India has the fastest growing mobile internet base across the world and is poised to become the 2nd largest country (by user base) across the world by end 2015. Currently, the country has users on 2G and 3G but the 4G (LTE is commonly referred as 4G) networks are yet to be rolled out. Last few weeks have witnessed significant action on the LTE (Long Term Evolution) front in India after a relative lull post 2300 MHz spectrum auctions in 2010. This was due to auction of 1800 MHz spectrum which the operators plan to use for LTE.
Why is LTE required in India?
India has the 3rd largest mobile internet users across the world driven by entertainment (video, gaming) and social networking. The consumers are fast migrating to smartphones and the installed base of smartphones in India is likely to reach 150 million by end 2014. This means that the demand for data would continue to increase but the operators are constrained by low spectrum in 3G bands and heavy voice traffic on 2G. The current mobile internet experience is inconsistent and marred by frustratingly low speeds.
LTE can not only give better efficiency but can also reduce the cost per bit. LTE networks are more reliable than the 2G or 3G networks and are easier to manage. By moving to this super efficient network, operators will be able to offer the new types of services (video calling, high-definition content streaming, etc.) that weren’t possible before. It’ll probably also bring changes in how they price and sell services to consumers.
LTE Scenarios for India
India was expected to go the TDD-LTE way just like China on 2300 MHz spectrum band but a couple of events changed the landscape completely. First, the 1800 MHz spectrum came up for auctions and then the regulatory authorities allowed the winners of the spectrum to use the spectrum for any technology. This move allowed the operators to use the spectrum for any technology including refarming of existing spectrum. As a result the following 3 scenarios have emerged:
1. TDD-LTE on 2300 MHz spectrum (auctioned in 2010)
2. FDD-LTE on on 1800 MHz spectrum (auctioned last month)
3. FDD-LTE on 850 MHz spectrum (re-farming from existing CDMA for FDD-LTE)
A quick look at the winners of 1800 MHz spectrum (figure below) shows that no player would be able to launch FD-LTE services on 1800 MHz across the country unless there is consolidation in the industry.
Apart from the recent win in 1800 MHz spectrum, Reliance Jio has a nationwide spectrum for 2300 MHz and Airtel has 2300 MHz spectrum in 8 circles. CDMA players like RCOM, Tata and MTS have 850 MHz spectrum that can be re-farmed post auctions. It is getting very clear that India will see multi band LTE roll-outs. This multi-band requirement will be a headache for the handset vendors as it is likely to increase the prices but at the moment it appears inevitable.
Different operators will follow different strategies depending on their spectrum holdings. The approach used by various operators would be as follows:
1. Reliance Jio– Likely to launch FD-LTE in circles where it has won 1800 MHz spectrum and TD-LTE in rest of the circles. It might use the 2300 MHz for back-haul in a few circles. Though it got the nationwide spectrum in 2300 MHz, tt is reluctant to launch TD-LTE services due to higher CAPEX required for 2300 MHz band. It may even bid for 850 MHz spectrum when it comes for auction to optimize the costs. Reliance Jio is the only carrier without 2G network and hence does not have circuit switch as a fall back option. This means that it would be implementing VoLTE (Voice over LTE) to provide voice services.
2. Airtel – Likely to concentrate on FD-LTE on 1800 MHz though it has TD-LTE service in 4 cities and licence for 8 circles. There is a good overlap between Airtel’s 2300 MHz and 1800 MHz circles. Moreover, it has 1800 MHz spectrum in all big circles except for Maharashtra, UP East and UP West. Hence, it is likely to focus on FD-LTE only. It has circuit switch fall back option available due to existing nation-wide 2G services and hence is likely to gain the most from the existing device ecosystem which is most elaborate on 1800 MHz.
3. Vodafone & Idea – Likely to wait and watch. Both the players have got 1800 MHz spectrum in key circles but are unwilling to commit due to the high Capex. If they see traction for LTE services, they are likely to move fast
4. CDMA Players (RCOM, MTS and Tata) – There are very few subscribers left on CDMA networks. Once the auctions take place for 800 MHz CDMA spectrum, the existing players would be allowed to re-farm the 800 MHz spectrum for LTE in 850 MHz. This should make the players like Tata and MTS pretty attractive for acquisition. Given the current troubles of Tata, in all likelihood, it would be looking at LTE as an exit strategy
I expect the first few LTE networks to come up by the end of the year and spread to top 20 towns by middle of next year. I also expect the operators, particularly Reliance Jio to aggressively price the LTE services to drive adoption. Entertainment and home broadband are the two areas that most of the players would be targeting.
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Mohit is a telecom professional with rich experience over 15 years. His expertise is in the area of strategy and planning and his work experience includes stints with two of Big 5 consulting organizations, a telecom operator and a handset vendor. Mohit can be reached at firstname.lastname@example.org