How Tikona Built Low Cost Wi-Fi Broadband Business in Free Spectrum ?

Tikona Wireless WiFi- Broadband BusinessTikona Digital Networks is a wireless broadband provider that operates in the unlicensed spectrum band. The company uses 60MHz of bandwidth in the 2.4GHz band for linking customers to cell sites and an additional 50MHz of spectrum in the 5.8GHz band for backhaul.

The company has a presence in 25 cities and currently has ~275,000 subscribers that include 14,000 SMEs and 1,400 large corporates. ~35% of revenues are from enterprise customers.

Broadband Market in India
Overall data market in India is worth US$3bn (~11% of voice market), 2/3rd of which is accounted for by fixed connection (home, enterprise, and Wifi hotspots). Broadband penetration in the country remains low, with only 15.5m connections v/s 230m in China. Unfavorable economics of wireline broadband is the key impediment – Cost of connecting a home is ~US$500 whereas ARPU is ~$10/month. Cable companies too are required to make investments to move from 1-way plant to 2-way plant to be able to provide broadband services.

To address the shortcomings of Wireline Broadband, Tikona adopted a Wi-Fi Model. It Provides a wireline equivalent broadband connection using wireless technology, with speed of up to 4 Mbps [Actual Speed Depends on Location of the User] Its cost of connecting a home is a fraction of that for a wireline broadband provider Current Tikona’s network utilization is ~15% and the company can handle 1.6m subscribers at full utilization of current capacity (40,000 cell stations). It also holds 4G LTE spectrum in 5 circles which it acquired for US$230m in 2010. The company is currently in wait and watch mode and will launch LTE services once the ecosystem is ready.

Average data usage per subscriber is 20GB/month (6GB/month 15mths ago) and ARPU is ~Rs600 for retail, ~Rs1,200 for small enterprises and ~Rs10,000 for large enterprises. The contribution per customer for the company is over 70%. The churn rate for Tikona is 3.2% (vs ~5% for mobile operators). Out of this, 1.8% is due to subscribers shifting homes and 0.6% is due to customers being removed for non-payment.

Probably, taking a lesson out of Tikona’s corporate strategy, Aditya Birla Group Company, Idea Cellular also rolled out Wi-Fi Broadband in Ahmadabad, Hyderabad, Pune, Cochin and Vizag which can later be used for 3G Data Offload as well when it really takes off.

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