Antilia TowerDecember added 12M data users to 344M with 700M 2G feature phones the next target.

Rishi Tejpal, new telecom lead at Economic Times, introduced some dramatic projections in his first article. Bharti, Jio, and Voda/Idea intend to introduce 4G smartphones at 500 rupees, less than $10 U.S. He estimates that would require subsidies of ~$30/phone. The result: over 200M Indians will switch to 4G with Internet connections. I believe $5B for customer acquisition is modest compared to the $10's of billions each of the companies is spending for robust networks. (Jio and the others will generally offer >15 megabit downloads by the end of this year. Their state of the art 5G networks are bringing cost per bit so low they can make money at prices the West think remain impossible.)

Depending on how you count 2G and 3G mobile connections, India either soon will have more Internet connections than the U.S. population of 326M or may have already done so. Soon, India will have twice as many people connected at broadband speeds as the U.S., mostly on wireless. A dynamic private sector led by Reliance Jio is complemented by the sensible public buildout to over 300,000 villages. Both are moving quickly.

India data 230Tejpal recently joined ET from Gartner, where he and other analysts were close to all the telcos. He's likely to be well informed of the company plans. Forecasts like this can never be guaranteed. Companies can change marketing plans in a few months. If Ambani told investors, for example, that "Jio believes a smartphone price of $20 makes more sense," the others would probably revise their plans as well.  Building large networks or developing technologies takes much longer, so 2-5 year projections often are accurate.

While the technologies available for the next year are predictable, the subsidy cost could change quickly if major vendors decide to be aggressive pursuing orders in the hundreds of millions. Spreadtrum has financial support from Intel and Unigroup, both large enough to take large losses if they want to expand market share. Foundry utilization in 2018 will be limited at the most advanced nodes (7 nm) but probably in ample supply for the older technologies needed here. Qualcomm is looking to take market share in RF front ends from Avago/Broadcom. Decent screens are in good supply. The manufacturers could change marketing plans quickly as well, although there's little evidence of that so far. 

With only three surviving large telcos in India, signaling is likely. I'm seeing that in the U.S. right now. Sprint and T-Mobile are currently signaling they believe prices should go up. AT&T and Verizon would be delighted to go along and Wall Street bid up the stocks expecting higher prices. This week, Craig Moffett looked at the actual prices and the competitive situation. He came to the conclusion price firmness was possible but wasn't clear in the data. 

Corporate decisions about pricing in these markets are an exercise in game theory, not competitive supply and demand. Despite a few Nobel prizes for game theory, the economics of imperfect competition is still challenging in practice. Most economists run from the problem. Policy advocates are worse; most make "simplifying assumptions" and their work becomes garbage in, garbage out.

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The Indian telcos are crying poverty and demanding subsidies, just like Deutsche Telecom and so many others, A common opinion is "Considering the current financial health of telcos, where the cumulative debt is in excess of Rs 5 lakh crore, they need to be careful and can ill afford this additional burden of subsidies." 

My take is that companies with a market cap of > $70B don't need government and can afford this. Bharti's $26B market cap is actually up ~14% on the year.  Jeffries estimates Jio would be worth $47B if it went public. (Jio is part of Reliance Industries and Vodafone part of a worldwide company. The $65B is therefore an estimate.)

Would users or shareholders benefit from a government subsidy? That's the question you always have to ask, whether the purpose is bringing broadband to rural Scotland or bringing down the price of mobile phones in Nigeria. The Indian telcos want $billions in a country that is short of the capital it desires for growth. If the telcos got tax reductions, lower spectrum prices, or other programs, would most of the money go to more/better broadband or to profits. There's no reason to expect the companies to spend most of the funds for the consumer. 

Will Ambani have to sell Antilia Tower, his beautiful home in the photo, if he doesn't get government funds?

 

 

dave askOn Oct 1, Verizon will turn on the first $20B 5G mmWave network, soon offering a gigabit or close to 30M homes. The estimates you hear about 5G costs are wildly exaggerated. Verizon is building the most advanced wireless network while keeping capex at around 15%.

The Koreans, Chinese, and almost all Europeans are not doing mmWave in favor of mid-band "5G," with 4G-like performance. Massive MIMO in either 4G or "5G" can increase capacity 4X to 10X, including putting 2.3 GHz to 4.2 GHz to use. Cisco & others see traffic growth slowing to 30%/year or less. Verizon sees cost/bit dropping 40% per year. I infer overcapacity almost everywhere.  

The predicted massive small cell builds are a pipe dream for vendors for at least five years. Verizon expects to reach a quarter of the U.S. without adding additional small cells. 

In the works: Enrique Blanco and Telefonica's possible mmWave disruption of Germany; Believe it or don't: 5G is cheap because 65% of most cities can be covered by upgrading existing cells; Verizon is ripping out and replacing 200,000 pieces of gear expecting to save half. 

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 5G Why Verizon thinks differently and what to do about it is a new report I wrote for STL Partners and their clients.

STL Partners, a British consulting outfit I respect, commissioned me to ask why. That report is now out. If you're a client, download it here. If not, and corporate priced research is interesting to you, ask me to introduce you to one of the principals.

It was fascinating work because the answers aren't obvious. Lowell McAdam's company is spending $20B to cover 30M+ homes in the first stage. The progress in low & mid-band, both "4G" and "5G," has been remarkable. In most territories, millimeter wave will not be necessary to meet expected demand.

McAdam sees a little further. mmWave has 3-4X the capacity of low and mid-band. He sees an enormous marketing advantage: unlimited services, even less congestion, reputation as the best network. Verizon testing found mmWave rate/reach was twice what had been estimated. All prior cost estimates need revision.

My take: even if mmWave doesn't fit in your current budget, telcos should expand trials and training to be ready as things change. The new cost estimates may be low enough to change your mind.