India Telecoms-LTE in India-Jun11

THEMATIC RESEARCH
LTE in India From minutes to bytes
14 JUNE 2011
Based on Cisco VNI, worldwide mobile data usage will increase by 26x by 2015 LTE is the technology of choice to cater to the surge in mobile data usage RIL may need to acquire telco assets or spectrum to complement BWA limitations LTE will enable Bharti to prevent network congestion as 3G usage peaks
LTE emerging as technology of choice to meet mobile data growth needs

Based on the Cisco Visual Networking Index (VNI), a barometer of Internet traffic growth, worldwide mobile data usage will increase 26x between 2010 and 2015. LTE is emerging as a technology of choice to provide next-generation wireless broadband, due to higher spectral efficiency, availability of unused TDD spectrum bands, backward compatibility with legacy GSM and CDMA ecosystems, multi-band chipsets providing economies of scale and ownership of LTE patents by key stakeholders across the telecom value chain.
Sameer Naringrekar
+91 22 33704385 [email protected]
Kunal Vora, CFA

+91 22 33704384 [email protected]
LTE in India
We are bullish on the prospects of next-generation wireless broadband in India due to maturity of Internet usage, improving usability and falling prices of smartphones and the proliferation of mobile applications. LTE-TD is the technology being considered to launch broadband wireless services in the auctioned 2.3GHz spectrum band in India. Regulations have been put in place to encourage Internet telephony, reduce interconnect charges to lower barriers to entry for new LTE operators and provide a steady supply of spectrum by vacation of spectrum by government agencies, digitization of television and spectrum re-farming.
Implications for Indian telecom operators

Reliance Industries may need to acquire assets of existing telecom operators or spectrum in lower bands with wider coverage characteristics, to complement the limited coverage of current BWA spectrum and lack of voice support in the current version of LTE. Access to tower and backhaul infrastructure would also shorten time-to-market for RIL. Bharti can leverage BWA spectrum to prevent network congestion as 3G usage peaks over the next few years. Other operators will have to wait for spectrum in the 700 MHz band or spectrum refarming to provide next-generation wireless services.
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LTE IN INDIA FROM MINUTES TO BYTES
14 JUNE 2011
Contents
1) What is LTE?................................................................................................................................................................................ 3 2) How does LTE differ from 2G/3G technology? ......................................................................................................................... 4 3) Adoption of LTE by service providers..................................................................................................................................... 10 4) Key stakeholders betting on LTEs success........................................................................................................................... 12 5) Equipment vendors make beeline for LTE .............................................................................................................................. 13 6) LTE device proliferation crucial for adoption ......................................................................................................................... 15 7) Will LTE sound the death knell of CS voice?.......................................................................................................................... 17 8) LTE in India ................................................................................................................................................................................ 21 9) Favourable regulations on Internet Telephony....................................................................................................................... 26 10) Reduction in IUC to aid LTE-only operators ......................................................................................................................... 27 11) Spectrum availability in India for LTE services .................................................................................................................... 28 12) Backhaul: Wireless networks Achilles heel ......................................................................................................................... 30 13) Bharti Airtel.............................................................................................................................................................................. 32
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What is LTE?
LTE, or Long-Term Evolution, is a standard for the fourth-generation mobile communications system developed by the 3rd Generation Partnership Project (3GPP) in the evolutionary path of the second-generation GSM/EDGE and third-generation UMTS/HSPA technologies. The LTE standard targets peak theoretical download speeds of up to 300Mbps and upload speeds of up to 75Mbps with advanced antenna and wireless transmission technologies. The current LTE systems being deployed are targeting download speeds of 100Mbps and upload speeds of 50Mbps, which is almost 3x that of HSPA Evolved. Initially, LTE will be primarily used to provide high-speed wireless data services. Support for voice-based communication is being currently developed for LTE. The next generation of LTE, LTE-Advanced is targeted to provide download speeds of 100Mbps (low mobility) to 1Gbps (high mobility). Exhibit 1: Mobile technology evolution
Source: Global Mobile Suppliers Association
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How does LTE differ from 2G/3G technology?

Mobile data explosion
The capacity provided by existing wireless data services on 2G/3G networks is not adequate to meet the future need of wireless data consumption. Based on the Cisco Visual Networking Index, a barometer of the growth in traffic on Internet Protocol (IP) networks, mobile data is expected to grow 26x between 2010 and 2015. Exhibit 2: Mobile data consumption by device
* Monthly basic mobile phone data traffic Source: Cisco VNI
Cisco Visual Networking Index (VNI)

The Mobile Network in 2010 and 2011: Global mobile data traffic grew 2.6-fold in 2010, nearly tripling for the third year in a row; Mobile video traffic will exceed 50% of mobile traffic for the first time in 2011; Mobile network connection speeds doubled in 2010; The average amount of traffic per smartphone in 2010 was 79 MB per month, twice that in 2009; In 2010, 3m tablets were connected to the mobile network, and each tablet generated 5x more traffic than the average smartphone; There were 94m laptops on the mobile network in 2010, and each laptop generated 22x more traffic than the average smartphone. The Mobile Network in 2015: Global mobile data traffic expected to increase 26x between 2010 and 2015; Mobile-connected devices are expected to exceed 7.1b devices in 2015 approximately equal to the world's population in 2015; The average mobile network connection speed (215 Kbps in 2010) expected to grow at a compound annual growth rate of 60%, and will exceed 2.2 Mbps in 2015; Two-thirds of the world's mobile data traffic is expected to be video by 2015. Mobile video will more than double every year between 2010 and 2015; The average smartphone will generate 1.3 GB of traffic per month in 2015, a 16fold increase over the 2010 average of 79 MB per month.
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Exhibit 3: Global consumer internet traffic 2010-2015

(petabytes/month) 2010 2011 2012 2013E 2014E 2015E 2010-15 CAGR (%) File sharing Internet video Web, email, and data Video calling Online gaming Voice over IP (VoIP) Other 4,968 4,672 2,393 308 49 138 0 6,017 8,079 3,113 442 68 147 1 7,277 12,146 4,146 659 95 153 1 8,867 17,583 5,325 905 133 157 3 11,040 24,357 6,769 1,251 187 160 8 13,797 33,620 8,592 1,736 290 168 11 23 48 29 41 43 4 132
Video will lead to an explosion in Internet traffic
Source: Cisco VNI
Over the years, increasing allocation of new frequency bands and improving efficiency of new wireless technology has enabled us to keep pace with our ever-increasing communication needs. 1. Increasing spectrum allocation for next-generation wireless services In India, GSM operators have been allocated spectrum in the 900MHz and 1800MHz spectrum bands and CDMA in the 850MHz spectrum band. The government has auctioned a total of 20MHz x 2 in the 2100MHz band, out of the total quantum of 60MHz x 2 assigned for 3G services. In addition, a quantum of 60MHz in the 2300MHz band was auctioned out of a total quantum of 100MHz assigned for BWA services. In the future, spectrum allocation will be technology neutral. The auctioning of spectrum is a first step in decoupling spectrum from wireless technology. Across the world, nextgeneration wireless technologies are converging towards LTE. Spectrum Refarming of CDMA and the GSM spectrum in the 850MHz, 900MHz and 1800MHz bands will enable deployment of next-generation 4G LTE services in the lower but more efficient spectrum bands currently being used for 2G and 3G services. The lower spectrum bands provide better coverage at lower capital expenditure. The 2.5-2.69GHz is also being considered as an extension band to increase the capacity of next generation wireless services. The 3.4-3.6GHz band could also be used for wireless communications. The digital dividend spectrum in the 700MHz band is currently being occupied by analog television broadcast. If all television broadcast turns digital, a significant quantum of spectrum can be freed in the 700MHz band for next generation wireless services. The 700MHz band is being viewed as the prime band for LTE deployment as it has spectrum characteristics suited for high-speed, rural/semi-urban and in-building coverage.
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2. Technology advances in wireless communications The next-generation wireless technologies, such as LTE, will enable faster data speeds in a stationary mode or when in motion. The higher data speeds, improving usability of handheld devices, proliferation of applications and improving affordability should drive the growth of telecom operators wireless data revenues. Exhibit 4: 3G to 4G speed evolution
LTE Evolution
LTE
HSPA+
HSPA
3G/WCDMA D/L peak rate

Source: GSMA
384 Kbps
14.4 Mbps
21/28/42/84 Mbps
> 150 Mbps
1 Gbps target
New technologies use innovations such as spread spectrum, and higher levels of modulation and signal propagation characteristics to squeeze more bits through the air interface. a. Spread Spectrum The conventional capacity of wireless networks was determined by the Time Division Multiplexing (TDM) or the Frequency Division Multiplexing (FDM) techniques. The TDM technique uses different time slots to transmit signals while FDM uses different frequencies. Later, the Code Division Multiple Access (CDMA) technique helped increase the capacity of TDM/FDM networks by introducing an additional code known to the transmitter and receiver to transmit different signals on the same carrier. CDMA is a type of Spread Spectrum signalling, as the transmitted signal has much greater capacity than the capacity of the actual spectrum. b. Modulation Modulation is the process of imposing the information to be transmitted on a carrier wave by changing some characteristics of the carrier wave. There are various modulation techniques such as Phase Shift Keying (PSK), Frequency-shift Keying (FSK), Amplitude-shift Keying (ASK) and Quadrature Amplitude Modulation (QAM). Higher-modulation levels increase the error in receiving information. With technology improvement, it is possible to achieve higher levels of modulation and to push more information across the network without errors in reception. Moving from 16-QAM to 64QAM can result in 50% improvement in capacity of an HSPA+ network. c. MIMO Multiple Input, Multiple Output (MIMO) technology uses multiple antennas at the transmitter and receiver to transfer data utilising the multipath where transmitted information bounces off walls, ceilings, and other objects, reaching the receiving antenna multiple times via different angles and at slightly different times. MIMO increases network bandwidth by enabling antennas to combine data streams arriving from different paths and at different times.
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LTE performance
Exhibit 5: Application download times
Source: Global Mobile Suppliers Association
LTE Release 8 standard aims for peak download speed of 100 Mbps and uplink speed of 50 Mbps on a wider spectrum band of 20 Mbps which is 2-3x the theoretical speed supported by existing 3G networks. LTE can support flexible carrier bandwidths from 1.4Mhz to 20MHz using carrier aggregation to achieve this superior download speed.
TDD vs FDD
Exhibit 6: LTE TDD vs FDD
Source: Qualcomm
LTE uses either Frequency Division Duplexing (FDD) or Time-Division Duplexing (TDD) as the method of two-way radio communication between the handset and the base station. TDD enables time-separated transmission to segregate the uplink and the
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downlink channel on the same frequency band. However, FDD uses two separate frequency channels for the uplink and downlink communication. TDD is suited for asymmetric communication, such as high-speed mobile broadband, while FDD is suited more for symmetric voice-based communications.
LTE spectrum
The 3GPP has designated 15 paired FDD spectrum bands and eight unpaired TDD spectrum bands for LTE. FDD is predominantly in the lower spectrum bands to support an evolutionary path for legacy voice-based mobile communication systems. FDD is suited for rural deployment of mobile data services due to the superior propagation characteristics of the lower spectrum band. The TDD bands are in the higher spectrum bands, which were unallocated in many countries across the world. TDD is suited for high-speed wireless data services by virtue of the higher quantum of spectrum available for deploying these services in the higher spectrum bands. TDD is conducive for urban deployment due to the relatively inferior propagation characteristics of the TDD spectrum bands. Exhibit 7: 3GPP LTE FDD spectrum bands
Band 1 2 3 4 5 6 7 8 9 10 11 12 13 14 17
Source: 3GPP
Uplink Frequency (MHz) 1920 1980 1850 1910 1710 1785 1710 1755 824 849 830 840 2500 2570 880 915 1749.9 1784.9 1710 1770 1427.9 1447.9 698 716 777 787 788 798 704 716
Downlink Frequency (MHz) 2110 2170 1930 1990 1805 1880 2110 2155
869 894 875 885 2620 2690 925 960 1844.9 1879.9 2110 2170 1475.9 1495.9 728 746 746 756 758 768 734 746
The 3GPP, while finalising the LTE standard, ensured that there was a common radio interface for FDD and TDD to ensure that existing divergent mobile communications systems such as GSM, UMTS/HSPA and CDMA2000 converge on a common standard in the future for mobile communications. Most chipmakers are targeting multi-mode chipsets to support LTE FDD and TDD, along with backward compatibility for 3G networks. The common standard will ensure that LTE ecosystems benefit from economies of scale and will not have to battle competing standards globally. Exhibit 8: 3GPP LTE TDD spectrum bands
Band 33,34 Identifier TDD 2000 Frequencies (MHz) 1900 -1920 2010- 2025 35,36 TDD 1900 1850 1910 1930 1990 37 38 39 40 Newly Proposed
Source: 3GPP
PCS Center Gap IMT Extension Center Gap China TDD China TDD US TD-LTE
(1915) 1910 1930 2570 2620 1880 1920 2300 2400 2496 2690
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As shown in Exhibit 9, LTE-TDD would be used for targeted, high-capacity, hotspot deployments, while LTE-FDD, along with 3G network would provide wider area coverage. Exhibit 9: TD-LTE for targeted capacity expansion; LTE FDD + existing 3G for wider coverage
Source: Qualcomm
LTE network
Exhibit 10: LTE network commitment
Source: Comparison between 2G/3G and LTE network Alcatel-Lucent
Compared to existing 2G and 3G networks, which have two separate circuits switched and packet switched networks for voice and data respectively, LTE uses a single all-IP network for voice and data. This implies that voice calls on LTE will eventually be VoIP, and carried end-to-end as data packets. The all-IP architecture will eventually reduce the complexity and the cost to maintain two separate voice and data networks. There is almost an 80-90% overlap between Wimax and LTE technology, which will aid the migration of existing WiMax networks to LTE. Both technologies are targets for packetbased data networks, have a similar OFDM radio interface, are all-IP networks, and operate in similar spectrum bands.
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Adoption of LTE by service providers

Exhibit 11: LTE commitments across the world
Source: Global mobile Suppliers Association
According to GSA (Global mobile Suppliers Association) 196 service providers have pledged their commitment to deploy LTE. Out of 196, 17 commercial LTE networks have been deployed, 123 network operators have made a commitment, and the remaining 56 are pre-commitment trials of LTE. TeliaSonera in Norway was the first operator to launch LTE-based wireless data services in Oslo in Norway and Stockholm in Sweden in the 2.6GHz band in December 2009. Many of the initial deployments of LTE in Europe and the US are based on the LTE FDD variant. Exhibit 12: Commercial LTE network launches
Country Norway Sweden Uzbekistan Uzbekistan Poland US Austria Sweden Sweden Hong Kong Finland Germany US Finland Denmark Estonia Japan Operator TeliaSonera TeliaSonera MTS UCell Mobyland & CenterNet MetroPCS A1 Telekom Austria TeleNor Sweden Tele2 Sweden CSL Limited TeliaSonera Vodafone Verizon Wireless Elisa TeliaSonera EMT NTT DoCoMo Launched 15 December 2009 15 December 2009 28 July 2010 9.August 2010 7.September 2010 21 September 2010 5.November 2010 15 November 2010 15 November 2010 25 November 2010 30 November 2010 1 December 2010 5 December 2010 8 December 2010 9 December 2010 17 December 2010 24 December 2010
Source: Global mobile Suppliers Association (GSA)
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However, the worlds largest mobile operator, China Mobile has pledged support for the TDD variant of LTE, called TD-LTE. China Mobile has chosen seven equipment vendors namely: Huawei, Alcatel-Lucent, Nokia Siemens Network, ZTE, Datang, Ericsson and Motorola, to establish a TD-LTE trial network across seven cities in China. The seven cities where the TD-LTE trial is planned are Beijing, Shanghai, Hangzhou, Nanjing, Guangzhou, Shenzhen and Xiamen. In addition, Clearwire of the US decided to switch from WiMax as a standard of choice to LTE TDD in the 2.6GHz band, putting the momentum behind widespread adoption of TD-LTE. At the recently concluded Mobile World Congress 2011 in Barcelona, Spain, six telecom companies, China Mobile, Bharti Airtel, Softbank (Japan), Vodafone and Clearwire (US), launched a Global TD-LTE Initiative (GTI) to promote TD-LTE across the world.
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Key stakeholders betting on LTEs success

Exhibit 13: LTE patents ownership distribution
Others 11% Qualcomm 13%
NTT DoCoMo 5% LGE 6% ZTE 7% Ericsson 8%
Inter Digital Patent Holdings 13%
Inter Digital Technology 11% Nokia 9%
Huawei 8%
Samsung 9%
Source: ETSI IPR Online Database
Many of the leading handset and equipment vendors, such as Qualcomm, Nokia, Huawei, Ericsson, Samsung, ZTE, and service providers such as NTT DoCoMo, hold the majority of the patents related to LTE. The support of these vendors will ensure the proliferation of LTE as a next-generation wireless broadband technology. Qualcomm, Altair, Sequans, Innofidei, Wavesat, Beceem, Runcom, LG, Huawei, Samsung and STEricsson have indicated availability or progress on development of TD-LTE chipsets. Since LTE FDD and TDD variants are part of the same 3GPP standard, most vendors are designing chipsets with support for both variants on a single chipset. Equipment vendors will be able to tap into economies of scale of both networks by bundling their devices with chipsets supporting both variants. Despite the lead of LTE FDD over LTE TDD networks, the support for both variants on a single chipset will enable widespread adoption of TD-LTE in addition to LTE FDD. Altair Semiconductor has partnered with Alcatel-Lucent, ST-Ericsson with Ericsson, Sequans with Nokia Siemens Network, Qualcomm with Huawei, and ZTE with Innofidei to trial and develop solutions for LTE networks.
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Equipment vendors make beeline for LTE

Motorola demonstrated end-to-end support for LTE TDD with USB dongle devices at the Shanghai Expo in 2010. In a parallel development, Nokia Siemens Networks has inaugurated a TD-LTE Open Lab at its Hangzhou R&D facility and are trailing with China Mobile. China Mobile has chosen seven equipment vendors, namely Huawei, Alcatel-Lucent, Nokia Siemens Network, ZTE, Datang, Ericsson and Motorola to establish a TD-LTE trial network across seven cities in China. In December 2009, Huawei and TeliaSonera jointly announced the deployment of the worlds first LTE commercial network in Oslo, Norway. In November 2010, Huawei won the world's first LTE TDD commercial contract from Aero2 in Poland, leading the global commercialisation of LTE FDD and LTE TDD. ZTE Corp has recently announced that it will deliver LTE infrastructure equipment to operator Hi3G, which plans to build the world's first LTE TDD/FDD dual-mode networks in Sweden and Denmark. The delivered base stations will enable Hi3G to support all viable mobile standards and frequency bands, housing both the upgraded 3G network and the two versions of LTE TDD and FDD. The Software Defined Radio (SDR) technology will also make it possible for Hi3G to perform future upgrades of its infrastructure without acquiring new base stations.
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Exhibit 14: Q&A with Kanwalinder Singh, President, Qualcomm, India and South Asia Q) What is the status of the LTE TDD ecosystem in terms of availability of chipsets, equipment and end-user devices? A: LTE TDD ecosystem is now ready for commercial deployment and there are many trials under way globally and in India. Network infrastructure providers such as Ericsson, NSN, ZTE, Huawei and Alcatel Lucent are ready with LTE TDD equipment to be shipped. Indian 3G operators have already deployed, or are starting to deploy, future-proof LTE-ready infra. Qualcomms MDM9x00 chipset family that supports both TDD and FDD versions, and is interoperable with 3G (HSPA and EV-DO) was sampled in 2H 2009, and commercial LTE TDD devices are expected in the second half of 2011. BWA operators are currently carrying out trials with prospective infra and device OEM partners and are preparing for commercial launch. Both RIL and Qualcomm have already demonstrated LTE TDD mobility in outdoor environments in Mumbai and Gurgaon respectively. Qualcomms LTE Venture continues to execute as per stated plans and will demonstrate 3G-LTE interoperability by middle of this year. All these are expected to lead to launch of commercial services by the end of 2011 or the first quarter of 2012. Q) Media reports cite operators mulling upgrading to Dual Carrier HSPA+ or HSPA+ Advanced instead of leapfrogging to LTE. The incremental spectral efficiency of LTE compared to HSPA+ is also being debated. What is the justification for 3G operators to migrate to LTE by leap-frogging HSPA+? A: Operators in India are expected to embrace 3G-LTE complementary strategy, both working in tandem instead of any migration or leap-frogging. The spectral efficiency comparison with similar bandwidth and number of antennas (MIMO configuration) will be fairly similar between the two technologies; however, the difference in the Indian scenario is the available bandwidth and spectrum type (paired 2 X 5 MHz for 3G and unpaired 20 MHz for LTE). 3G operators have been assigned 2 X 5MHz spectrum in 2.1GHz band and have deployed HSPA+ (Rel. 7) networks in all major cities. Unless more 3G spectrum is assigned in the near future, it is not possible for operators to deploy dual carrier HSPA+ or HSPA+ Advanced. On the other hand, BWA operators have 20MHz of unpaired/TDD spectrum in 2.3GHz band, and will deploy LTE in this band for offering high bandwidth broadband services. Since, 3G spectrum will be used for both voice and data services, as operators reach broadband congestion they will look to LTE for capacity relief. As LTE and 3G inter-work with each other, consumers will experience seamless service through multimode devices. In summary, we dont expect to see any migration from 3G to LTE per se. All these technologies will be deployed in parallel in the spectrum available to best cater to the needs of end consumers. Q) What is the likely standard to support voice calling on LTE between VoLTE, VOLGA and simple over-the-top (OTT) VoIP applications such as Skype? Why? A: We believe voice will continue to be circuit switched (CDMA 2000 1x, GSM and UMTS R99) for a long time to come in India. Circuit switched (CS) voice is the most efficient in terms of voice capacity. Indian operators have harnessed CS voice and offer the lowest tariffs in the world today. Next, there is pent-up demand for data in India, and spectrum availability is limited to meet the demand for data, which has the potential to yield higher ARPUs. This makes the business case for VoIP difficult in the near term. In due time, VoLTE will gain sufficient momentum and scale. Q) Would high capital expenditure be a deterrent for telecom operators to migrate to LTE in the near term? A: With LTE, 3G operators can leverage their existing investments. LTE has been standardised with seamless 3G interoperability supported from day one. As Indian operators are already deploying LTE-ready 3G infra, the upgrade is simple and incremental. Q) How rapidly would pricing of LTE end-user devices need to fall to facilitate rapid adoption of LTE services? A: Like all new technologies, LTE will follow the demand-price curve. However, given the heavy pent-up demand for broadband in India, it is likely that LTE will attain required volume significance that will drive device affordability. We expect LTE device pricing movement to trace a similar curve as 3G HSPA and EV-DO devices did in India. In addition, LTE device pricing is expected to benefit from global economies of scale, similar to 3G. Q) The absence of a fibre backhaul is often cited as the deterrent to rapid deployment of LTE networks. What is the status of the backhaul network in India? How long will it take operators to upgrade the backhaul and how much would it cost? A: Yes backhaul is an important consideration, as the huge capacities created over the air need to be carried to the packet core. As tower-sharing has transformed the business for 2G, backhaul-sharing between multiple operators will do the same thing for 3G/LTE. Operators may not afford to have independent backhaul networks of their own as most of these have to be based on fiber optics and will have sufficient spare capacities for others as well. Since BTSs are going to be hosted in shared towers, sharing of optical fiber will not be difficult. The Indian government has already realised the importance of backhaul and is now working to create a national fiber optical backbone network, especially connecting the rural areas. Backhaul problem will be much more onerous in the urban areas due to large customer base and usage, and hence the government should also focus on urban centres as well.
Sources: Qualcomm; BNP Paribas
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LTE device proliferation crucial for adoption

The pace of proliferation of LTE devices will be crucial for the success of LTE. According to the Global mobile Suppliers Association (GSA), there were 98 commercial LTE devices available as of March 2011. Despite the initial focus of the device manufacturers towards routers and USB modems, looking ahead more and more mobile handsets and tablets would have LTE compatibility. A single chipset supporting 3G, LTE FDD and TDD technologies will help device manufacturers achieve economies of scale by driving down prices to foster wider adoption. According to Bloomberg, China Mobile Communications' Chairman Wang Jianzhou said Apple is interested in developing a version of the iPhone based on TD-LTE technology. (Apple CEO Steve) Jobs has expressed his interest in an LTE iPhone and is willing to start the development at an early date, the chairman told Bloomberg in Beijing. This statement highlights the growing significance of LTE and the TDD variant among service providers, equipment vendors and leading handset vendors such as Apple Inc. Exhibit 15: LTE Devices Ecosystem
Supplier Model LTE Operating Frequency Other Modes Supplier Model LTE Operating Frequency Other Modes
MODULES AnyDATA GCT Franklin Wireless Franklin Wireless Huawei LG LG Novatel Wireless Novatel Wireless Novatel Wireless Novatel Wireless Qualcomm Qualcomm Renesas Sequans Sierra Wireless Sierra Wireless Sierra Wireless St-Ericsson ST-Ericsson ST-Ericsson ST-Ericsson
DTP960S LTE GDM7240 chipset M700 LTE/HSPA+ M700 LTE/EV-DO EM920 WM300 L2000 Expedite E351 Expedite E362 Expedite E371 Expedite E373 MDM9625 chipset MDM9225 chipset SP2531 modem SQN3010 TD-LTE Airprime MC7700 Airprime MC7710 Airprime MC7750 M710 Multimode LTE Thor M720 Thor M700 Thor M7400
AWS, L-band Quad TBC 700 TBC 700 700 700 700 700, AWS Multiband Multiband Multiband Multiband Bands 38, 40, 41 700, AWS 800, 900 1800, 2100, 2600 700 Quad Multiband Quad Includes 700 2600
HSPA+ TBC HSPA+ EV-DO TBC TBC TBC EV-DO HSPA+ EV-DO HSPA+ EV-DO DC-HSPA+ DC-HSPA+ EVDO TD-SCDMA DC-HSPA+TDSCDMA DC-HSPA+ None HSPA+ HSPA+ HSPA+ EV-DO HSPA HSPA+ None DC-HSPA+
ROUTERS AVM C-motech Cradlepoint Cradlepoint Cradlepoint Cradlepoint Cradlepoint Cradlepoint Dovado Dovado Huawei Huawei Huawei Huawei Lancom NEC NetComm Netgear Netgear Netgear Nexaira Novatel Wireless ProLink Samsung Sierra Wireless ZTE ZTE ZyXEL USB modems AnyDATA Franklin Wireless
FRITZBox 6840 CLR-960 CBA750 CTR500 MBR1000 CBA250 MBR1200 CTR35 Travel router 4GR 3GN E589 personal HS B390 B593 Vodafone B1000 1681-4G BBRide Liberty LTE WiFi MBR1000 MBR1000 HSPA+ MBR1517 Business Class II MiFi 4510L PWH2004 4GLTE Mobile Hotspot AirCard 754S MF91 mobile hotspot MF92 mobile hotspot ZLR-2070S
800, 2600 700 700 700 700 700 700 700 700 700 700, 900, 1800, 2100, 2600 800 800, 900, 1800, 2100, 2600 800 700 TBC TBC 700 700 Includes 2600 TBC 700 TBC 700 TBC TBC TBC 700
TBC EV-DO EV-DO HSPA EV-DO HSPA EV-DO EV-DO EV-DO HSPA+ DC-HSPA+ DC-HSPA+ HSPA None TBC None HSPA+ HSPA HSPA+ HSPA HSPA+ HSPA+ HSPA+ EV-DO HSPA EV-DO HSPA+ DC-HSPA+ HSPA+ TBC
M TABLETS Acer Cisco Motorola RIM Samsung ZTE ZTE Iconia Tab A500 Cius Xoom 4G Playbook Galaxy Tab LTE Light2 Light LTE 700 700 700 700 700 TBC 700 TBC EV-DO EV-DO EV-DO EV-DO HSPA EV-DO
ADU960S U700 LTEEVDO
TBC TBC
HSPA+ EV-DO
(Continued on next page)
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Exhibit 15: LTE Devices Ecosystem (Contd)

Supplier Model LTE Operating Frequency Other Modes Supplier Model LTE Operating Frequency TBC 800, 900, 1800, 2100,2600 700, 2100 700, AWS, 800, 1800, 2600 800, 1800, 2600 700, 2600 700, AWS 2300 1500 1500 700 700, AWS TBC TBC 700 700 700 2600 2600 800 800, 1800, 2600 TBC TBC 2600 plus 1800 later 800, 1800, 2600 TBC Other Modes
Notebooks GammaTech HP HP Samsung Samsung Samsung D12C Pavilion dm13010nr Compaq CQ10688nr N350 N150 X430 0 700 700 TBC 2600 2600 TBC TBC TBC HSPA+ HSPA HSPA
Franklin Wireless Huawei Huawei Huawei IP Wireless IP Wireless IP Wireless IP Wireless LG LG LG LG Motorola Nokia Novatel Wireless Novatel Wireless Pantech Samsung Samsung Samsung Sierra Wireless ZTE ZTE ZTE ZTE ZTE
U700 LTEHSPA+ E392 E397 E398 USB-032038AL-03-E USB-121341AL-03-U USB-041213AL-03-U USB-40-AL-03LD100 L-02C VL600 Adrenaline AD600 USB-LTE 7110 RD-3 multi mode Ovation MC551 USB551L UML290 GT-B3730 GT-B3710 GT-B3740 AirCard 320U AL600 AL620 AL621 MF820D MF29L
HSPA+ DC-HSPA+ DC-HSPA+ DC-HSPA+ None None None None None HSPA EV-DO HSPA TBC HSPA+ EV-DO EV-DO EV-DO HSPA+ None None DC-HSPA+ HSPA+ EV-DO HSPA+ HSPA+ HSPA+ HSPA+
PC cards Fujitsu Phones HTC LG Motorola Samsung Samsung Samsung
Xi F-06C
1500
HSPA
Thunderbolt VS910 Revolution Droid Bionic Galaxy S 4G LTE i520) Craft SCH-R900 Galaxy S SCHR910 Indulge
700 700 700 700 AWS AWS
EV-DO EV-DO EV-DO TBC EV-DO EV-DO
Source: GSA- Global mobile Supplier's Association
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Will LTE sound the death knell of CS voice?

The result of the all-IP network design of LTE implies that there is no inherent support for Circuit Switched (CS) voice communications similar to 2G/3G networks. The LTE community has aligned along four lines to include support for voice on LTE networks: Circuit-Switched FallBack (CSFB); Voice over LTE via Generic Access (VOLGA); Voice over LTE (VoLTE); and Over The Top (OTT) Mobile VoIP Applications.
Circuit-Switched FallBack (CSFB):

Exhibit 16: Circuit Switched FallBack
Source: Ericsson
CSFB is a 3GPP standard solution to support voice on LTE in early stages of deployment until a complete IP Multimedia Subsystem (IMS) solution is commercially available to support multimedia communication services. CSFB relies on falling back on the legacy 2G/3G network for supporting voice and SMS services. Disadvantage - CSFB involves a delay in call set-up as LTE falls back on the legacy 2G/3G network. It does not have support for advanced multimedia services.
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Voice over LTE via Generic Access (VOLGA):

Exhibit 17: VOLGA
Source: VOLGA Forum
The VOLGA standard seeks to deliver voice and messaging services over LTE networks based on existing 3GPP Generic Access Network Standards. VOLGA was backed by T-Mobile and Kineto Wireless as an alternative to CS fallback method. However, T-Mobile has switched its allegiance to the VoLTE standard after it received the backing of the GSM Association (GSMA). Disadvantage VOLGA does not have the capability to evolve into a full-fledged multimedia system.
Voice over LTE (VoLTE):

Exhibit 18: Voice Over LTE
Source: Ericsson
In February 2010, the GSM Association (GSMA), the association of mobile operators and related companies, adopted VoLTE (earlier called the One Voice Alliance), as the standard to support voice and messaging services over LTE. VoLTE is based on the IP Multimedia Subsystem (IMS) specification developed by the 3GPP. VoLTE was backed by AT&T, Orange, TeliaSonera, Verizon Wireless and Vodafone among others. Disadvantage The VoLTE system is in an early stage of development and the IP Multimedia Subsystem is still not widely deployed by telecom operators.
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Over The Top (OTT) Mobile VoIP Applications:

Exhibit 19: Over The Top (OTT) mobile VoIP applications Skype
Source: Skype
Applications such as Skype, Fring, GoogleTalk, etc., enable voice calling, chat, video calling and file-sharing via unified communications interface on mobile phones and on personal computers. There is an increasing trend of these applications being bundled on smartphones to support unified communications. These applications provide free member-to-member calls while they charge for out-of-the-network calls terminating on the physical telecom network. Disadvantage The disadvantage of OTT mobile VoIP applications is that there is no way to hand over a call to a circuit-switched 2G/3G network in the absence of LTE network.
Legacy voice meets next generation VoIP

In July 2008, BT acquired Ribbit Corporation, a Silicon Valley-based company that enables voice capabilities to be added to web-based application or a community, for USD105m. In a similar development Telefonica, one of Europes leading telecom service providers acquired Silicon Valley based internet telephony service provider, Jajah for USD207m in December 2009. These acquisitions signal the first bold steps by conventional telecom service providers to align themselves for a future when there wont be a distinction between voice and data networks.
Embedded voice Giving a voice to Social Networking

In 2005, Ebay, the online auction web-site, acquired Skype for USD2.6b in cash and stock to enable their buyers and sellers to interact over free PC-to-PC voice calls. In May 2011, Microsoft agreed to acquire Skype for USD8.5b to enhance Microsofts existing portfolio of real-time communications products and services. Microsoft plans to integrate Skype with Xbox and Kinect. In a similar fashion, T-Mobile recently launched a service called Bobsled to enable Facebook users to call each other and leave voicemails.
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Exhibit 20: T-Mobile introduces free calling on Facebook
Source: T-Mobile
According to the T-Mobile blog, the new Bobsled application provides Facebooks more than 500m users worldwide with free, one-touch calling to their Facebook friends from a personal computer and through the social platforms chat window. With Bobsled, TMobile is giving voice to social networking. Bobsled by T-Mobile is a new brand aimed at bridging the world of traditional telecommunications with Internet-based voice and data services. This application for Facebook is the first product available under the new Bobsled by T-Mobile brand. As the way people communicate transcends networks and devices, Bobsled by T-Mobile positions T-Mobile as a provider of cloud-based communications services over the Internet.
Shift to VoIP is inevitable, albeit gradual

Over the long term VoLTE will emerge as the prominent standard for supporting voice on LTE. In the near term, most operators are likely to adopt CSFB as an interim option by virtue of their existing 2G/3G circuit switched voice networks. LTE-only operators would have to rely on OTT mobile VoIP applications such as Skype to provide voice support until VoLTE matures as a standard and is baked into the network infrastructure. The shift from Circuit Switched voice to VoIP is imminent, threatening the voice revenues of legacy mobile and fixed-line telecom service providers. However, the transition to VoIP will be gradual as it will take a few years for existing telecom operators to adopt and completely migrate to LTE like next-generation high-speed wireless data networks and enterprises to adopt IP telephony systems. In the interim, LTE-only telecom operators will have to rely on OTT VoIP applications for voice calling with the disadvantage of no call continuity in regions outside LTE coverage.
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LTE in India
Potential for next-generation wireless services in India
In our view, success of next-generation wireless services depends on four factors: Readiness of consumers to adopt next-generation wireless services; Affordability and availability of mobile devices; Ease-of-use of devices and applications; Access to applications and content.
Readiness of consumers
With the increasing usage of the Internet due to the popularity of applications such as Google, Facebook, YouTube and Twitter (Exhibits 5-6), and steady decline in the prices of smartphones, we believe that 3G/4G could drive the next phase of growth for Indian telecom. India features among the top-five countries by internet traffic on leading websites such as Facebook, Google and Twitter. Exhibit 21: Global leading websites by internet traffic
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Source: Alexa
Google Facebook YouTube Yahoo! Windows live Wikipedia Blogger.com Baidu.com Microsoft Network Yahoo Japan QQ.com Google India Twitter Myspace Google China Sina.com Google Germany Amazon.com Wordpress Microsoft Corporation
Exhibit 22: India among top five countries in internet traffic on top websites
Google.com 35.0% US 8.8% India 6.5% China 3.5% Brazil 3.3% Germany Facebook 29.7% US 5.1% France 4.8% Italy 4.8% UK 4.2% India Yahoo 34.2% US 8.8% India 3.7% China 3.5% Taiwan 3.3% UK
Wikipedia 23.5% US 8.4% Japan 7.7% Germany 5.9% India 4.4% UK

Source: Alexa
YouTube 23.3% US 6.8% Japan 4.8% Germany 4.2% India 3.9% Italy
Twitter 36.9% US 8.3% India 6.8% Germany 5.9% UK 4.7% Japan
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Smartphones becoming affordable

According to Gartner, the average selling price of smartphones will decline by 37% by 2013. Leading manufacturers, such as HTC Corp of Taiwan and Samsung of Korea, have already shifted their focus to mass-market smartphones. Exhibit 23: Forecast for Smartphone pricing
(USD) 600 500 400 300 200 100 0 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E Smart Phones - Entry-level Smart Phones - Feature
Sources: Gartner; BNP Paribas estimates
Proliferation of alternatives from subscribers to devices The popularity of alternative devices such as the Amazon Kindle e-book reader, the Apple iPad and other close imitations will drive the adoption of the next generation of mobile devices. In addition, there is an increasing trend of Machine-to-Machine (M2M) communication in the form of home control systems, fleet management, remote billing systems, etc., which will drive the growth of alternative devices dependent on wireless infrastructure. The proliferation of these devices will enable operators to monetise connectivity for each device vis--vis the consumer, thus expanding the addressable market. Usability of devices improving The ease of access of internet on mobile devices was one of the biggest deterrents in the widespread adoption of mobile internet services. Trivial tasks such as setting up internet connections, web browsing and accessing emails were cumbersome on legacy data enabled handsets. The advent of iPhone-like multi-touch and wide screen phones has eased access to content and applications. Applications made for mobile devices have improved usability and arrangement of content on the smaller screen compared to the screen of personal computers. Application ecosystem differentiates from Dumb Pipe The Apple AppStore, Google Android Marketplace, Nokia Ovi Store and the Wholesale Applications Community (WAC) an alliance of 24 international operators, the GSMA and three handset manufacturers (LG, Samsung and Sony Ericsson) are a few of the initiatives to provide a plethora of standardised applications across mobile devices. These application repositories will aid development and standardisation of applications to facilitate monetisation of wireless data by offering services differentiated from a dumb pipe. These application stores have also changed the business model of subsidising the upfront hardware cost by recurring expensive content purchases with market price hardware aided by high-volume low-price content.
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Wireless data trends on the rise across leading markets

Since the launch of the Apple iPhone on the AT&T network in the middle of 2007, the wireless data revenues at US wireless operators such as AT&T and Verizon, have been on the rise. In 1QFY11, the wireless data revenues accounted for 38.1% and 36.6% of total wireless data revenues, for Verizon and AT&T respectively. Exhibit 24: Data revenue as a % of wireless revenue for US wireless operators
Data ARPU (USD) 25 20 15 10 5 0 2Q09 Verizon AT&T
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
Sources: Verizon; AT&T; BNP Paribas
Exhibit 25: Wireless data revenue as a percentage of total wireless revenues for US wireless operators
(%) 39 37 35 33 31 29 27 25 2Q09 Verizon AT&T
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
Sources: Verizon; AT&T; BNP Paribas
Exhibit 26: Smartphone trends at Verizon

(%) 70 60 50 40 30 20 10 0 1Q10
Source: Verizon
Smartphone sales as a % of total phones Smartphone phone base
2Q10
3Q10
4Q10
1Q11
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The increasing adoption of smartphones is aiding an explosive growth of wireless data. At Verizon, smartphones accounted for 60% of phone sales and currently smartphones account for 32% of the phone base. Exhibit 27: US wireless data speed test
Carrier PCMag.com Mobile Speed Index Consistency D/L speed Avg (%) AT&T Cricket Sprint 3G T-Mobile Verizon Sprint 4G
* Cricket in 10 of 18 cities; WiMax in 9 of 18 cities Source: PCMag
U/L speed Avg (mbits/sec) 0.28 0.34 0.30 0.34 0.35 0.40 Max (mbits/sec) 0.36 0.43 0.37 0.63 0.47 0.50
Time to first byte
Max (mbits/sec) 2.75 1.54 1.26 2.26 1.40 3.14
(mbits/sec) 1.79 0.94 0.99 1.17 1.01 2.11
(seconds) 1.00 1.06 1.12 1.21 1.02 1.00
93
86.20 95.32
76 83 77
95.90 92.78 88.22 84.27
The 3G speed test performed in the US by PCMag is evidence of the currently available wireless broadband speeds in developed markets. The average download speed was 0.94 Mbps to 2.11 Mbps while the upload speed averaged around 0.28 Mbps to 0.40 Mbps. The improving speeds will enable operators to meet the pent-up demand for wireless data downloads and drive up wireless data usage trends over the next few years. Exhibit 28: Projected average mobile network connection speeds in India (in kbps)
(kbps) 1,200 1,037 1,000 800 600 400 200 1 0 2009
Source: Cisco VNI
2010-15 CAGR 124% 546
262 19 2010 61 2011 125
2012
2013
2014
2015
Based on Cisco VNI, average mobile connection speeds in India are projected to increase by a CAGR of 124% compared to a 60% CAGR for average global mobile connection speeds from 2010 to 2015. The average mobile connection speeds in India will increase from 19kbps to 1037kbps compared to global connection speeds increasing from 101kbps to 2200kbps from 2010 to 2015.
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BWA auction concludes with one pan-India winner

The Indian Broadband Wireless Access (BWA) auctions concluded on 11 June 2010 after 117 rounds. Three slots of 20MHz spectrum in the 2.3GHz band were auctioned, while one unit was given in advance to government-owned telecom companies BSNL and MTNL IN, on the condition that they would match the price of the highest bidders. InfoTel, a lesser known broadband service provider, was the only entity that won a panIndia license (22 circles) worth INR128b. Reliance Industries (RIL IN), a diversified conglomerate which had incubated Reliance Communications (RCOM IN), has bought a 95% stake in Infotel. The second license was distributed between Aircel (8 circles), Bharti Airtel (4 circles), Tikona Digital Networks (5 circles), Qualcomm (4 circles) and Augere (1 circle). The other incumbent operators, i.e. Vodafone, Idea, RCOM and Tata withdrew in earlier rounds when bids exceeded rational expectations. Bharti has won BWA spectrum in four circles which are complementary with their 3G wins with the exception of Karnataka, one of its strongest circles.
BWA technology of choice will be LTE not WiMax

The BWA spectrum is in the 2.3GHz band. Earlier expectation was that operators will launch BWA services on WiMax. Adoption of WiMax technology has been on the wane across the globe, with the biggest proponent of WiMax, ClearWire of the US, annulling its agreement with Intel to use WiMax for its network rollout. Qualcomms entry as a potential bidder brought forth the potential use of this band for launching nextgeneration LTE services. Exhibit 29: BWA auction bidders, wins and strategy
BWA bidders Aircel Augere (Mauritius) Bharti Airtel Idea Cellular Infotel Broadband Qualcomm Reliance Communications Spice Internet Tata Communications Tikona Digital Networks Vodafone Essar
Sources: Department Of Telecom; BNP Paribas
Circles 8 1 4 22 4 5 -
Cost (INR m) 34,380 1,247 33,144 128,478 49,125 10,582 -
Strategy Overlapping with 3G circles New entrant Overlapping with 3G in Karnataka No spectrum win Pan India footprint Acquired the two metro's Mumbai and Delhi No spectrum win No spectrum win No spectrum win Existing wireless broadband service provider No spectrum win
Exhibit 30: By circle, winners and price paid

(INR m) Delhi Mumbai Maharashtra Gujarat Andhra Karnataka TN Kolkata Kerala Punjab Haryana UPE UPW Rajasthan MP WB Himachal Bihar Orissa Assam NE Jammu Total Infotel 22,410 22,930 9,156 6,139 10,591 15,433 20,695 5,232 2,587 3,323 1,199 1,425 1,839 973 1,247 710 207 993 636 330 213 213 128,478 Qualcomm 22,410 22,930 Bharti Tikona Aircel Augere Total 44,820 45,859 18,313 12,277 21,182 30,865 41,389 10,464 5,173 6,645 2,398 2,850 3,677 1,946 2,493 1,419 413 1,986 1,273 660 425 425 256,955
9,156 6,139 10,591 15,433 20,695 5,232 2,587 3,323 1,199 1,425 1,839 973 1,247 710 207 993 636 330 213 213 34,380
49,125
33,144
10,582
1,247
Source: Department Of Telecom
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Favourable regulations on Internet Telephony

Until 2008, internet telephony was restricted in India. On 18 August 2008 the Telecom Regulatory Authority of India (TRAI) released recommendations on Internet Telephony, which removed the earlier restrictions. The key recommendations on Internet telephony proposed by TRAI are as follows: Internet service providers (ISPs) are permitted to provide Internet telephony to wireline and wireless communication networks within the country; ISPs can interconnect with National Long Distance (NLD) operators through public Internet (Internet cloud) only for the purpose of provision of unrestricted Internet telephony within country; The agreement between ISPs and NLD to facilitate termination of Internet telephony calls on PSTN/PLMN shall be on mutual agreement basis. TRAI shall monitor the progress and may intervene in case mutual agreements are not effective; NLD shall negotiate carriage charges with ISPs within the ceiling limit prescribed by TRAI under IUC regulations from time to time. In no case shall carriage charges be more than the upper ceiling limit prescribed by TRAI. What is the current status of these recommendations? The removal of restrictions on Internet Telephony will enable LTE service providers to offer voice telephony over OTT VoIP applications such as GoogleTalk, Skype or NimBuzz among others. LTE operators would not have to invest in a separate 2G/3G circuit-switched voice infrastructure until Voice over LTE standard is finalised. TRAI in its 2010 recommendations on Spectrum Management and Licensing Framework has proposed reduction of license fees from the 10%, 8% and 6% in the Metro and A, B and C circles, respectively, to a uniform license fee of 6% over a period of four years to match the license fee of ISPs to prevent any differential in levies.
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Reduction in IUC to aid LTE-only operators

Interconnection Usage Charges (IUC) are wholesale charges payable by one telecom operator to the other for use of the latters network for originating, terminating or transiting/carrying a call. These charges are usually based on cost and indicate a fair compensation for use of one service providers network resources by another service provider. In March 2009, TRAI had recommended a reduction in domestic termination charges to INR0.20 from INR0.30 and an increase in termination of international calls to INR0.40 from INR0.30. The carriage charge ceiling was retained at INR0.65. Recently, TRAI ordered a review of IUC via a consulting paper issued on 27 April 2011. The reduction in IUC charges will enable new LTE operators to terminate their calls on the incumbent operators network at a low cost; reducing barriers to entry faced by telecom new entrants, thus enabling them to offer competitive tariffs. The carriage charges have been demand-driven and are significantly lower than the INR0.65 ceiling due to adequate competition amongst National Long Distance (NLD) providers.
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Spectrum availability in India for LTE services

Proper planning of future spectrum requirements, coupled with technological advances in wireless communications, should allow us to meet the growth needs of the wireless industry in the future. Exhibit 31: Spectrum availability in India across bands
Source: TRAI
In India, the scarcity of spectrum is man-made, due to hoarding of spectrum by various government and commercial agencies that could be partially attributed to legacy equipment in their networks and improper planning of future spectrum needs by the Indian government. According to the TRAI, out of 1161 MHz of spectrum identified for telecommunications use, a minimum of 287 MHz and a maximum of 454 MHz are presently available. Part of the unavailable spectrum, currently with government and other commercial entities, could be potentially freed and assigned for next-generation wireless services by migrating existing users to alternatives such as a fibre network or other unused spectrum bands. In addition, spectrum allocated to legacy wireless services could be reassigned to next-generation services with superior spectral efficiency via a process called Spectrum Refarming. The Telecom Minister has recently, in a 100-day progress report of the Ministry of Telecommunications, highlighted that he is in discussions with Power Grid Corporation of India Ltd. (PGCIL) for vacation of 10 to 12 MHz in different circles to make one chunk of 20 MHz of BWA spectrum available within the next year.
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Digital Dividends
Digitisation of analogue broadcast to free spectrum in 700MHz In India, 108MHz of spectrum in the 696-806MHz (700 MHz band) is currently used by the defence department (24MHz), analogue broadcasting of television services (48 MHz) and other commercial agencies (36 MHz). The Ministry of Information & Broadcasting has proposed the following dates for digitisation of television transmission: Four Metros of Delhi, Mumbai, Kolkata and Chennai Cities with population more than 1m All urban areas (Municipal Corp/ Municipalities ) Rest of India 31 March 2012 31 March 2013 30 September 2014 31 December 2014
The digitisation of television broadcasting will free up 48MHz of coveted spectrum in the 700Mhz band which is suited for rural deployment of high-speed wireless broadband services on LTE due to the superior propagation characteristics of this spectrum band which provides wider coverage with lower capex.
Spectrum Refarming reallocation for next-gen LTE services

According to the International Telecommunications Union (ITU), spectrum refarming is a combination of administrative, financial and technical measures aimed at removing users or equipment of the existing frequency assignments either completely or partially from a particular frequency band. The frequency band may then be allocated to the same or different service(s). These measures may be implemented in short, medium or long time-scales. In India, the 800MHz, 900MHz and the 1800MHz bands have been allocated for 2G GSM and CDMA wireless services, beginning in 1994. These spectrum allocations were for a 20-year period, and are due for reallocation starting 2014. The TRAI, in its recent recommendations on Spectrum Management and Licensing Framework, has proposed migration of telecom operators whose licenses expire in the 900 MHz spectrum band to 1800 MHz to free up the 900 MHz band for LTE services. The 900 MHz spectrum would then be auctioned to existing or new operators interested in launching LTE-like services in the 900 MHz band. In addition, the telecom minister recently highlighted the intention to decouple the spectrum allotment from the technology and the license fees. This change would ensure that a nominal license fee is charged for providing telecom services in the country, while the price of spectrum can be discovered by market-driven auction process.
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Backhaul: Wireless networks Achilles heel

With global mobile data traffic expected to increase 26x over the next five years, the demand for capacity of the backhaul network will increase exponentially. Currently a majority of the backhaul networks are set up using microwave links which were adequate to meet the demand of voice and limited GPRS data traffic. However with rapid growth in wireless data, the capacity of the backhaul network needs to be upgraded significantly. In addition, microwave backhaul might not be adequate to support high-capacity, high-speed wireless networks due to degradation of the link quality during poor weather conditions. Fibre is the only long-term viable option to meet the capacity needs of next-generation wireless networks. However, in the interim until wireless data utilisation ramps up, telecom operators might resort to microwave backhaul to keep capital expenditure under control. In international markets, due to the high level of adoption of wire-line broadband connections, operators are looking at femtocells (a residential broadband router which also serves the purpose of a micro cell-site providing cellular coverage within the home) to reduce the load on wireless backhaul networks. However in India, due to the poor wire-line broadband penetration, femtocells are not a viable option to ease the load on wireless backhaul network. Exhibit 32: Existing fibre infrastructure in India
b. Includes fibre deployed for access in addition to core and middle mile infrastructure Source: Analysys Mason, CII
Part of the process of upgrading of the backhaul networks is under way due to deployment of 3G networks by several operators following the 3G spectrum auction in 2010. Currently Indian operators have over 1m route kilometres of fibre deployed across the country. Based on the TRAI recommendations on National Broadband Plan released on 28 December 2010, an investment of INR656b (USD14.6b) is required to provide wireless broadband connectivity up to villages with a population over 500 individuals, comprising 2.5m route kilometres of new fibre across the country. TRAI has recommended the creation of 100% central government-owned National Optical Fiber Agency (NOFA) and a State Optical Fiber Agency (SOFA) with 51% equity held by
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NOFA and 49% by the respective state governments to oversee the planning, deployment and maintenance of the national fiber network. TRAI has proposed that the deployment of the national fibre network be supported by grants from the Universal Service Obligation (USO) fund and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). The MGNREGS has been created with an objective of providing 100 days of guaranteed wage employment in a household whose adult members volunteer to do unskilled manual labour. MGNREGS can be leveraged to do the trenching work which forms a major part of laying fibre networks. Telecom tower infrastructure companies having wider portfolios of telecom towers and fibre infrastructure provide an advantage in terms of shorter time-to-market and continuous wireless data coverage to its existing tenants. Telecom tower companies such as Indus Towers and Axiom Networks (formerly known as Tata-Quippo or WTTIL) having multiple tenants could leverage their multiple tenants to build a business case to pull a fibre to individual towers. Tower companies such as Reliance Infratel, which has a portfolio of 50,000 towers with collocated CDMA and GSM cell-sites and higher proportion of towers with fibre connectivity, would be actively evaluated for tower and infrastructure sharing agreement by new entrants to reduce time to market.
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Bharti Airtel
Exhibit 33: Bharti Airtel; 3G and BWA Spectrum Win And Competitive Position
Subscribers Circle Andhra Gujarat Karnataka Maharashtra TN Haryana Kerala MP Punjab Rajasthan UPE UPW WB Assam Bihar Himachal Jammu NE Orissa Delhi Kolkata Mumbai Total (000's) 12,995 5,457 12,643 6,629 10,917 1,534 3,132 6,640 4,790 10,303 9,048 4,040 5,566 2,405 11,003 1,318 1,887 1,432 4,134 5,915 2,784 3,045 127,619 Subs M share (%) 29 17 35 16 20 11 13 21 24 32 21 13 23 27 30 27 36 28 28 21 17 12 22 Revs M share Spectrum 3G spectrum (Won) Yes No Yes No Yes No No No No Yes No Yes Yes Yes Yes Yes Yes Yes No Yes No Yes 32,471 122,955 33,169 5,140 1,236 415 2,035 372 303 423 3,210 14,649 15,799 Spectrum price (INR m) 13,731 BWA spectrum (Won) No No Yes Yes No No No No Yes No No No No No No No No No No No Yes No 33,144 5,232 3,323 15,433 9,156 Spectrum price (INR m)
(%) (Band Mhz) 40 21 51 21 39 19 19 29 39 45 28 18 28 33 46 44 42 37 39 38 29 20 32 900 1,800 900 1,800 1,800 1,800 1,800 1,800 900 900 900 1,800 900 900 900 900 900 900 900 900 900 1,800
Sources: Department Of Telecom; TRAI; BNP Paribas
Bharti has won BWA spectrum in four circles which complements its 3G coverage in 13 circles with an overlap in Karnataka (its strongest circle, where it has both 3G and BWA). The 3G and BWA coverage enables Bharti to provide next-generation services in 16 out of the total 22 circles. In addition, media reports cite Bharti vying to acquire Qualcomms BWA spectrum, increasing its 3G+BWA coverage to 18 out of 22 circles including the metros of Mumbai and Delhi. Bharti, which has 3G in 13 out of 22 circles is in talks with other GSM incumbents, namely Idea Cellular and Vodafone, to provide nationwide intracircle roaming for 3G services among partners to ensure pan-India 3G coverage. This pan-India 3G coverage coupled with LTE-TD sites in dense urban sites with high capacity requirement will enable Bharti to efficiently leverage its BWA spectrum in eight circles. The Telecom Minister has recently, in a 100-day progress report of the Ministry of Telecommunications, highlighted that he is in discussions with Power Grid Corp of India Ltd (PGCIL) for vacation of 10 to 12 MHz in different circles to make one chunk of 20 MHz of BWA spectrum available within the next year. Bharti can potentially bid for this spectrum to get pan-India coverage of BWA spectrum. Bharti is one of the Indian telecom operators which has a higher proportion of superior ARPU subscribers who are in the sweet spot for adoption of high-speed wireless services. At the recently-concluded Mobile World Congress 2011 in Barcelona, Spain, Bharti partnered with leading telecom companies, namely China Mobile, Softbank (Japan), Vodafone and Clearwire (US), on a Global TD-LTE Initiative (GTI) to promote TD-LTE across the world, which will enable Bharti to have a say in the evolution of LTE-TD.
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Reliance Industries
Reliance Industries has acquired a 95% stake in Infotel to get access to the recently auctioned BWA spectrum in the 2.3GHz band. RIL has indicated that it intends to launch a high-speed wireless network using LTE-TD as a technology. In our view, RIL will have to acquire additional spectrum in the lower spectrum bands or acquire an existing wireless operator with CDMA EVDO or 3G GSM spectrum to provide uninterrupted wireless data services as LTE-TD is not suited for coverage outside dense urban markets. In addition, acquisition of an existing operator or spectrum would allow RIL to provide voice services using CSFB, as VoLTE is still evolving as a standard and LTE coverage will not be contiguous in the 2.3GHz band to rely solely on OTT VoIP applications. RIL may also benefit by leveraging the tower and national fiber network of an existing telecom operator to shorten the time-to-market for its BWA services. The biggest challenge faced by RIL will be to develop the ecosystem of LTE end-user devices to ensure that prices are affordable to drive widespread adoption. RIL has experience in developing ecosystems of affordable end devices as witnessed during the launch of Reliance Communication (formerly Reliance Infocomm), which was incubated by RIL.
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Exhibit 34: Reliance Infocomm press release of first handset launch
Reliance Infocomm makes mobile telephony more affordable

1 July 2003: Unveils 'Monsoon Hungama A multimedia mobile phone and connection for just INR501. LIMITED period offer opens 2 July In an attempt to give every Indian a chance of owning a mobile phone, Reliance Infocomm today announced Monsoon Hungama, an unprecedented scheme from Reliance IndiaMobile which allows you to get a mobile phone at an upfront payment of just INR501. Monsoon Hungama is an extremely affordable payment option which allows customers to choose from any of the existing tariff plans including the best value for money Dhirubhai Ambani Pioneer Offer (DAPO), Budget 149 and Budget 249. This limited-period offer gives consumers a unique opportunity to own a mobile phone with both a low entry cost and a low monthly spend. For example, a customer opting for Monsoon Hungama as an upfront payment option and Budget 149 as tariff plan will be able to restrict his/her fixed recurring monthly outgoings to INR449, inclusive of the INR200 paid as club membership and privilege charges. The customer, of course, will also get INR100 worth of free Talktime (including SMS) per month. Shareholders of Reliance group companies can also avail themselves of this new offer in conjunction with the recently announced Khazana Club offer, wherein they are eligible for a discount of INR850 on upfront payment for becoming a Reliance IndiaMobile subscriber. Under Monsoon Hungama Reliance shareholders will not only take away a Reliance IndiaMobile connection absolutely free, but also get a credit of INR349 in their first bill. The Reliance IndiaMobile service is commercially available in around 200 cities presently. It will soon be available in 693 towns and cities across the country. The service is at present supported by over 250 Web Worlds and retail stores where a customer can walk in and buy a fully provisioned phone within 15 minutes. Reliance IndiaMobile also has a dedicated customer contact centre for responding to user queries on phone. The other challenge will be to get access to content to price services at a premium to vanilla connectivity services. The access to exclusive content will become critical as competition matches network speed and capacity over the long term.
Source: Reliance Infocomm
Aircel
Aircel has won BWA spectrum in eight circles which are primarily aligned along C circles and Tamil Nadu circle across which Aircel has a strong presence by virtue of its existing 2G network.
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Aircels BWA circles also overlap with its 3G circles which will enable Aircel to provide a complete range of services in the C circles. The challenge faced by Aircel will be the ability to bear the capex for 3G and LTE on the back of its recently executed pan-India 2G launch. In addition Aircel will face hurdles converting its low ARPU subscribers into adopters of next-generation services demanding a higher wallet share. Aircel can rely on USB dongle based wireless broadband services in the underpenetrated circles beyond its low ARPU mobile subscriber base. Exhibit 35: Aircel; 3G and BWA spectrum win and competitive position
Subscribers Subs M share (000's) Circle Andhra Gujarat Karnataka Maharashtra TN Haryana Kerala MP Punjab Rajasthan UPE UPW WB Assam Bihar Himachal Jammu NE Orissa Delhi Kolkata Mumbai Total 976 767 371 14,910 1,217 902 752 2,230 2,521 3,206 467 1,857 1,711 1,700 1,119 1,253 903 36,861 2 2 0.7 27.5 4.6 2 2.4 9 29.8 8.4 9.1 33 33.3 11.7 3.5 7.6 3.4 6.2 1 0.9 1.1 20.9 1.2 0.7 1.1 6.7 24.9 5.5 3.9 22 29.5 7.8 1.3 4.3 0.3 4 1,800 1,800 1,800 1,800 900 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 Yes No Yes No Yes No Yes No Yes No Yes No Yes Yes Yes No Yes Yes Yes No Yes No 64,995 5,443 303 423 970 1,236 415 2,035 3,646 3,220 3,125 14,649 15,799 13,731 Yes No No No Yes No No No No No No No Yes Yes Yes No Yes Yes Yes No No No 34,380 213 213 636 710 330 993 20,695 10,591 Revs M share (%) Spectrum (%) 3G spectrum (Band Mhz) Spectrum price (Won) BWA spectrum (INR m) Spectrum price (Won) (INR m)
All of Aircels BWA circles overlap with its 3G circles Sources: Department Of Telecom; TRAI; BNP Paribas
Tikona
Tikona has won BWA spectrum in five circles. Tikona does not own 3G spectrum in any of the 22 circles. Lack of 3G spectrum will restrict Tikonas ability to offer mobile wireless broadband services in these circles. Tikona currently provides unlicensed band WiFi-based broadband services in 30-plus cities. Tikonas aim in acquiring the BWA spectrum was to provide fixed wireless broadband services to enterprises on licensed spectrum without any spectral interference.
35
BNP PARIBAS
SAMEER NARINGREKAR
14 JUNE 2011
NOTES
36
BNP PARIBAS
SAMEER NARINGREKAR
14 JUNE 2011
NOTES
37
BNP PARIBAS
SAMEER NARINGREKAR
14 JUNE 2011
DISCLAIMERS
&
DISCLOSURES
ANALYST(S) CERTIFICATION Sameer Naringrekar, BNP Paribas Securities India Pvt Ltd, +91 22 33704385, [email protected]. Kunal Vora, CFA, BNP Paribas Securities India Pvt Ltd, +91 22 33704384, [email protected]. The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies, or issuers mentioned in this report; (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, relate to the specific recommendation or views expressed herein; and (iii) is not aware of any other actual or material conflicts of interest concerning any of the subject securities companies, or issuers referenced herein as of the time of this certification. GENERAL DISCLAIMER This report was produced by BNP Paribas Securities India Pvt Ltd, a member company of the BNP Paribas Group. "BNP Paribas is the marketing 1 name for the global banking and markets business of BNP Paribas Group . This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set forth herein. BNP Paribas analysts prudently perform analysis and create quantitative models and estimates derived from their own review of publicly available data without any assistance from any represented company. BNP Paribas analyst estimates and models reflect the analysts current judgment only; they are neither all-inclusive nor can they be guaranteed. The analysts analysis and models are subject to change based on various other factors. Valuations are based on internal quantitative models and qualitative interpretation. No representation or warranty, express or implied, is made that such information or analysis is accurate, complete or verified and it should not be relied upon as such. Analysts' compensation is not linked to investment banking or capital markets transactions performed by BNP Paribas or the profitability or revenues of particular trading desks. BNP Paribas analysts may participate in company events such as site visits and are prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the recipients own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this report may not be available for sale in certain jurisdictions. BNP Paribas is not aware of any other actual or material conflicts of interest concerning any of the subject securities and companies referenced herein as of the time of publication of the research report. 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This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street Sydney NSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no. 238043 and therefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. By accepting this document you agree to be bound by the foregoing limitations, and acknowledge that information and opinions in this document relate to financial products or financial services which are delivered solely to wholesale clients (in terms of the Corporations Act 2001, sections 761G and 761GA; Corporations Regulations 2001, division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the Corporations Act 2001). 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By accepting this report you agree to be bound by the foregoing instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on a particular stock, please contact the relevant BNP Paribas research team or the author(s) of this report. 38 BNP PARIBAS
SAMEER NARINGREKAR
14 JUNE 2011
No portion of this report was prepared by BNP Paribas Securities Corp. personnel, and references to BNP Paribas in this General Disclaimer section and in the immediately following Important Disclosures section refer to BNP Paribas Securities India Pvt Ltd only.
IMPORTANT DISCLOSURES The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report: Company NA Disclosure (as applicable) NA
BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It beneficially owns 1% or more or the market capitalization of this company. 5. It makes a market in securities issued by this company. 6. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in securities issued by this company or derivatives thereof. 7. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company. Additional Disclosures Within the next three months, BNP Paribas may receive or seek compensation in connection with an investment banking relationship with one or more of the companies referenced herein. Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in our most recently published reports available on our website: http://equities.bnpparibas.com, or you can contact the analyst named on the front of this note or your BNP Paribas representative. All share prices are as at market close on 13 June 2011 unless otherwise stated. RECOMMENDATION STRUCTURE Stock Ratings Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price. BUY (B). The upside is 10% or more. HOLD (H). The upside or downside is less than 10%. REDUCE (R). The downside is 10% or more. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.
* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.
Industry Recommendations Improving ( ): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months. Neutral ( ): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months. Deteriorating ( ): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months. Country (Strategy) Recommendations Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. RATING DISTRIBUTION (as at 13 June 2011) Total BNP Paribas coverage universe Buy Hold Reduce 572 377 139 56 Investment Banking Relationship Buy Hold Reduce (%) 3.98 5.04 1.79
Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report. 2011 BNP Paribas Group
39
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THEMATIC RESEARCH

LTE in India From minutes to bytes

LTE emerging as technology of choice to meet mobile data growth needs

Kunal Vora, CFA

Implications for Indian telecom operators

PREPARED BY BNP PARIBAS SECURITIES ASIA

LTE IN INDIA FROM MINUTES TO BYTES

Asia Pacific Sector Swap

LTE IN INDIA FROM MINUTES TO BYTES

Source: Global Mobile Suppliers Association

LTE IN INDIA FROM MINUTES TO BYTES

How does LTE differ from 2G/3G technology?

* Monthly basic mobile phone data traffic Source: Cisco VNI

Cisco Visual Networking Index (VNI)

LTE IN INDIA FROM MINUTES TO BYTES

Exhibit 3: Global consumer internet traffic 2010-2015

Video will lead to an explosion in Internet traffic

Source: Cisco VNI

LTE IN INDIA FROM MINUTES TO BYTES

3G/WCDMA D/L peak rate

> 150 Mbps

LTE IN INDIA FROM MINUTES TO BYTES

Source: Global Mobile Suppliers Association

LTE IN INDIA FROM MINUTES TO BYTES

LTE IN INDIA FROM MINUTES TO BYTES

Source: Comparison between 2G/3G and LTE network Alcatel-Lucent

LTE IN INDIA FROM MINUTES TO BYTES

Adoption of LTE by service providers

Source: Global mobile Suppliers Association

Source: Global mobile Suppliers Association (GSA)

LTE IN INDIA FROM MINUTES TO BYTES

LTE IN INDIA FROM MINUTES TO BYTES

Key stakeholders betting on LTEs success

NTT DoCoMo 5% LGE 6% ZTE 7% Ericsson 8%

Inter Digital Patent Holdings 13%

Inter Digital Technology 11% Nokia 9%

Source: ETSI IPR Online Database

LTE IN INDIA FROM MINUTES TO BYTES

Equipment vendors make beeline for LTE

LTE IN INDIA FROM MINUTES TO BYTES

LTE IN INDIA FROM MINUTES TO BYTES

LTE device proliferation crucial for adoption

ADU960S U700 LTEEVDO

(Continued on next page)

LTE IN INDIA FROM MINUTES TO BYTES

Exhibit 15: LTE Devices Ecosystem (Contd)

PC cards Fujitsu Phones HTC LG Motorola Samsung Samsung Samsung

700 700 700 700 AWS AWS

EV-DO EV-DO EV-DO TBC EV-DO EV-DO

Source: GSA- Global mobile Supplier's Association

LTE IN INDIA FROM MINUTES TO BYTES

Will LTE sound the death knell of CS voice?

Circuit-Switched FallBack (CSFB):

LTE IN INDIA FROM MINUTES TO BYTES

Voice over LTE via Generic Access (VOLGA):

Source: VOLGA Forum

Voice over LTE (VoLTE):

LTE IN INDIA FROM MINUTES TO BYTES

Over The Top (OTT) Mobile VoIP Applications:

Legacy voice meets next generation VoIP