Telecom Lead Asia: The re-entry of AT&T into the Indian wireless market by planning to buy 25 percent stake in Reliance Jio Infocomm, the 4G venture of billionaire Mukesh Ambani, for $3.5 billion, will add significant value to both.
Reliance Jio Infocomm — which is still in the process of finalizing a business plan for its 4G / TD-LTE launch, will be able to utilize the expertise of AT&T.
In the U.S., AT&T is ahead of competition in LTE innovation. Recently, AT&T said it will offer 4G LTE services on most vehicles from General Motors starting with the 2015 fleet, which comes out late 2014. GM isn’t AT&T’s first automotive customer for wireless services. The telecom giant has smaller deals with Ford Motor and Nissan Motor.
Both AT&T and Reliance can source 4G phones and network cost effectively. India has the potential to become one of the top 5 LTE markets in the world.
But AT&T offers 4G using FD LTE technologies, while Reliance Jio Infocomm will use TD-LTE technologies. Both the partners’ spectrum is different. Reliance will be forced to tap cost effective phones and offer cost effective data plans for growth. AT&T’s main focus in the U.S. is high end customers and data plans. AT&T is forced to subsidize smartphones — that puts revenue pressure — and generate major chunk of revenue from data plans.
If AT&T is picking up stake in Reliance Jio Infocom, it will be the re-entry of AT&T into the Indian mobile space after exiting from Birla AT&T Tata venture (now known as Idea Cellular). The investment will further encourage several other foreign telecom firms to re-look at Indian wireless space. Due to regulatory issues and uncertain policy conditions, a number of foreign players did not look at Indian mobile market in the past 2-3 years.
AT&T will be the first overseas strategic investor for Reliance Industries’ Mukesh Ambani in his telecom business. After working with Tatas and Birlas, AT&T can taste the corporate and investment culture of Ambanis as well.
AT&T’s plans for overseas acquisition is important to accelerate revenue growth. But Reliance Jio Infocom may take 2-3 years to generate substantial revenues.
At present, AT&T offers LTE in 141 markets covering some 170 million people. Verizon currently covers more than 470 markets and over 270 million people.
AT&T will extend its 4G LTE coverage to 300 million people by the end of 2014, 50 million more people than previously planned. The company expects to cover 99 percent of all customer locations with 4G LTE.
On January 17, The Wall Street Journal reported that AT&T, America’s second-largest carrier, is looking for a European carrier to buy. An investment abroad will help it escape constraints on growth at home and, in Europe, enable it to offer upgraded technologies and more lucrative pricing strategies.
The Wall Street Journal suggested carriers in the Netherlands, Germany and United Kingdom might be of interest, specifically Everything Everywhere, one of the U.K.’s largest carriers, and Royal KPN, the largest carrier in the Netherlands. The report did not mention a deal with Reliance Jio Infocom.
Both Reliance Jio Infocom, which is planning to invest $10 billion in LTE networks, and AT&T have strong financial muscles to address competition.
AT&T is planning to spend $22 billion per year as Capex (capital expenditure) in the next three years to expand networks in the U.S. This is a significant amount as AT&T’s third quarter Capex alone totaled $4.9 billion.
The availability of LTE service is prompting mobile customers to consume substantially more data, particularly if those customers have large data plans, according to a new white paper from device-based mobile analytics vendor Mobidia and consultancy Informa Telecoms & Media.
Reliance Jio Infocom — with its planned association with Samsung for cost effective 4G phones and network — will try to garner a part of $340 billion global LTE revenues by 2017. It will not be a significant portion for Reliance as Juniper Research recently said carriers in North America, China and the Far East will account for the vast majority or 70 percent of the revenues LTE generates.
According to Juniper, 4G LTE service revenues will exceed $340 billion by 2017, representing 31 percent of total service revenues from all mobile services — 4G, 3G and 2G. By contrast, 2013 LTE revenues are expected to total just over $75 billion.
With 4G subscriptions on the rise over the last 12 months, Juniper believes that by 2015, consumer subscriptions will exceed those of the enterprise segment, which currently dominates. Consumers will only account for less than 50 percent of the operators’ total revenues.
Pix source: venturebeat.com
Baburajan K
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