As CDMA subscribers migrate to less-efficient 1,800MHz for voice services, they could be poached by the top three mobile service providers—Airtel, Vodafone and Idea—the very same companies that battled over CDMA and GSM almost a decade ago. Photo: Pradeep Gaur/Mint
As CDMA subscribers migrate to less-efficient 1,800MHz for voice services, they could be poached by the top three mobile service providers—Airtel, Vodafone and Idea—the very same companies that battled over CDMA and GSM almost a decade ago. Photo: Pradeep Gaur/Mint

Reliance Jio’s LTE bet may mean curtains for CDMA in India

The mobile technology which the Ambanis backed 14 years ago will be the biggest loser when the 4G shift gains traction

Mumbai: Reliance Industries Ltd (RIL) chairman Mukesh Ambani’s telecom services bet on the fourth-generation long-term evolution (LTE) technology is ironically set to relegate the Code Division Multiple Access (CDMA) radio technology—which he and his brother Anil Ambani backed 14 years ago—to the annals of telecom history.

In 2002, when the Ambani brothers launched their telecom business, they placed their bets on the less popular CDMA, even as the world was fast embracing the Global System for Mobile Communication (GSM) technology. In part, that was on account of the fact that the company then launched mobile operations without possessing a mobile licence in most parts of the country (indeed, it used GSM in the few areas where it had mobile licences).

However, CDMA never really took off. As on 31 December, 2015, CDMA had less than 5% share of the total wireless subscriber base in India, according to an 18 May note by the Telecom Regulatory Authority of India. The technology’s fading relevance was hastened by Reliance Communications’ success in lobbying the government to allow telcos operating on the CDMA platform to also use the GSM technology.

CDMA subscribers accounted for just about 47 million of the total 1.1 billion wireless users as on 31 December. The rest are GSM subscribers.

Rohan Dhamija, partner and head of India and South Asia at consulting firm Analysys Mason, recalled Ambani’s ‘Monsoon Hungama’ campaign in 2002 as the “most memorable CDMA event".

That was the year Reliance Infocomm (subsequently named Reliance Communications after the Ambani brothers split the conglomerate’s businesses between themselves) sold CDMA mobile handsets for just 500, prompting carpenters, peons, bankers and companies to lap them up.

RIL subsequently re-entered the telecom business by acquiring pan-India wireless broadband licences.

It also has an infrastructure and spectrum-sharing deal with Reliance Communications.

The much-anticipated commercial launch of this broadband service will only make CDMA even more irrelevant, say analysts.

“As we approach the launch of fourth-generation (4G) services by Reliance Jio Infocomm Ltd (R-Jio), we believe it could likely mark the end of CDMA services," Sanjesh Jain, research analyst, ICICI Securities Ltd, wrote in a report dated 17 June.

Reliance Jio has already spent 1.2 trillion in financial year 2015-16 for the 4G launch.

“It is critical for R-Jio as completion of 850MHz (megahertz) spectrum refarming by R-Com infers that R-Jio could use the spectrum (through sharing/trading route) for its 4G-850MHz pan-India launch. R-Com has already vacated 850MHz in nine circles. Due to strong data card business, 55% of CDMA revenue comes from post-paid, which could be a low hanging target for R-Jio," added the ICICI Securities report.

Dhamija also believes that “CDMA could be migrated to 4G". He added that “the transition should be smooth, but much will depend on execution".

This May, 55-year-old Marimuthu Matheswary, a domestic help working in Navi Mumbai, received a call from her mobile phone operator suggesting that she should migrate to a new system because her cellphone, which uses CDMA, would no longer work.

Matheswary does not know the difference between, and hardly cares about, CDMA, GSM and LTE—typically marketed as 4G LTE.

What she does care about, though, is her phone continuing to work at all times and being able to retain her number.

“I don’t want to change my number. It’s my lifeline. I had bought this handset as it was the cheapest among the lot then," she said.

Another CDMA user in New Delhi, who did not want to be named, received a courier in April with a 4G LTE SIM card and a letter with instructions on how to use the card.

This person says he sent an SMS from his existing CDMA number saying “4G [16-digit SIM number]", following which he immediately received a text that his new SIM had been successfully mapped to his CDMA number.

He continued to use his CDMA phone till 19 June when he received an SMS instructing him that his new number would be activated that evening.

“That evening, I inserted the 4G SIM into my 4G-ready device and turned it on. All the voice and data services started working within three minutes," added this happy 4G LTE customer.

Matheswary, meanwhile, is waiting for her turn. Till she switches to a new number or migrates to a new GSM connection, Matheswary will be one of the few CDMA customers left in India.

Incidentally, even as the monthly Average Revenue Per User (ARPU) for GSM service increased to 123 in the December 2015 quarter, the monthly ARPU for CDMA full mobility service declined to 103.

Moreover, as CDMA subscribers migrate to less-efficient 1,800MHz for voice services, they could be poached by the top three mobile service providers—Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd—the very same companies that battled over CDMA and GSM almost a decade ago.

According to Jain of ICICI Securities, Bharti Airtel is best positioned in this regard, as 70% of CDMA subscribers are concentrated in its leadership circles.

“We see risk to R-Com’s revenue/Ebitda (earnings before interest, tax, depreciation and amortization) from migrating its subscribers to GSM/4G. Though the company has offered lucrative tariffs to migrate for the first month, which subscribers could likely opt (through internal MNP), but post 90 days, subscribers can choose to avail MNP again," the note said.

MNP refers to mobile number portability.

Meanwhile, Tata Teleservices Ltd has also asked its CDMA subscribers in Andhra Pradesh to migrate to its GSM network and the same is expected to happen in its remaining two circles coming up for renewal—Maharashtra and Mumbai.

“While it is true that CDMA will remain as a footnote in the evolution of mobile technology, it has left behind important imprints in the mobile experience we derive in everyday life," said Alok Shende, founder-director and principal analyst, Ascentius Consulting.

CDMA as a technology evolved naturally to 3G and 4G technology.

“The technology patents registered for CDMA technology have dovetailed with 3G and 4G LTE standards. These efficiency gains spawned by CDMA have touched upon data speeds, carrier aggregation as well as efficient spectrum band utilization for 3G and 4G standards," added Shende.

In sum, CDMA served as a foundation on which the next generation of technology could be built.

Shende said the second note of impact for CDMA has been on the side of evolution of the device ecosystem.

“While the morphological evolution of phones from clunky bricks to objects of art is without doubt evident, there have been equally significant upheavals in the device manufacturers’ market," Shende said.

Meanwhile, a person close to the development said Reliance Communications is expected to complete the migration of CDMA to 4G LTE service by mid-August, as most of its customers have already opted for the offered upgrade to 4G LTE services.

Reliance Communications now has liberalized 850MHz spectrum on a pan-India basis and the 4G LTE upgrade will be done on a national basis. It has paid around 6,600 crore for liberalizing its spectrum in 20 out of 22 circles.

In the other two circles (Assam and North-East), Reliance Communications already had liberalized spectrum (which allows telecom operators to use any technology to deliver mobile services such as 3G and 4G) in the 850MHz band, bought in the last auctions in March 2015.

The person quoted above said customers have to upgrade their handsets to 4G LTE to avail of the services, and older CDMA handsets will not work as the network is being upgraded to 4G.

CDMA will be phased out over the next couple of months, he confirmed.

*****

CDMA vs GSM

—CDMA is a proprietary standard that was launched by Qualcomm Inc. in the US.

—Phones on CDMA networks do not use SIM cards.

—CDMA is the infrastructure on which all 3G networks are based—for both GSM and CDMA carriers.

—GSM was invented in 1990 in Europe by the GSM Association.

—GSM is an international standard based on Time Division Multiple Access—voice is transformed into digital data and assigned a channel and time slot.

—CDMA uses the Code Division Multiple Access—hence, several radios can share the same frequencies.

—The future is clearly LTE, marketed as 4G LTE.

—CDMA had 47 million customers as on 31 December in India, while GSM had 964 million users.

—The monthly ARPU for GSM service increased to R123 in the December 2015 quarter, but that for CDMA full mobility service declined to R103.

Reliance Group firms have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

Close