Reliance Plans $7B GSM Build-Out

India's Reliance Communications Ltd. (RCom) is inviting bids for GSM equipment contracts in a massive $7 billion-plus network expansion that will see the CDMA-based operator running two mobile networks.

The country’s largest CDMA carrier, Reliance has made the strategic decision to switch to GSM for the purpose of expanding its network coverage and capacity. Its CDMA network will remain in operation, for the time being at least -- a decision the operator says will allow it to roll out the new network more quickly and cheaply by using its existing passive infrastructure to add capacity. (See Reliance Dabbling With Dual Networks.)

Reliance's CDMA network has capacity for 30 million subscribers, and if its customer base continues to expand by more than one million users every month, it will run out of capacity by mid-2007.

According to local press reports, Reliance is looking at awarding three or four contracts for around 70 million to 75 million GSM lines and 20 million to 25 million wideband CDMA (3G) lines.

By leveraging the CDMA network, it will be able to cut the cost of 30 million lines, and assuming it pays the going rate of around $100 per line for the rest, the carrier could spend around $7 billion or $8 billion on the network. The evaluation process could take up to five months.

The project dwarfs Bharat Sanchar Nigam Ltd. (BSNL) 's 60 million line tender as the largest ever wireless request for proposals. (BSNL's RFP is often called a monster; this must be Godzilla.) It's sure to attract the likes of Ericsson AB (Nasdaq: ERIC), Nokia Corp. (NYSE: NOK), and Alcatel-Lucent (NYSE: ALU) -- which are set to gain from the state-run carrier’s expansion. BSNL’s contracts are being delayed in court over a dispute with Motorola Inc. (NYSE: MOT). (See Ericsson, Nokia Bid Low for BSNL and Moto Stalls BSNL's Wireless Tender.)

In addition to its nationwide CDMA network, which operates in 21 of India’s 23 telecom “circles,” or regions with 24 million customers, Reliance already runs a small GSM network in eight regions with around 3 million customers through its Reliance Telecom subsidiary.

But while Reliance moves ahead with its plans to build out the GSM network, it remains to be seen whether the government will actually allocate any more GSM spectrum to the carrier. (See Reliance Squeezed by Spectrum Crunch.)

India’s mobile operators are all in need of spectrum to accommodate rapid subscriber growth. In October alone, they added a combined 6.7 million new subscribers -- bringing the total to 136.22 million. The Indian Department of Telecom is still working to release additional spectrum it promised by the end of the year, and says it will finalize a comprehensive spectrum allocation policy by the end of 2007.

Reliance has applied for GSM spectrum in 21 of the 23 circles under a unified service access license, but it’s at the back of the queue. And in the most sought-after circles, which incorporate cities like Mumbai and New Delhi, there won’t be enough spectrum to go around. Priority will go to the national GSM operators such as BSNL and Bharti and regional carriers like Hutchison Essar and Idea Cellular Ltd. , which have recently been awarded new licenses to expand. (See Indian Mobile Set to Spread.)

Since it first revealed its dual-network strategy, Reliance has been butting heads with the Indian government, which has said it will need to give up some of its CDMA spectrum in exchange for GSM spectrum. Reliance argues that it needs both to accommodate subscriber growth.

So why would Reliance go to the trouble of inserting itself into the GSM market? Part of the answer is, in fact, spectrum. In the less sought-after regions, there is spectrum still available, and while CDMA operators are allocated spectrum in blocks of 2.5 MHz, GSM carriers are allocated 5 MHz.

The shift in focus is also part of the larger move away from CDMA in the mobile industry. GSM now caters to 70 percent of global mobile subscribers, making handsets and equipment cheaper to source. It also provides a migration path to wideband CDMA for 3G, which is expected to reach India early next year. (See India Prepares for 3G Rollout.)

— Nicole Willing, Reporter, Light Reading

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farpoint 12/5/2012 | 3:32:31 AM
re: Reliance Plans $7B GSM Build-Out There are two issues here. One is the value in OFDM is perceived to be less under the influence of Qualcomm (or any other vendor) than is the case with CDMA. OFDM is also better suited to the larger bandwiths (20+ MHz.) that will typify next-generation deployments. Most importantly, though, 4G will provision more raw capacity than 3G, meaning more users on the air and higher throughput availability per user. If nothing else, that at least improves a carrier's competitive position regarding the services they can offer, and will perhaps offer an ROI advantage as well.

Make no mistake - 3G (and 2G, for that matter) will be around for many years. But it's very clear that once the technology of real wide-area broadband is available, that's where the industry is going.

BTW - we define 4G as all-IP, meaning that voice and video services are delivered that way as well. This makes bandwidth-allocation decisions much more straightforward than is the the case with 3G - which is, after all, still a telephony system at heart.

Thx. Craig.
lrmobile_millomar 12/5/2012 | 3:32:26 AM
re: Reliance Plans $7B GSM Build-Out As far as I can see vendors of 3G equipment have been reasonably successful getting the operators to buy that equipment. However, with very few exceptions, the operators have failed in making "more data" a compelling value for their customers. People want to use their phones to make voice calls and to send text messages because they are cheap. MMS, video calling, surfing the net and watching cricket highlights have all failed to garner much demand even in aggregate. This makes a very poor business case for moving to 4G. It is not a good business case to replace perfectly good equipment that is not used to anything like capacity with equipment that has even more capacity that will not be used! It doesn't matter if you are a new entrant or an existing player.
"New technology" does not equal "better business case" or we would have been using AT&T's video phone for more than 25 years.
So Craig why would you spend on a new network?
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