AT&T and Verizon may go for wireless licenses in India

[Fire14]

Wireless Growth In India Calls Out To U.S. Leader

AT&T has dialed up India's hot wireless market for growth, but intense competition could disconnect that call.

AT&T T has applied for mobile licenses covering all of India along with local partner Mahindra Telecommunications. India's government is expected to award licenses early next year. Some 30 companies have applied for the licenses, including a few well-connected groups.

If AT&T succeeds in wringing out a license from regulators, it'll face plenty of competition. Four companies control 75% of the market and six hold 93%, says UBS Research.

A dozen wireless firms already hold national or regional licenses in India. They include U.K.-based Vodafone VOD, which is just as big as AT&T. Vodafone paid $11.1 billion in early 2007 for a controlling stake in India's No. 3 wireless firm, Hutchison Essar.

There are good reasons why AT&T wants to crash India's wireless party. Only 19% of the nation's 1.12 billion people use wireless phones, compared with 37% in China and 56% in Brazil, two other emerging markets.

India is adding 7 million to 8 million new users each month, analysts say. By the end of 2011, it will have more than 480 million wireless users, up from 185 million as of June, says research firm Gartner.

"The market is big enough to accommodate a couple of more players," Gartner analyst Madhusudan Gupta said.

Will Need Spectrum, Too

AT&T/Mahindra is viewed as a front-runner for a new license. Last year, AT&T became the first foreign phone company to win licenses to provide landline long-distance and international services in India.

"We would focus on (both) business and consumers if we were to ultimately offer wireless service (in India)," AT&T spokesman Michael Coe said. "But we're still early in the process. First step is a license, then (acquiring) spectrum."

Other applicants for India's new wireless licenses include Hinduja Group, one of three companies that lost to Vodafone in the takeover battle for Hutchison Essar.

Some of India's information technology firms and real estate firms also have applied for licenses.

"There is doubt on the intent of all the applicants," Gupta said. "They are all undergoing a serious screening and evaluation."

AT&T, in fact, might not be the only U.S. company looking to break into India's wireless market.

Verizon Communications VZ has ties to one wireless applicant, Videocon, and is said to be interested in a mobile license.

"As is our policy, we have declined comment on any speculation," Verizon spokesman Robert Varettoni said. Verizon and Vodafone jointly own Verizon Wireless, the No. 2 wireless firm in the U.S.

Cingular Wireless, then controlled by AT&T forerunner SBC Communications, made an earlier foray into India. It owned a 33% stake in Idea Cellular, a joint venture with India's Tata and AV Birla groups.

Cingular sold its Idea Cellular stake for $300 million in September 2005, when SBC was pulling back from foreign investments. AT&T now seems to be getting more active outside the U.S. This year, it and a partner bid for a controlling interest in Telecom Italia TIA.

Idea Cellular now is the sixth-biggest wireless firm in India.

Phone Prices Falling

AT&T faces a few obstacles getting back into India, UBS Research analyst John Hodulik says. One is that companies that win new wireless licenses will need sufficient radio spectrum. The government might auction airwaves, he says.

In the U.S., wireless penetration is near 80%. AT&T is No. 1, with 63.7 million customers.

"They're (AT&T) most attracted to the growth of India's market," Hodulik said. "The country is going to bring on more wireless customers in the next two years than we have in the whole U.S. to date."

In India, wireless networks cover only about 60% of the country. India's wireless industry service revenue will jump to $25.6 billion in 2011 from $8.95 billion last year, says Gartner's Gupta.

Bharti, India's No. 1 wireless firm with 43 million users, has been expanding its network coverage quickly this year, says Tim Long, an analyst at Bank of America.

Lower-priced phones also have spurred mobile adoption in India, especially in rural areas, analysts say. That's the strategy of Vodafone, in India only a few months. Vodafone has been pushing $25 handsets made in China.

Price competition has been fierce in India. Most wireless firms offer "lifetime" calling plans for one-time fees below $25. The plans let users avoid minimum monthly payments.

India's wireless users spend on average about $9 a month on calls, down 15% from two years ago.

Wireless Growth in India Calls Out to U.S. Leader

[Andy]

That is interesting. I know Vodafone is pumping in A LOT of money to get cell sites up in rural areas that are still without any coverage whatsoever. I would think building out a network in India would take time.