Indian government strives to save its dwindling telco industry

Government officials have reportedly been having meetings to figure out how the prospects for Vodafone Idea can be improved and three-way competition can be preserved.

Rumours have been circling the Indian telco space over recent weeks as it appears the industry is sleep-walking towards the death of Vodafone Idea and the creation of a defacto duopoly. One potential outcome in the immediate future would be invoking banking guarantees, a precursor to termination of telecom licences, according to the Economic Times, though this would be a worrying move.

With finance and telecoms ministers meeting in private, the objective could be to preserve a level of competition which is deemed adequate. Three private telcos should be considered the absolute minimum, though this is arguably too few for a nation the size of India. If the status quo is to continue concessions will have to be made.

What is actually being discussed behind closed doors remains to be seen, though reports are suggesting the Indian Government is seeking remedies to the precarious situation. This may well mean deferred or staggered repayments for the €7 billion spectrum bill being faced by both Vodafone Idea and Bharti Airtel.

The seriousness of the situation in India should not be taken lightly, though whether the Indian Government has the foresight to appreciate the damage which could be done in pursuing immediate repayment remains to be seen.

Vodafone Group CEO Nick Reid has repeatedly stated he would not be prepared to invest more capital in the market, or at least the vast sums which are being discussed today. It does appear Vodafone is prepared to wrap-up the joint venture between itself and Idea Cellular. Reid is perhaps looking at the big picture.

Vodafone is under pressure in several markets across the world. In the UK, it is spending significantly to bolster its current market share, while both Spain and Italy are presenting challenging environments thanks to heightened competition. India offers great potential, but $7 billion is a significant investment to remain in the hunt. At some point, executives will have to question when the end is nigh.

The ‘Chase Theory’ is usually associated with compulsive gambling, but it is also applicable here. As one of the simplest forms of gambling, the punter doubles down to recoup losses in pursuit of a theoretical gain. India is a market which offers great rewards due to a massive population and rapid digitisation, but it is proving to be a very costly pursuit. The last thing Reid will want to do is bankrupt his business chasing the hypothetical pot of gold at the end of the rainbow.

If the Indian Government does not introduce some flexibility into its mindset in dealing with the telcos, the market will soon devolve into a defacto duopoly. Admittedly, there are two state-owned telcos still in the fray, but these are providing next to no genuine competition. For a sustainable and healthy telecoms industry in India, the existence of Vodafone Idea should be considered priority number one.

The trickiest aspect of this discussion will be how to maintain credibility as an authority; the Indian Government needs to help Vodafone Idea, but it cannot be held to ransom by divas in the telecoms space.

Indian Supreme Court takes another step towards telco duopoly

The Indian Supreme Court has rejected a plea from Vodafone Idea and Bharti Airtel to defer disputed spectrum licence fee payments, making the collapse of Vodafone Idea a realistic outcome.

While the dispute has been on-going for more than a decade, it has intensified considerably over the last few months. Vodafone Idea and Bharti Airtel are liable for roughly $7 billion each in payments, thanks to penalty fees and interests, and have been attempting to negotiate better terms.

The plea to the India Supreme Court, where the telcos asked for interest fees to be dropped and the sum to be payable over a ten-year period, has now been officially rejected. Vodafone Idea and Bharti Airtel now have until March 13 to make the payments to the Indian Government in full.

The question which now remains is whether the death of the Vodafone Idea business is anything more than a matter of time.

The dispute in question concerns license fees which the telcos are liable for. As part of the licence, the India Government is entitled to a slice of the profits, though what this percentage is and what it is a percentage of is the centre of the argument. As this disagreement has been on-going for more than a decade, the penalty and interest fees have been adding up to an eye-watering amount.

Despite pleas to ease the financial burden of these penalties, the Indian Government and regulator have remained stubbornly resolute. Now it appears in might be a case of ‘cutting off the nose to spite the face’.

The Indian Government has always looked quite self-serving when it comes to working alongside the telecommunications industry. It has seemingly looked at the market as a short-term money-tree, as opposed to a long-term stimulant to the greater economy. Spectrum auctions are another example of this, with the valuable, scarce and limited resource often going unsold at auctions as the telcos complain of the financial commitments.

Now the greediness of the Indian Government is seemingly coming back to haunt it as the threat of competition being dwindled to a duopoly, a very dangerous position to be in, becomes much more realistic.

At the time of writing, shares in Vodafone Idea were down 22%. Vodafone Group CEO Nick Reid has already suggested the business would not be prepared to invest anymore capital in India without assistance from the Government, with the latest ruling adding another nail in the coffin. The financial liabilities being placed on Vodafone Idea could very realistically cause the firm to shut up shop in the near future.

For the Indian telecommunications industry, this would be a disaster.

Telco Market share
Reliance Jio 32%
Vodafone Idea 29%
Bharti Airtel 28%
BSNL 10%
MBNL 0.2%

BSNL and MBNL are effectively being propped up by the Government currently, meaning the market has in-effect three mobile players. There of course used to be much more competition, but thanks to the Reliance Jio pricing disruption, Telenor, Tata and Reliance Communications exited the market, while Vodafone and Idea Cellular merged into a single entity in 2018. Competition is at a very weak point, and it now looks like it will become even more feeble.

If Vodafone was to cash in its chips, Idea Cellular will unlikely be able to revive its business. The merger was driven by survival after all, meaning the collapse of the third major MNO. A market duopoly is not healthy, especially when one of the competitors is already battered and bruised and facing the same monstrous fine as Vodafone Idea.

Bharti Airtel has suffered as much as any other telco since the arrival of Reliance Jio. As India is the domestic market of the telco, it is highly unlikely doors will close, but the Supreme Court decision will also hold Bharti Airtel to payments of roughly $7 billion. As the market heads towards an informal duopoly, the former-market leader could be weaker than ever.

On the other hand, as Reliance Jio only entered the market in 2016 its own spectrum fee bill is considerably less. It is still an uncomfortable amount, though the firm managed to sell off its tower assets to settle the amount. It might be a bit poorer for the saga, but it is in a considerably healthier position than any of its rivals.

The Indian authorities have done what can only be described an atrocious, amateur and absent-minded job of managing its telecommunications industry over the last few years. It seemingly favoured Reliance Jio to the long-term detriment of competition, was unable to price spectrum appropriately for decades, and in this example, is stubbornly demanding its dues. The authorities cannot be held to ransom by a diva-like demands of telcos, but the risk of a Vodafone Idea collapse is very high.

Vodafone Idea looks to be at breaking point, Bharti Airtel doesn’t have two rupees to rub together and Reliance Jio is laughing. The Indian Government is proving to be incompetent at managing a healthy and sustainable telco market.

US attempt to grab mid-band spectrum for 5G gets messy

The US telecoms regulator wants satellite companies to hand over 300 MHz of C-band spectrum, but the question of how compensation remains unresolved.

FCC Chairman Ajit Pai recently made a rambling speech about how vital it is to US strategic interests that it lead the world in 5G. Apparently critical to this is a chunk of mid-band spectrum currently owned by a few satellite companies, so he wants to compel them to make it available to operators.

In return he’s going to get the operators to give the satellite companies up to $5 billion to cover the cost of vacating 300 MHz from 3.7-4 GHz and a further $9.7 billion to compensate them for the lost asset so long as they hand it over sharpish.

This is where things get complicated. On one hand it’s distinctly possible that the satellite companies will decide that’s not a fair valuation of their precious spectrum and thus hold out for more, with even the threat of bankruptcy apparently on the table. On the other hand there are people who thing that price is too high and in anyone’s going to extort US operators it should be the US state. And presumably the operators themselves would rather not get rinsed yet again.

“The imminent issuance of the draft order reflects the tireless efforts of many over the past several years to ensure that this critical spectrum comes to market safely, quickly, and efficiently,” said a statement issued by The C-Band Alliance, which represents the interests of Intelsat, SES and Telesat in this matter. “Today’s comments by Chairman Pai are a significant development in this important proceeding. We look forward to reviewing the draft order, once issued, to place Chairman Pai’s comments in full context.”

The danger for the C-Band Alliance is that the current US administration increasingly views 5G as a matter of national security and of strategic geopolitical significance. If Kennedy’s bleat is anything to go by, the US state is warming to the idea of unilaterally appropriating private property in the name of kicking 5G ass. 5G is important, but so are property rights and legal due process. Something’s got to give.

The death of Vodafone Idea starting to become a real prospect

Vodafone Group CEO Nick Read has reiterated his vow that no fresh funds would be injected into the Indian joint venture with Idea Cellular, painting a dreary picture for competition in the market.

As it stands, Vodafone Idea owes the Indian Government roughly $7.4 billion in spectrum fees, overdue payments and fines. Bharti Airtel is in a similar position, with both telcos pressing the authorities for relief. To date, the authorities are not budging, potentially undermining any commercial objectives for Vodafone in the region.

According to The Economic Times, Read has demanded the Government waive the penalties and interest payments, while also allowing Vodafone Idea to repay the principle sum over a period of ten years. Only if these demands are met, will Vodafone commit to continue the joint venture with Idea Cellular and push additional funds into the market.

This is a very stern statement from Read and one the Indian authorities should take very seriously. Numerous telcos have already left the market, and while it cannot be held to ransom by another, the competition landscape is looking suspect already.

The main issue here is a dispute over licence fees paid on spectrum assets. The telcos and the Government have different opinions on how much should be paid. This argument has been on-going for more than a decade, hence the ridiculous sums which Vodafone Idea and Bharti Airtel are being asked to pay. As Reliance Jio only came into existence in 2016, its own bill is much more palatable.

With extraordinary pressures already being placed on the spreadsheets thanks to the Reliance Jio disruption by undercutting existing pricing models, as well as a drive towards modernising infrastructure, this bill is the last thing the telcos need.

For Vodafone, you can see the predicament. There is a fortune to be made in India, but how much pain and expense can the business go through to realise it. The firm is facing difficulties in several other markets also; how many headaches can Nick Read tolerate at once? India might prove to be one migraine too far.

Vodafone claims dynamic spectrum sharing first

The point of DSS is to allow smooth transitioning between 4G and 5G by allowing them to share the same spectrum, dynamically.

Vodafone reckons it’s the first to demonstrate this handy tech over a couple of low frequency bands (700 and 800 MHz). It announced it on a blog late last week, but kept so quiet about it that we only just found out. As if to demonstrate the folly of a complete Huawei ban, the Chinese vendor was involved, but so was Ericsson and, inevitably, Qualcomm.

The specific first was the simultaneous use of two bands on one 5G NSA device. Only the 700 MHz band did any dynamic sharing, however, with the other one used as an ‘anchor’ whatever that means. Light Reading attempted to shed some light on it here. It looks like DSS has never been a thing before, so this is quite a big deal.

Outside of technological milestone gathering, this matters because it should minimise the disruption caused by the switch to 5G. For operators it means that, in terms of spectrum, they don’t have to hold on with one hand before letting go of the other and will effectively make refarming a thing of the past, at least in theory.

FCC finally opens up 3.5 GHz for US telcos

It might be years overdue, but the Federal Communications Commission (FCC) has made the first tentative steps towards utilising valuable assets in the 3.5 GHz spectrum band.

Described as the C-Band, or at times the ‘Innovation Band’, the 3.5 GHz spectrum assets have been widely recognised around the world as the key to unlocking 5G in the short-term. Thanks to a more palatable compromise between coverage and speed, these spectrum assets have been the most desirable for telcos in Europe and Asia.

In appointing CommScope, Federated Wireless, Google and Sony as its four Spectrum Access System (SAS) Administrators, US telcos might have the opportunity to access the spectrum in the near future.

“The FCC has made it a priority to free up mid-band spectrum for advanced wireless services like 5G,” said FCC Chairman Ajit Pai. “And today, I’m pleased to announce the latest step to achieve that priority: the approval of four systems that will enable the 3.5 GHz band to be put to use for the benefit of American consumers and businesses.

“As with all of our efforts to execute on the 5G FAST plan, we’re pushing to get next-generation wireless services deployed in the 3.5 GHz band as quickly and efficiently as possible.”

While many of the US telcos have been preaching the benefits of mmWave spectrum to deliver 5G services, many have been critical of the approach. It might deliver eye-wateringly fast download speeds, though the coverage from cell sites is currently pathetic, as are the propagation characteristics. There is a very good reason the vast majority of regulators have prioritised the 3.5 GHz spectrum band; it offers increased download speed but does not frustrate on coverage anywhere near as much.

The issue for the FCC and US telcos in the 3.5 GHz spectrum band has been one of congestion. The US Navy has been utilising the spectrum in recent years and is reluctant to permanently vacate due to the compatibility of its equipment on ships and bases. Overhauling the US Navy radar system is hardly a simple task, though as it does not make use of the spectrum in all places and at all times, a new solution was needed.

What will emerge over the near future is an innovative dynamic spectrum sharing mechanism, with the four SASs key to the success. The 3.55-3.7 GHz band will now be split into 15 channels, with access for third parties and telcos being managed by the SASs, though the Navy will have priority use as and when demanded. However, the Navy’s use of the spectrum will largely be limited to the coastal areas.

While the US is very late to the 3.5 GHz spectrum party, it is bringing a very interesting idea with it. Such a dynamic spectrum sharing initiative is an excellent idea to make use of scarce and valuable assets. There will be numerous regulators watching this project very closely.

Indian Supreme Court rejects telcos appeal over government bill

The billions owed by Vodafone Idea and Bharti Airtel for historic license fees must be paid after the Indian Supreme Court rejected their appeal.

The two massive operator groups appear to be running out of options, having spent the latter half of last year first contesting the fees, then begging for clemency and then finally threatening to exit the market if they’re given no relief over their massive financial burden. Typically the Supreme Court is where you turn to when you’ve tried everything else, but in this case it was that same court that enforced the fees last year.

Reuters reports that it’s specifically petitions seeking a review of last year’s order that have been rejected, indicating that the Supreme Court has seen nothing since then to persuade it any mistake was made. In today’s money Vodafone Idea owes £3.9 billion and Bharti Airtel $3 billion. This decision is sure to bring a fresh wave of existential angst from the beleaguered operators.

So what next? There will be talk of further petitions and that sort of thing but it looks like the Supreme Court is not for moving. That just seems to leave the political angle. The money is owed to the government, so it’s presumably within its power to at least ease the burden. In most countries MNO competition is considered vital to a healthy telecoms sector, but the way the Indian government has acted since the creation of Reliance Jio suggests otherwise in India.

Wi-Fi Alliance stakes its claim to the 6 GHz band

The 6 GHz band is expected to be made available in unlicensed form soon and the Wi-Fi Alliance thinks it’s a good fit for Wi-Fi 6.

While wifi most commonly uses the 2.4 GHz and 5 GHz bands, it’s always keen for more. With the advent of 5G and the auction of other higher frequency bands for mobile, especially the mid 3 GHz bands, wifi has increasingly come into direct competition with cellular for bandwidth. 5G seems to have a limitless appetite for such stuff, so the Wi-Fi Alliance seems to be planting its flag early for the 6 GHz band.

Specifically this takes the form of a sub-brand called Wi-Fi 6E, which will be used to designate devices that support connectivity over that frequency. The Alliance reckons regulators will offer up this band in unlicensed form fairly soon and it will represent a rare opportunity for the wifi ecosystem to expand its spectrum portfolio.

“6 GHz will help address the growing need for wifi spectrum capacity to ensure wifi users continue to receive the same great user experience with their devices,” said Edgar Figueroa, CEO of the Wi-Fi Alliance. “Wi-Fi Alliance is introducing Wi-Fi 6E now to ensure the industry aligns on common terminology, allowing wifi users to identify devices that support 6 GHz operation as the spectrum becomes available.”

“If the regulatory landscape permits, we expect companies to move forward aggressively with products that operate in 6 GHz because they understand the tremendous value brought to their customers by this portion of unlicensed spectrum,” said Phil Solis, Research Director at IDC. “If spectrum is made available early this year, we expect momentum of products that support operation in 6 GHz to ramp very quickly.”

The Alliance expects consumer routers to be the first to use 6 GHz, but its propagation characteristics are presumably pretty rubbish so you wouldn’t want to rely on that spectrum unless you were fairly close to the router and ideally in the same room. It could be handy for mesh wifi nodes though.

Malaysia outlines complicated plan for 5G spectrum allocation

The Malaysian Government has released complicated plans to allocate spectrum ahead of 5G deployment in the country in an effort to ensure the greatest efficiencies.

Theoretically, the Malaysian Communications and Multimedia Commission (MCMC) has outlined a strategy which could bring significant benefit to the country, but there is certainly a risk this could go disastrously wrong. There are a lot of moving parts, new ideas and opportunity for abuse should the pieces not fall perfectly into place.

Starting at the top, after a consultation period, the MCMC has identified four spectrum bands for 5G services; 700 MHz, 3.5 GHz, 26 GHz and 28 GHz. This is not revolutionary, as these airwaves have been identified for 5G by other nations, but the allocation of these assets is the interesting element of this story.

Starting with the 700 MHz and 3.5 GHz spectrum bands. As opposed to going through an auction process, these licences will be assigned to a consortium formed by the various different players in the industry. With only 2×30 MHz blocks in the 700 MHz band and 100 MHz in 3.5 GHz, the consortium approach expects to make best use of the available spectrum and also intends to minimise CAPEX for infrastructure deployment across the country.

An alternative strategy for 5G infrastructure deployment is not only critical to make use of the spectrum, but also to ensure 4G investments are continued. 5G does pose a threat to the cash allocated towards continued 4G investments across the world, though in countries like Malaysia where a digital divide is very clear and present currently, the consequence could be much greater. 5G has huge potential, but 4G has a significant way to go in some markets.

What is not entirely clear, is how the telcos will work alongside each other. Investment in infrastructure will be shared, as will the spectrum resources to deliver commercial services. This is where the plan faces risk; telcos generally do not play well together, so it will be interesting to see how this play-date unfolds.

Looking at the next band, 24.9 GHz to 26.5 GHz, these licences will be assigned through a tender process, also known derivatively as a ‘beauty contest’. Although some have good intentions for this approach to allocating spectrum, it is wide open for abuse and more often than not fails to deliver on the intentions in the long-run.

The final band, 26.5 GHz to 28.1 GHz, will be assigned on a first-come first-served basis and is open to any party, not just telcos. While the 26 GHz licences will be allocated on a national basis, the 28 GHz spectrum will be highly localised. Anyone who wishes to deploy a highly localised, private network will be free to apply for a licence. Industrial, enterprise and smart city focused usecases have been envisioned here.

Like every market, Malaysia is nuanced and has to adjust spectrum allocation to meet its own wants and needs. The European or North American approach could not be applied here, and it is very encouraging to see a Government attempt to drive through innovation in the spectrum process.

Unique challenges demand unique approaches, and that is certainly what Malaysia is applying. That said, there is plenty which could go wrong. This is a process which is certainly worth keeping an eye on, as there are plenty of nations around the world who could learn from the successes and failures.

India ignores industry on spectrum pricing complaints

The Indian Government has said it will not drop prices for spectrum licences in the next auction, despite persistent complaints from industry.

At conferences across the year, the Indian Government has been making suggestions it would reform the spectrum auction process, perhaps to appease the complaints from telcos, though this statement is quite the contrary. According to the Economic Times of India, after reviewing recommendations from the Telecoms Regulatory Authority of India (TRAI), the Government has decided to maintain the current pricing structure.

And while telcos will always attempt to reduce investments made on spectrum, as well as bemoan the amount spent, you have to take these protests with a pinch of salt. There might be some credibility to the Indian complaints however.

In other markets, Germany for example, the telcos have been in uproar regarding the structure and pricing of spectrum auctions. The same complaints are being aired in India, though there is a slight difference in the outcome; spectrum is snapped up in Germany, suggesting the telcos can afford it, they just don’t like the price, but spectrum is remaining unsold in India.

According to Broadband India Forum (BIF), the high reserve prices placed on spectrum assets is a significant barrier. Since 2010, a period which includes six spectrum auctions, only 60% of the licences have been purchased. If such a valuable, and sparse, asset is remaining unsold, there is clearly something wrong with the status quo. Spectrum is arguably the lifeblood of a telco after all.

When compared to other nations, adjusted to take into account ARPU, BIF believes spectrum is 4X the price in India. As a result of these assets remaining unclaimed, $756 billion in economic losses have added-up over the years. This is very likely to be exaggeration, though there will of course be a dent to the progress and adoption of the digital economy when telcos are not in full-flight with all the relevant support from authorities.

The next spectrum auction is likely to take place in early 2020, starting with the 3.3-3.6 GHz spectrum band, some of the most prized assets due to the palatable compromise between speed and coverage. 275 MHz will be made available in the first instance, which the Government insists is enough to launch services, though industry and BIF disagree.

This could be an interesting auction, as the Government has ambitions to launch 5G services in India in 2020. Ericsson’s most recent mobile study suggests 5G connections will not be available in the country by 2022 to counter this point and considering the telcos are not happy with the current status quo, it does not look incredibly likely.

Once again, the Indian Government and regulator does not seem to want to work collaboratively with industry, taking a somewhat authoritarian approach as opposed to listening to how it could aid progress of the digital economy.