[Via DNA]

For many years smart-phones were synonymous with Blackberry. The device launched 10 years ago was initially aimed at enterprise users, enabling them to access their corporate email accounts on-the-go. Today, with the lines between corporate users and normal consumers getting blurred, it is the iPhone and Android-based phones with their nifty innovations that are capturing our imagination. I spoke to Frenny Bawa, VP-India, Research In Motion, last Friday about how Blackberry aims to keep its nose ahead of this growing competition.

We are seeing a huge shift towards smart-phones. Who are the people shifting? And how is this shift changing the way you as a manufacturer think about smart-phones?
Smart-phone sales globally are rising. The expected increase in the number of smart-phones for 2010 in India itself is about 50 per cent. So the trend is global and [the growth] is rapid.

In the last 5-6 years we have globalised our operations. We have been in India since 2004. We have much more of a focus on what the Indian business and consumers are looking for today. Basically, we are following the trend of where the growth is. Blackberry is associated with the enterprise. Butwith the launch of the Curve 8520, we received an incredible response from the youth segment. This phone was designed with India in mind - the social networking habits of the Indian youth, the love for music, etc.

The Curve 8520 was designed keeping India in mind, says Frenny Bawa, VP-India, Research in Motion

If you take business needs out of the picture, does the Blackberry lose its edge?
Recently we announced our Q3 results. We added 4.4mn new customers and over 80 per cent of our new customers worldwide are from the consumer space. So I don’t think it [Blackberry] loses its edge.

Blackberry provided connectivity on-the-go to the business person and it provides the same connectivity for any individual - not just from the email perspective, but connectivity to your kids wherever they may be through applications like the Blackberry Messenger or any of the other social networking applications available.

How will the new Blackberry operating system (OS) enhance user experience?
The recently launched Blackberry Bold 9700 has come out with the 5.0 OS. One of the reasons we are successful is that we have over 10 years perfecting the product. We focus on things like making the OS faster, more effective and efficient. In the 5.0 version there are many enhancements, but for the person on-the-go the significantly enhanced battery life is fantastic.

As a phone manufacturer what are the things you can do to encourage app development for your platform?
In India only recently have we begun to recruit and build on our Independent Software Vendor (ISV) programme. The response has been phenomenal. We have been able to make quick progress to attract a very qualified base of app developers in India. The skill-set of the Indian technology industry coupled with an increasing awareness and use of Blackberry in India is coming together beautifully.

As we go into markets like India, China or Indonesia, we know that for markets to embrace our product, we need to localise. With respect to India, we launched our applications store, App World, last year. We launched it with over half a dozen apps specific to India and it has been well received by users.

How significant is the buzz around mobile apps? Are they really that important to consumers?
Yes they are. Blackberry is a platform and a platform enables more functionality for the user. For example, I travel a great deal, but I am still able to do my banking. I know that my Visa bill is due on 5th of the month, but I am not at home to get my bill. So around 5th I log on to find out about my bill and pay, so that I don’t have to bear interest charges. I think the more mobile we become the more our requirements change.

For an Indian, knowing the cricket score is like a lifeline. So yes apps are important, but not just for the sake of having hundreds or millions or however many number of apps. Our approach has always been to develop apps for which our consumers see use for.

How is your approach different from Apple’s which has given 3rd party app developers a free hand and therefore have many applications on their App Store?
We have the IVC programme which the developer signs up to. We give them training, our development kit, and a lot of times we introduce them to our (cellular) operator partners.

For example, we launched the Pune Traffic Cop application. This was a special bringing together of a Blackberry alliance partner and the Pune police department and it has been one of the most exciting and well-received applications.

At one point of time Nokia and Blackberry dominated not just in numbers and brand value but also in innovation. Today, though you continue to dominate in numbers and brand value, the most exciting innovations seem to be happening in the Apple and Android space. What is Blackberry doing about this?
The smartphone market especially is exciting because it is growing so fast. And any market that is growing attracts a lot of entrants and it makes it better for everyone. You will have one manufacturer who will come up with something to catch people’s imagination. And then the second one will come and leapfrog that. That’s technology and it always happens. It is a snapshot in time.

But it is important to remember that we envisioned the smart-phone. If you take a look at our record then you know that there has to be a solid convergence between technology and market requirement and all the other business factors.

Keeping with tradition, Apple did not take part in the Consumer Electronics Show (CES) 2010 in Las Vegas. Nonetheless Apple’s presence was felt more than ever this year.

The reason: Apple’s mysterious tablet device which is expected to be launched later this month. Now, tablet PCs have failed the market test miserably in the past. But it’s funny how a device becomes cooler when Apple decides to make one.

The competition has reacted swiftly — in order to go one-up on Apple, Dell and HP amongst a host of companies launched prototypes of their own tablets at the CES this year. Except now these devices are called slates.

The nomenclature is significant. In late December, MacRumours, a technology website, unearthed documents which indicated that Apple had acquired the domain name islate.com in 2007. Clearly, HP and Dell are trying to take the wind out of Apple’s marketing.

HP Slate runs on Windows 7

On the other hand, there is a need for creating a separate device category as well. Unlike tablets which are basically laptops with swivelling touch screens, the new line of tablets (sorry, slates) look to bridge the gap between smartphones and laptops. HP’s Slate, which has a touchscreen, for example, comes loaded with Kindle software and so can be used to read e-books.

While HP’s device runs on Windows 7, Dell’s concept tablet runs on Google’s Android operating system. Also, its size is much smaller — 5-inch screen as compared to HP’s 10-12 incher (exact specs are not yet out).

Lenovo launched the U1 Hybrid Notebook, which appears to be a regular laptop, until the screen pops out of its shell and it becomes a slender, glossy touch-screen tablet.

This signifies that when slates roll out later this year, there will be a variety to choose from. And if you aren’t happy with any of those, there’s always Apple iSlate (maybe).

Why Kindle should be worried

Since its launch in 2007, Amazon’s e-book reader Kindle has gone unchallenged, despite some significant competitors— most notably Barnes & Nobles’ Nook. The devices on display at CES, however, should have Amazon worried.

Let’s start with Skiff, a lightweight device with an 11.5-inch flexible touchscreen, much bigger than the 9.7-inch display on the Kindle DX. Skiff is optimised for reading newspapers and magazines, say the developers.

The Skiff with a flexible screen is optimised for newspapers and magazines

Plastic Logic’s Que proReader too is appealing to a niche — business users. The 8.5×11inch device will support Word documents and Powerpoint presentations.

More interesting are dual-screen e-book readers by MSI and enTourage. According to experts, these devices are more like netbooks with two screens. The MSI device, for example, has two 10-inch touchscreens.

Coming to the displays, users have never been happy with black & white screens that current e-book readers come with. That is set to change. Pixel Qi showed off its new display technology, which switches between backlit colour LCD mode and low-power reflective mode, which looks more less like E Ink, which is used in current e-book readers.

[From DNA]

Vinod Kala is among many businessmen who will be waiting for news from Copenhagen with bated breath. He is the founder of Emergent Ventures, a Gurgaon-based climate change consultancy company.

Kala is hoping Copenhagen will open a slew of new opportunities for green businesses. These hopes got a boost this week with the announcement by environment minister Jairam Ramesh that India will voluntarily cut its carbon emission intensity by 20-25 per cent from its 2005 levels.

This is a significant shift in policy because till now, India had set targets for lowering energy intensity (measured as units of energy per unit of GDP). Now the emphasis will be on reducing carbon emissions per unit of GDP. This will bring into play new areas that go beyond improving energy efficiency. For example, the conservation of forests which help absorb carbon dioxide will become important.

“The creation of bio sinks (such as forests that absorb CO2) is an important area around the globe,” says Vinod Kala. Afforestation, reducing deforestation and waste land management will therefore provide new opportunity for green businesses, he adds.

New Calculations

Another thrust area will be increasing the share of renewable energy in the overall energy mix. Mohanjit Jolly, executive director of Draper Fisher Juvertson, a venture capitalist firm, explains why this will become vital for reducing India’s carbon intensity:

“We have invested in Reva, an electric car. By itself, the grams of carbon [emitted] per kilometer by the Reva is much lesser than a car running on petrol or diesel. That would be enough to convince someone about [the advantages of] an electric car. But now we need to peel the onion. If you use coal to produce the electricity to charge Reva, then question marks will arise. If you shift to non-coal sources to produce that electricity, then the carbon footprint of the car falls drastically.”

Jolly sees great potential in companies entering areas such as power generation, distribution and management from solar, micro hydro, and bio mass sources. The shift in emphasis from energy intensity to carbon emissions intensity will require hard decisions.

As Ritu Mathur, associate director, Energy Environment Policy Division, The Energy Research Institute (Teri) puts it, “When you start looking at emissions intensity, then the pressure is totally different [compared to reducing energy intensity]. You have to start looking at substituting fuel and technology, which are currently high-cost or not yet at the mass-production level.”

Fears Exaggerated

But fears that the reduction in emission intensity will have a drastic impact on industries, especially the manufacturing sector, too might be exaggerated, according to Rangan Banerjee, professor, Department of Energy Science and Engineering, IIT Bombay.

He feels that a 20-25 per cent reduction in emissions intensity by 2020 can be achieved partly by improving energy efficiency and partly by increasing the share of renewable energy in India’s total energy mix. The technology needed for this is quite cost-effective, he says.

But all this still remains in the realms of what is possible. As Kala points out, “[Making] announcements does not mean any mechanism can be evolved in Copenhagen… We still need to figure out the exact mechanism for trading, financing, and technology sharing and adoption… I think the clarity over this will emerge over 6-9 months. But Copenhagen will clarify the ambitions and commitments of the entire world and will give an impetus to the market for carbon credit and renewable energy.”

[via DNA]

Two sets of figures pertaining to the Indian telecom industry were released recently. Each tells a different story. According to the one released by the Telecom Regulatory Authority of India (Trai), the wireless subscriber base increased by 16.67million during October 2009, taking the total number of subscribers to 488million. That’s a yearly growth rate of almost 50 per cent — a continuation of the great Indian telecom story.

Meanwhile, for the September quarter, Bharti Airtel, the country’s largest cellular operator, saw its profits slide quarter-on-quarter for the first time in its history. Rival Reliance fared no better: its profits fell by more than 50 per cent compared to last year. Vodafone Essar’s revenues too fell 7 per cent in the September quarter compared with the June quarter. How does this make sense? More subscribers mean more revenues, and more revenues mean more profit, right? Well, not exactly.

Shrinking profits

The first part of the answer lies in the fact that the new subscribers are from the “bottom of the pyramid” and contribute very little to revenues. “Till we reached the 300million mark, each subscriber was contributing to the top line (gross revenue) and the bottom line (profits) [of cellular operators]. But after 300million, not everyone’s been contributing. Today, between 10-20 per cent of an operator’s subscribers are not contributing [to revenues]. They have just taken the phone to receive incoming calls,” says analyst Romal Shetty, head, telecom, KPMG India.

Secondly, there is an increasing trend of consumers buying two or more SIM cards to take advantage of schemes offered by competing operators. According to a recent report by Macquarie equities research, the recent addition of subscribers has been due to “increased incidence of dual SIMs”. So the total number of people using a mobile phone might actually be lower.

Thirdly, in a bid to rapidly add subscribers, new players such as Tata Docomo have driven prices down with schemes such as per-second billing. Existing players such as Airtel, Reliance and Vodafone have followed suit. Also, the subscriber growth today is fragmented between 13-14 operators who have set up base in India — an unsustainable number, according to analysts.

All these factors are expected to push down the average revenue per user (Arpu). Now, Arpu has always been falling in India (from a little over Rs300 per month in 2006 to less than Rs200 per month in 2009) thanks to lowering of tariffs. But it never affected the revenues of cellular operators because they continued to add more subscribers. This, however, will be difficult to achieve now.

For the first time, experts are predicting a fall in the EBITDA margins of telecom companies. EBITDA is earnings before interest, tax, depreciation and amortisation. A lower EBITDA margin indicates lower profitability, making companies less favourable for investment.

“It’s after one quarter that we will see the full impact [of the price war]. EBITDA margins historically have been around 35 per cent for publicly listed players in India. That could fall to below 30 per cent,” says Kunal Bajaj, managing director, BDA Connect, an advisory firm. The telecom industry will see a ‘bloodbath’ for at least two years. According to analysts, there will eventually be a consolidation, which will leave only six or seven of the current 13-14 players standing.

VAS is the difference?

In the mean time, with diminishing returns on calls and SMSes, cellular operators need to shift their focus to value added services (VAS), opine experts. “In mature markets like Japan and Korea, 30 to 40 per cent of revenues come from VAS. In India, operators earn around 90 per cent from voice and only 10 per cent from VAS,” says Shetty.
Revenue per user doesn’t normally increase on voice services, adds Shetty, pointing out how VAS can boost margins for the operator: “With Indian Idol, an SMS to vote for your favourite contestant costs the user Rs6. The cost of providing that SMS might be less than 10ps to the operator.” That’s some margin, no doubt. However, person-to-person SMS is priced much lower.

VAS will also help in retaining [higher end] customers, says BDA Connect’s Bajaj, “The higher end segment has remained untouched by the recent price wars because it is not so price sensitive. They also tend to be very loyal to their phone numbers. [But] when mobile number portability comes into play, operators risk losing this higher-end customer base. This could also affect large bulk enterprise deals. So, one really needs to think about how to retain these consumers by offering compelling services.”

Things have begun shifting on the ground as well. According to Mouli Raman, co-founder and chief technology officer, OnMobile, a VAS provider, “There is an urgency [among cellular operators] that we haven’t seen before. We had some products in the pipeline on which operators were not keen on earlier because of other preoccupations. But now they are really pushing them through so that they can take [the service] to market much faster.”

Beyond caller tunes

Although there are several examples of VAS that are doing well, they are restricted to services such as caller tunes or on-demand music. Such services constitute what Mouli calls “the first phase” of VAS.

High-spending customers, who typically also own smartphones, look for internet-based services, which are just not up to the mark in India, says Bajaj. “Today, ring tones account for a disproportionate share of the VAS pie and that is only because there isn’t much else of value that has been marketed to the consumers,” points out Albert Almeida, chief operating office, Hungama Mobile

KPMG’s Shetty agrees: “When telecom services get into the eco-system of the people — and by that I mean the economic life-cycle of people, when they use it for business services… That’s when the second revolution will take place.”

This is happening at a very smallscale today. Mouli points out a company called Baba Jobs which has a mobile service to help rural migrants find jobs in cities. “This is a very niche application. But people are willing to pay Rs30-40 per month for the service.”
Another such tool is Reuters Market Light, which provides farmers price information on various crops from nearby mandis. This service has, according to the company, been used by 1,35,000 farmers in two years. “Even farmers are willing to spend Rs60 per month, because they feel they can get a return on their investment,” says Bajaj.

On the whole, it is hard to deny that cellular operators are under pressure on multiple fronts: the levelling off of new and high-usage customers, falling revenue per user, the spectrum squeeze, and a deadly price war that is bound to hurt revenues. Plus, the Trai is getting into the picture to trim hitherto fat margins on SMSes. And there’s also the risk of consumer disenchantment with poor quality of services which could, with number portability in the offing, result in the erosion of customer base. It is clear that the tough times ahead will be a call of opportunity that, if not answered swiftly, may prove to be a fatal missed call.