Nielsen.

Meanwhile, Indosat’s other GSM product, IM3, costs Rp 500 per 30 seconds for local calls during peak hours and Rp 250 during off-peak hours. Last week, IM3 announced that it would invest up to $1 billion this year.

Following Hutchison’s arrival on Indonesian shores, major Russian conglomerate, Alfa Group, is set to invest up to $2 billion on setting up yet another wireless telecoms operation later this year.

“We see that a lot remains to be done in Indonesia in order to increase mobile penetration. The telecoms market is overly concentrated. There’s not enough competition in that sense, and that severely limits the development of the sector,” said Alfa vice president Andrei Zemnitsky.

Call of the Village Thomas K. Thomas, Hindu Businessline, April 2, 2007
[..] Affordability is key

According to a new study done by LIRNEasia and AC Nielson, close to 100 million new cellular subscribers are expected to come from the rural areas over the next two years and the prospective subscribers are reasonably heavy users, making an average of 40 calls a month.

However, analysts caution that while operators are rolling out networks to the remote and poor areas, they also need to bring down the cost of owning a phone if they want to penetrate a highly budget-conscious rural market.

The bidding has been intense for deployment of mobile services (Part B) and most of the bids were for zero subsidy fund and in some cases negative bids were made! This strongly indicates that mobile operators in India perceive deploying mobile services in India’s rural areas to be commercially viable. Of the 81 clusters, results have been declared for 24 clusters that have been won by BSNL, Dishnet Wireless and Reliance. The remaining 57 clusters have to be re-bid because of tie between the third and fourth operators! The absence of Bharti from the list is a bit surprising.

The results of Part A of the auction for deploying passive infrastructures like towers and base stations were more uneven. BSNL has won 80% of the $570 million USO fund to deploy passive infrastructure like mobile towers in rural areas across the country.  BSNL won 63 of those clusters and will be deploying around 6000 mobile tower, the remaining clusters were won by other operators.

The USO least cost subsidy auction for fixed lines that was held in the past also resulted in BSNL bagging the majority of the clusters. However, unlike the previous auction the current auction resulted in bids being about 30% lower than the benchmark bidding rate due to “severe competition and bidder interest.” That is indeed a positive development.

More from the Hindu.

The study, Teleuse@BOP, is the second study of this nature that LIRNEasia has conducted. It has brought out several interesting findings, which would provide valuable insights into the telecom user space in these Asian countries.

Media coverage of the Teleuse@BOP findings are below:

Telecom Journal from Thailand

However, yesterday’s Wall Street Journal (March 15, 2007) seems to suggest that high speed 3G wireless technology like HSDPA can bring broadband on a large scale to Indonesians. It (misleadingly) implies that since HSDPA is merely a software upgrade to 3G networks it will not require any new major telecom infrastructure investment in Indonesia. The fact is that 3G services have just been launched in the last quarter of 2006 in some urban areas concentrated in and around Jakarta. The Indonesian operators have a long way to go to upgrade all their base stations to support 3G. Even if the base stations were upgraded to 3G standards there are no shortcuts to building backbone infrastructure (preferably fiber optic) to connect the base stations. Furthermore, large parts of eastern Indonesia do not have any connectivity leave alone 2G or 3G.

Realistically, HSDPA will be a connectivity solution for those customers who have been starved off ADSL connectivity thanks to Pt Telkom’s “Dog in the manger” attitude. Those customers who can afford HSDPA compatible handsets will be a very small subset of potential Internet users in Indonesia. 2+G connectivity solutions will continue to remain relevant for a vast majority of Indonesians.
Indonesia Embraces 3G to Get Up to Speed on Web (Wall Street Journal March 15, 2007)
JAKARTA, Indonesia — Indonesia’s rapid adoption of cutting-edge cellphone technology for Internet access is helping Southeast Asia’s largest economy to catch up with its technologically savvier neighbors.

A sprawling nation of 220 million people and more than 13,000 islands, Indonesia has one of the least-developed communications systems in Asia. Getting a phone connection without echoes or distortion is a matter of luck, and Internet connections relying on cable networks are among the slowest in the region.

The arrival of High-Speed Downlink Packet Access, or HSDPA — a software upgrade to 3G mobile-phone technology that allows users faster access to the Internet through cellular networks — could help change that[..]

HSDPA technology, pioneered in Indonesia by PT Indonesia Satellite Corp., or Indosat, offers Internet download speeds at least six times as fast as connections relying on cable, a wider difference than in a more-developed economy. And because it’s an add-on to 3G technology, it doesn’t need any major new telecom infrastructure — just some equipment attached to existing mobile base stations.

Indonesia also is primed for expansion because less than 30% of its population currently uses cellphones, compared with 80% in Malaysia and 40% in the Philippines. Indonesia has 65 million mobile users; industry analysts forecast that number will reach 100 million by 2010.

Since starting its service in November, Indosat has signed 60,000 customers in Jakarta and Surabaya, Indonesia’s second-largest city. Working with Ericsson and Nokia, the company hopes to add coverage to eight other major cities by the end of March. “It’s going to be very popular,” predicts Djarot Handoko, a spokesman for Indosat.

Nokia is working with another local telecommunications company, PT Telekomunikasi Selular, to start an HSDPA service in Indonesia later this year. Indonesia is one of the biggest potential markets for 3G, says a Nokia executive advising the company[..]

Dev Yusmananda, an executive at PT Excelcomindo Pratama, which has just started a similar service, says the prospective Indonesian market is huge. “We’re talking about it [HSDPA] as a substitution for a broadband connection,” he says.

Ironically, the interest generated by the arrival of HSDPA is a consequence of Indonesia’s failure to build a decent national cable grid. The country had plans to lay an extensive network in the 1990s, but the Asian financial crisis in 1997-98 intervened, and many projects were shelved. Many of the cables that were installed were poorly laid. Recent flooding in Jakarta damaged networks and left many people without Internet access for days[..]

On March 16, the Director General of DGPOSTEL conceded that requiring new international operator to build 10 new gateways was a heavy burden on the new entrant especially when the two existing operators in total had six.

The tender for the telephone fixed line is postponed till June
March 16, 2007(Translated from Bisnis Indonesia, March 16, 2007)
Jakarta:[...] The director general of the Post and the Telecommunications, Basuki Yusuf Iskandar added that the government will lessen the requirements for the IDD tender by reducing the number of international gateways that must be built. “Before, one of the conditions followed the IDD tender was to have the commitment to be able to provide 10 units IDD Gateways. But afterwards the government reconsidered this obligation and it was reduced to five ,” he said.

According to the Director General of post and telecommunications, the decline in the obligation is because the provision of 10 IDD Gateways will be too heavy a burden for the operator since the existing operators currently only have approximately six units.

LIRNEasia‘s input to the White Paper issued by the Indonesian government on introducing a new license for local, long distance and international telecom is available here.

The tender for the telephone fixed line is postponed till June
March 16, 2007(Translated from Bisnis Indonesia, March 16, 2007)
Jakarta:The Government will postpone the tender schedule for fixed line telephone to June which was earlier expected to be issued this month. The postponment is due to legal delays and readiness of operators to participate in the tender.

The director general of the Post and the Telecommunications, Basuki Yusuf Iskandar, said the government hoped the tender will go well and successfully. The legal instrument will take the form of a Ministerial
Decree. There is a “big possibility” that the “tender would be carried out this coming June although in principle the government will try to do that as soon as possible,” he stated to the reporter, yesterday.

The Tender for the provision of fixed local, long distance and international was originally scheduled for March 2007. At this time the government is carrying out the finalisation of the new licensing of the three services. Depkominfo (DGPOSTEL) is currently drafting the Ministerial Decree regarding the opening of new opportunity
to provide the Local, IDD & DLD services.

Basuki added that the government will lessen the requirements for the IDD tender by reducing the number of international gateways that must be built. “Before, one of the conditions followed the IDD tender was to have the commitment to be able to provide 10 units IDD Gateways. But afterwards the government reconsidered this obligation and it was reduced to five ,” he said.

According to the Director General of post and telecommunications, the decline in the obligation is because the provision of 10 IDD Gateways will be too heavy a burden for the operator since the existing operators currently only have approximately six units.

For international connectivity, Telkom and Indosat are the incumbent operators. Telkom has Internet hubs in Malaysia, Batam, and Hong Kong, while Indosat had optic fibre links between Jakarta-Japan, Jakarta-Australia,
Jakarta-the Middle East, and Europe.

Although the International Gateway market is not yet opened officially, there are several companies that have expressed interest in the tender. The interested companies are PT Excelcomindo Pratama Tbk and Telematika
Indonesia. The chairman of the Association of the Cellular Telecommunications Indonesian, Johnny Swandi Sjam considered the government should NOT open the new opportunity for providing Fixed telephony services (IDD, DLD & Local) since currently the service are still under “duopoly” status (ie. PT Telkom and Indosat).