CDMA: The Die Is Cast

The wireless market in India has been doing exceptionally well, with a

subscriber base of around 10.15 million as of October 2002. In India, GSM has a

5—6 year lead time in comparison to CDMA and dominates the wireless scene with

around 9 million subscribers as compared to CDMA, which is estimated to have

around 1.15 million subscribers.

But CDMA has a faster growth rate.



While the GSM network is inducting 0.4—0.5 million subscribers per month,

CDMA network is adding around 0.11 million subscribers. With the ‘big bang’

launch of Reliance Infocomm’s services and with Tata launching services in new

circles, 0.36 million CDMA subscribers are likely to be added per month.

According to Qualcomm, the worldwide CDMA subscriber base stands at around

134 million (as of September 2002). Of this, Asia-Pacific contributes around 50

million. In India, of the 1.15 million CDMA subscribers, around 440,000 are for

WLL (M) and the rest are for fixed wireless terminals (FWT). On the CDMA front,

things are moving at a fast pace, with Tata Teleservices launching services in

Tamil Nadu and Karnataka, to be followed by launches in Delhi and Gujarat in the

first half of December 2002. Reliance Infocomm is also moving as per the

schedule of 28 December. BSNL is also enhancing its pilot project and is going

for a commercial deployment of WLL (M) in a big way.

The

Big Four



Four players, Reliance, Tata, BSNL, and MTNL will push CDMA in the country.

Reliance is well ahead on the front and is planning to make its Infocomm

operations a success by putting a lot of focus and synergy, supported by a good

deal of financial muscle.

Reliance Infocomm is being touted as the service provider that will change

the face of CDMA in the country. (CDMA innovator Qualcomm is also betting

heavily on Reliance, having invested around $200 million for a 4 percent equity

stake.) Reliance is planning to deploy 5 million lines in more than 1,000 cities

spread across 18 circles (except in J&K, A&N, and Northeast). Initially,

both Nortel and Lucent were in the race but according to sources, Lucent edged

an advantage over Nortel in terms of logistics as well as the capability to work

in Indian conditions (read, the period when India—Pakistan tension was at its

peak). According to industry sources, till date, Reliance has given CDMA

infrastructure orders of around 3 million lines to Lucent Technologies. Talks

for another 2 million lines are reportedly on with Samsung, Nortel, and Lucent.

In spite of having tasted the success of CDMA in Andhra Pradesh by being the

first company to commercially offer CDMA services in the country, Tata

Teleservices has been moving cautiously on the CDMA turf in new license circles

of Delhi, Karnataka, Tamil Nadu, and Gujarat. On the CDMA infrastructure front,

the company has opted for a pessimistic approach and has given a 610,000-lines

infrastructure order to Lucent for all its new circles.

In Maharashtra, where Tata has acquired Hughes Tele.com, the company is

planning to provide CDMA-based service once the acquisition process is

completed. It is expected that the company will launch CDMA-based services in FY

2003-04. At present, the company is providing TDMA-based fixed wireless services

in the country and its fixed wireless subscribers are around 49,552 (as on 31

October 2002).

A strong GSM player, Bharti has reported that it will foray into the CDMA

space through its basic services arm Bharti Telenet. The company has applied for

spectrum and will initially limit its services for fixed wireless in the new

circles of Delhi, Haryana, Karnataka, and Tamil Nadu, along with Madhya Pradesh

where the company has been providing CDMA-based fixed wireless services in the

past. The company has kept its options open by acquiring spectrum space.

Depending on how the market moves, the company can launch fixed wireless

services. And with the spectrum license in hand, the company can also think of

launching WLL (M) services in future.

The incumbent operators–BSNL and MTNL–are also moving at a fast pace on

the CDMA front. MTNL has given expansion orders of 1 lakh lines each to Fujitsu

for Mumbai and Motorola for Delhi. The company has also come out with a tender

of 4 lakh lines each in Delhi and Mumbai. BSNL too is expanding the pilot

project that was done in 22 cities. It has given an order to LGSYS for 2.1 lakh

lines. The company has recently finalized a tender of 5 lakh lines for which

purchase order is yet to be placed. It has recently floated a tender for 745,000

lines for which bids are yet to open.

Players like Shyam Telelink and HFCL Infotel are also moving at a fast pace

in their respective circles of Rajasthan and Punjab. Currently, the service

providers do have the monopoly in a majority of the cities but soon we might see

Reliance and BSNL also providing CDMA services in these circles.

The Infrastructure Market



Taking the overall performance of all the service providers in the country,

Voice&Data estimates that India will have around 2.4 million subscribers by

March 2003 and 8.7 million subscribers by March 2004. In volume terms, CDMA is

forecasted to achieve a growth of 552 percent in 2002-03. In 2003-04, the growth

is forecasted to be around 253 percent. This sudden surge in growth as well as

volume is due to the launch of new circles by Tata Teleservices and all-India

launch of Reliance. This, coupled with the aggressive approach of incumbent

operators, will lead to those numbers.

A Northbound Market

The CDMA equipment market in India will grow at a rate of 192 percent in fiscal 2002-03, in revenue terms In number terms, the growth will look even more impressive There will be a cumulative subscriber base of 2.46 million as against 376,741 the previous fiscal Thus, CDMA subscriber base will register a growth of 552 percent

According to VP Chandan, president, Qualcomm India, the country will reach a

base of 10 million subscribers by the end of December 2003. Even WC Kim,

managing director, LG Electronics System India echoes the same feeling.

According to him, by March 2004 India will have 10 million lines and CDMA will

achieve in three years what GSM has achieved in eight years.

The majority of CDMA lines will be for WLL (M) handsets. Vijak K Gupta,

director (business development–Asia), Lucent Technologies, who was till

recently head of Lucent in India, feels that fixed wireless is dead but it is

okay for certain applications like PCO operations any other applications which

is compulsory due to regulation.

In FY 2002-03, the CDMA infrastructure market in value terms is estimated at

Rs 2,788 crore as against Rs 955 crore in FY 2001-02. In terms of value, the

market will grow by around 192 percent in FY 2002-03. With the increase in

deployment of CDMA infrastructure in the country, there has been about

20-percent drop in equipment prices since the last year, says WC Kim.

According to Rajan Mehta, V-P (service provider segment), Nortel Networks,

the CDMA growth rate in India is the highest because of the low teledensity here

and the absence of an extended network. This gives CDMA players ample room to

enable leapfrog from wireline to wireless technologies.

Qualcomm is also looking at alternate revenue streams on the infrastructure

front and is promoting GSM 1X in the country. The technology is aimed at

providing the existing GSM operators the advantages of both CDMA as well as GSM

technologies. Using this technology, the GSM service providers can move to

next-generation technology by upgrading their network to 3G using the same

frequency band and expect speeds equivalent to 1X EV-DO. So, on the GSM front,

one can avail of facilities like roaming and prepaid, while on the CDMA front

the company can avail of high data rate and high capacities.

Currently, the chip for GSM 1X has been perfected and sampled and it is

offered to the manufacturer. They, in turn, have to come out with a prototype,

says Chandan. This chip can also be used for dual mode/dual technology, which

will be helpful for GSM operators as they can have one number for GSM to be used

for roaming and second to be used for CDMA WLL (M) applications.

The Vendors



Vendors from three countries–the US, South Korea and China, dominate the

CDMA scene in India. The US companies like Lucent, Motorola, and Nortel are

present in India and so are Korean companies like LG and Hyundai. From China,

while there are a lot of new companies but the lead has been taken by ZTE, which

has recently bagged an important order.

Lucent Technologies has been the front runner in India as it has bagged all

major deals in the private sector. Unsuccessful on the Reliance front, Nortel is

rethinking on its strategy in India and is now planning to target BSNL through a

partner and to bid directly for MTNL.

LG has been successful in the government sector but is yet to make a mark in

the private sector.

Motorola and Fujitsu have also done well on the MTNL front. ZTE, the Chinese

company has recently bagged good orders and made its presence felt in India.

With the market opening up for CDMA in the country, many new companies are

getting aggressive either directly or through their partners. The huge size of

the CDMA market is throwing up new opportunities for vendors. At the same time,

with the competition rising, prices of infrastructure are bound to fall with

each new tender. What’s more, service providers won’t just be looking at the

prices but also evaluating the supply record and proof-of-reliability of the

vendors in the fray.

Pravin Prashant

CDMA Development in India (FY2002-03)

BSNL

• 16,000 line CDMA infrastructure order finalized early in FY 2002-03

• 290,000 line CDMA infrastructure order finalized in June
  
  2002

• Urban expansion order of 210,000 in 16 cities finalized
  
  in September

• Urban infrastructure order of 500,000 lines was bagged
  
  recently by ZTE but the company is yet to recieve the Purchase Order

• Rural expansion order of 473,000 lines finalized recently
  
  for which Purchase Order is to be given

• 745,000 CDMA infrastructure tender issued recently where
  
  seven vendors participated through 11 bids. MTNL

• Recently expansion order of 100,000 lines each given to
  
  Motorola in Delhi and Fujitsu in Mumbai

• Tender issued for 400,000 lines each for Delhi and Mumbai
  
  yet to be finalized

Reliance Infocomm

• Issued order for 5,000,000 lines to Lucent to be deployed
  
  in 18 basic services circles

Tata Teleservices

• Issued order for 611,000 lines to Lucent for the new
  
  circles of Tamil Nadu, Karnataka, Delhi, and Gujarat

• Expected to add around 100,000 CDMA subscribers in
  
  existing circle of Andhra Pradesh

Hughes Tele.com

• Focussing more on FWT but with Tata acquiring Hughes
  
  Tele.com, the company will provide WLL(m) services in FY 2003-04

Bharti Telenet

• Plans are for deployment of fixed wireless terminal based
  
  on CDMA in the new circles as well as in Madhya Pradesh.

Shyam Telelink

• Expected to add around 30,000 subscribers in FY 2002-03

HFCL Infotel

• Expected to add around 50,000 subscribers in FY 2002-03