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Why Is Tikona Bidding For Broadband Spectrum, When It Already Operates In Free, Unlicensed Spectrum?


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Tikona Digital Networks, one of the final eleven bidders for Broadband Wireless in India, has received an approval from India’s Foreign Investment Promotion Board to raise Rs. 11.42 billion, and “enhance the FDI (limit) to 74% by issue of Compulsorily Convertible Debentures (CCDs) and equity shares to existing foreign investors and new foreign investors.” A Tikona representative has told MediaNama that the company will speak with us about the approval when they’re ready to, and no further comment was on offer on the new investors or plans.

Our guess is that a part of the money will probably be used to pay for spectrum won in the BWA auction, the base price for which is Rs. 17.50 billion. The company had raised Rs. 4.88 billion in its first round of funding, with 69.6% stake allocated to private equity companies Goldman Sachs Investment Partners (22.8 percent stake), Indivision India Partners (13.46% stake), Oak India Investments (23.55% stake) and Green Lotus Investments (10.09% stake). Tikona Founder, MD & CEO, Prakash Bajpai owns 2.67 percent, while Tikona Trust owns 26 percent. Note that the shareholding mentioned here is on a fully converted basis, as of 28th February 2010, and based on data provides to India’s Department of Telecom.

As of December 15, 2009, there were 379 ISPs registered with the Indian Department of Telecom, of which 98 have category ‘A’ licenses: meaning they can roll out pan-India. Tikona has a pan-India ISP license (number 820-1019/08 LR, dated 09.09.2008). They’ve launched services in 10 cities (Mumbai, NCR Delhi, Chennai, Bangalore, Pune, Hyderabad, Kolkata, Indore, Ahmedabad, Surat), and have a target to expand to 50 cities by end of 2010. They claim to be adding around 20,000 customers every month, and tariffs range between Rs 300 to Rs 5000 per month.

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Unlicensed vs Licensed Spectrum For Broadband

It’s worth noting that Tikona’s is bidding for licensed spectrum, while in the past it had been operating its WiBro service in free, unlicensed spectrum. Note that WiBro is just a brand name they’ve chosen, and has nothing to do with the WiBro specification being used by Korea. So why is the company now choosing to bid for licensed spectrum, instead of continuing operations in the significantly cheaper unlicensed spectrum?

In an earlier interaction with MediaNama, Bajpai had told us that Tikona’s Broadband network architecture is suitable for both licensed and unlicensed spectrum bands. At present both 5.8GHz and 2.4 GHz bands are utilized in the network, and the company plans to deploy in other bands as well. It is, after all, free to use, and the lower cost can allow Tikona to provide cheaper broadband access. So why aren’t more telecom operators opting for unlicensed spectrum? Bajpai’s emailed response: “It is quite difficult to build a carrier grade network with high availability unless special technology components are deployed with expertise. Usually many operators deploy small coverage models like campus or Hot-spots using unlicensed spectrum and this practice is very popular all over the world.”

Thomas K Thomas at BusinessLine delves into the use of unlicensed spectrum in India, and in particular, he highlights the issue of quality of service on unlicensed spectrum due to interference from hundreds of other users of free air waves. However, Bajpai tells Businessline that they addressed quality issues by deploying Multiple-Input and Multiple-Output platform using about 110 MHz of free spectrum, and the network architecture takes care of interference issues. Much more here.

So the question still remains: why would Tikona bid for licensed spectrum if it is confident of its unlicensed spectrum rollout?

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  • To the comment by Mr Bajpai, it is prohibitively expensive to blanket large areas with wifi (the underlying technology they are using), and therefore the need to move into wimax/3G (a.k.a regulated spectrum).

    Tikona has done a great job in building a consumer base and trustable brand while using the cheaper unregulated spectrum …and keeping costs low. Now, as they scale they want to acquire regulated spectrum to grow and expand their customer base.

    It is also a sound strategy to focus on mobile broadband, instead of entering the crowded mobile voice business, and focus on building a solid business by themselves in this market. They will make a very attractive acquisition target for the big mobile operators in a matter of 24 months.

  • kumar

    first tikona should concentrate on giving quality internet bandwidth to subscribers, then they can think of 3G or anything else. It is one of the worst ISPs in India. I used Tikona and got it cancelled in 10 days because of irregular net connectivity and irresponsible technical support operations.

  • shekhar

    its all about valuations. if Tikona gets licenced spectrum then they can sell out at a premium.

  • I like Tikona internet service but some time problems creates while surfing.

  • i suspect tikona is going to die out or just keep conning investors. i tried to get a tikona connection. their people are not sure if i have sufficient signal strength…. the person who comes to sell says it is sufficient signal strength.
    the installing engineers feel that there is insufficient strength.

    in any case it has been some 6 months i have not heard from them and they wont even pay me back my money. customer care keeps saying that they will send back the money, i have registered atleast 6 complaints.

    i wrote to them and they do not bother to reply.

    i think prakash bajpai is just pulling a fast one on his vcs