Let’s start with the basics. India has just about 50 million telephones, putting together both mobile and fixed phones. If the teledensity has to be taken to 7 by the year 2005 and to 15 by the year 2010, as per the NTP ’99 targets, then the total number of telephones will reach 150 million by 2010. This translates into about 100 million new phones. (COAI, however, puts the cellular figure itself at 120 million by 2008). Going by the trend that has been seen in most of the low tele-density countries in the world, as much as 70-80 percent of this would be mobile. The fixed line growth is likely to slow down, as is the trend worldwide.

Compare that to the projected growth of mobile worldwide—2 billion by 2008 or about 932 million new connections, according to EMC. So India will account for a cool 11.8 percent of these new connections. This will catapult India’s share in the global mobile base from a minuscule 1 percent to a respectable 6 percent by 2008

How Will That Affect CDMA?
Let’s now come to the technology. Even if half of the new users in India decide to go for CDMA (we’ll examine below why they would do so), about 50 million users from the country would be on CDMA by 2010. Today, the global CDMA subscriber base is 135 million.

Is that the reason why the CDMA pioneer Qualcomm and CDMA handset vendors like Samsung and LG have suddenly become hyperactive in India?

Never before has any country witnessed the kind of enthusiasm for a technology as has been visible in India for CDMA, of late. There is an air of expectancy in all concerned quarters, in India as well as globally. Qualcomm has put a big bet on pushing CDMA in Asia-Pacific, and India is a major focus point of that. The seriousness became all the more evident when it pledged $200 million to Reliance Infocomm.

Analysts, worldwide, are very closely watching as the CDMA saga unfolds in India. Closer home, GSM operators are busy reviewing their marketing strategies and reworking their tariff plans to face the charge of the CDMA brigade led by Reliance. This would be the toughest competition they have faced since the launch of mobile services in 1995. The Global mobile Supplier Association (GSA) organized a pro-GSM conference in Delhi, wherein several vendors and service providers reiterated their commitment to GSM in India, and cited an independent study to rubbish the march of CDMA.

Much of the fight between the cellular and fixed-line operators in India revolves around the limited mobility services front. The matter went to the Supreme Court, which refused to stay the rollout of WLL services. The final decision is however yet to come from the telecom tribunal, which has been entrusted the task of re-looking into some of the level-playing issues. But with the government firmly behind the WLL operators, the final outcome is likely to be in favor of WLL. S Ramakrishna, CMD, Tata Teleservices, pertaining to the launch of its limited mobile services in Delhi, said, "We’ve taken into account the inherent risk involved before going ahead with our launch." Reliance has already announced its nationwide launch of CDMA-based WLL services with a bang.

Focus Shifts to India
There are a total of 134.9 million CDMA subscribers worldwide, of which 40 million subscribers are in Asia-Pacific. Considering that CDMA is a relatively new phenomenon, this is an impressive number. China Unicom, which launched CDMA services in April 2002, upset all calculations by adding 700,000 users in the two weeks prior to 8 October 2002, bringing the total to 3.7 million in China. The operator says it expects to add 11.4 million CDMA users in the fiscal 2003, which is nearly three times its 2002 target of 4 million.

CDMA mobile growth

Year 2002 2008* Net Addition World 1,068 2,000 932 India 10 (Dec’ 2002) 120 110 India’s Share (%) 1 6 11.8 Note: Total CDMA subscribers is 135 million which is 12.8 % of the total mobile users.  Source: EMC, COAI, and Strategis *Projected

China Unicom also stunned by revealing that its CDMA ARPU was 155.8 yuan (about Rs 850), which is more than double the GSM ARPU. China already has 200 million cellular subscribers, more than what the US has. But with the growth rate of mobile telephony in China stabilizing at around 40 percent now, after reaching as high as more than 100 percent at one point of time, the world is talking about India as the next market. Assumptions about India are largely based on the sudden hype about CDMA in India, thanks to Reliance Infocomm’s ambitious plans. Other players, like Tata Teleservices, which acquired 100,000 CDMA mobile customers, have also helped build expectations.

India is set to emerge as a laboratory for CDMA and the Reliance-effect can be already seen across the country. The market is buzzing with activities. Reliance aims to redefine the way telecom services are marketed in the country by taking the direct route. Already the market is showing signs of a shake-up, with Reliance betting big on doing something that has not been done by anybody in the world; certainly not on this scale.

Let’s see how market responds to a service that operates on a widespread network. The launch of BSNL’s CellOne in November saw a cumulative addition of 700,000 mobile subscribers, the highest additions so far. It was the low tariff, coupled with BSNL’s countrywide network that drew such a large number. Besides, BSNL is also continuing with its CDMA-based limited mobile offerings and has been able to garner 2.25 lakh subscribers till now.

Considering that Reliance’s network spans 18 circles, a similar, overwhelming response to Reliance Infocomm’s services should not be surprising. It may also be noted that Reliance’s launch is backed by a strong and innovative marketing and advertising strategy—something not the case with BSNL—and that makes Reliance’s case even stronger. Similarly, Tata Teleservices is moving ahead aggressively with its CDMA plans. TTSL is present in Andhra Pradesh, Delhi, Gujarat, Karnataka, and Tamil Nadu, and is planning to foray into Kerala, Punjab, Haryana, and even UP.

Given the full-fledged entry of Reliance and Tata, besides BSNL, the market is simply going to explode and witness a never-before growth. The financial muscle of the two private players will help tap the huge virgin markets. It’s not far-fetched deduction that the overall CDMA mobile base in India will soon be forming a substantial chunk of the global CDMA base.

CDMA has been in existence in India for a couple of years now, with MTNL having the distinction of being the first to launch its services. The services launched in Mumbai and Delhi were a hit, and MTNL soon ran out of network capacity. It re-launched the services in January 2002 after augmenting the capacity.

Operators’ Ingenuity
Bundling of handsets or helping subscribers get handsets financed, appears to be a brilliant move undertaken by Reliance and will probably be adopted by other players too, including Tata. That will truly spur the growth of CDMA, just as the consumer electronics industry took off with financing schemes. Such schemes have never really been pursued by GSM operators in the country. Another first from the Reliance stable is the direct marketing of CDMA services.

Reliance is well tuned to the fact that the success of high-speed data services will significantly depend on the effectiveness of applications. The company has enrolled more than 1,000 software developers towards this end. The company has ambitious plans to make 100,000 developers join the bandwagon by December 2003. The job of these developers would be to churn out products that could run on Reliance’s CDMA infrastructure. Sounds realistic looking at the vast and ready pool of software professionals in India. In fact, Reliance is even talking of providing 3G-type video services and has bought solution from the US-based Thin Multimedia for the purpose. Thin Multimedia has a track record of successfully providing such services to operators worldwide. These include SK Telecom of South Korea, and Cellcom of Israel.

The regulator in India, TRAI, however, is yet to clear the proposals submitted by both Reliance and Tata, for offering data services. Down-to-earth tariffs, especially the lure of free incoming and nominal outgoing, is seen as a unique pricing strategy that can really attract new users, but the chances of significant churn from existing users can’t be ruled out.

Deterrents—Waiting to Go Away?
The biggest deterrent in the way of cellular growth is the high cost of handsets. ABTO, in its budget proposals, has asked the finance ministry to allow duty-free import of CDMA handsets. It has also asked the government to remove the CVD of 16 percent on infrastructure equipment. A positive response from the government can be a boon for CDMA players. Till that happens, Reliance and Tata plan to subsidize the handset and offer attractive finance schemes to rope in new customers.

There are, however, certain other regulatory hurdles as well that are holding back the market. Interconnect still remains a major issue. There have been reports about GSM operators not opening up their networks for interconnect to CDMA players. Tata Teleservices, which launched its services in Delhi, has not been able to sign the interconnect agreement with AirTel so far. Pramod Mahajan, minister of communications, urged GSM operators to allow interconnects in the best interest of subscribers, but in vain. Nevertheless, he reiterated government’s commitment for WLL.

What Does It Look Like?
In the run up to the launch, top analysts, including some skeptics, have finally seen reason behind Reliance’s plan and have gone to the extent of saying that Reliance’s CDMA strategy may just click. The company has pegged 4–5 million CDMA subscribers by March 2004 and is aiming for 20–25 percent market share by that time.

Projections apart, the availability of 3G-like high-speed data services (up to 144 kbps) will help CDMA operators to gain advantage over existing GSM/GPRS (which offer speed between 30-40 kbps) operators. This is one threat that’s looming large over GSM operators as their plans of migrating to 3G via the GPRS and EDGE route may take a couple of years. The uptake of GPRS has not been very encouraging in India, which is a cause of concern. It is also significant to note that CDMA2000 already has 99 percent of the 3G market. Not surprising, given the fact that CDMA2000 supports 3G services as defined by the International Telecommunications Union (ITU) for IMT-2000.

Sure, the huge and globally spread installed base of GSM will ensure that CDMA operators like Reliance and Tatas won’t have a cakewalk. The cost of CDMA handsets will continue to be higher than GSM for some more time to come. Handsets must become cheaper for CDMA operators to give a tougher competition to GSM operators. Globally, the total number of mobile users is 1,068 million, which is expected to catapult to 2 billion by 2008. The total number of CDMA subscribers (September 2002) is 135 million, which is 12.8 percent of the overall mobile users base.

Qualcomm is trying to lure existing GSM operators with its GSM1X technology. Qualcomm claims that the technology is a cheaper means of migrating to 3G (CDMA2000) for existing GSM/GPRS operators. Given that European GSM operators are in a state of shock due to their failure to roll out 3G data services, Qualcomm is selling GSM1X as a way out. In India too, the technology is likely to be sold as a good migration alternative to 3G for existing GSM operators. And if Qualcomm is able to sell the concept, supported by some sound proof of execution, India will change the fate of CDMA sooner rather than later.

Sudesh Prasad