MTS India: Rev B is Immediate Plan, LTE as Long-term Goal

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It seems the bad days of Sistema Shyam Teleservices (SSTL) are over. The company which operates under MTS brand and offers voice and data services on CDMA platform in the country is looking forward to break even in all circles before 2015. The company had lost 21 licences following Supreme Court’s order in February last year. However the period of uncertainty is over when SSTL secured 3.75MHz spectrum on 800MHz band in 8 circles in March 2013 auction, currently SSTL offers services in 9 circles – Delhi, Uttar Pradesh West, Rajasthan, Kolkata, West Bengal, Kerala, Karnataka, Tamilnadu and Gujarat.

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MTS India told that they chose the circles with very cautions to continue its focus on voice enabled data strategy. MTS believes data is the growth factor in future. MTS already rolled out EVDO Rev A (MBlaze) and Rev B Phase II (world’s first, MBlaze Ultra) services in the country with more than 350 towns with high speed mobile broadband.

As Sistema JSFC released its financial reports, Sistema President and Chief Executive Officer Mikhail Shamolin said, “However, despite these difficulties, our perseverance paid off in the first quarter this year when we managed to secure superior licences for Sistema Shyam TeleServices Ltd (SSTL) at no immediate cost, thereby strengthening its investment case,” SSTL now has more streamlined operations and expects to cut down the debt to $700 million this year from last year’s $1047 million. With few circles it will also require less funding. Already MTS has reached breakeven in West Bengal circle. The company believes the most of its revenue will come from its data services.

In a press release Sistema expressed its intension to roll out LTE services on 800MHz band in India, but that will come after the company’s operations in the country becomes profitable, market is ready for high speed LTE and ecosystem develops. Sistema also considers the consolidation options after 2 years when all 9 circles will be profitable.

SSTL is now planning for its 4G operations, as it will invest around Rs 1100 crore for rolling out LTE-FDD services in India. SSTL will focus more in tier II and III cities and intends to deploy LTE services in 1.4MHz channels. If all go well SSTL will start the investments from next year, until then MTS will kickstart its Rev B phase II services to offer upto 9.8Mbps internet service.

Currently MTS has launched MBlaze Ultra services in Jaipur, Rajasthan only. As LTE is company’s long term plan, immediate plan is to roll out Rev B services in all circles using 2 carrier channels.

Our Take:
With CDMA technology and spectrum on 800MHz band, MTS certainly gets more advantage over GSM-3G services, which are offered over 2100MHz band. As MTS starts rolling out 9.8Mbps Rev B services under Ultra brand, it will give more competition to 3G operators which is offering 3G/HSPA at 7.2Mbps in most places (though their advertisements say it’s upto 21-28Mbps).

But there is practically no Rev B smartphone in the market, and I believe MTS will try its best to capture data card market. But with higher tariff for Rev B MTS can not tap customers. MTS got spectrum at low price (compared to 3G spectrum), yet its data plans for data cards are almost similar to 3G players – they are not extending the price advantages to consumers. And data card is not the only way to tap data customers, they are now using smartphones more.

MTS will count on LTE-FDD technology, which is more mature than LTE-TD, but ecosystem on LTE over 800MHz is not that mature, as it is over LTE1800MHz. Also deploying LTE on just 1.4MHz channel may not deliver awesome customer experience, though that can be easily handled as MTS buys more spectrum.

Reliance Industries Jio Infocomm is gearing up to roll out 4G/LTE-TD services, people are very much excited for it. I am not sure how MTS can keep its customers with itself when Reliance Jio comes with dirt cheap smartphones, tariff plans and other stuffs.

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