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: Vendor financing business model used between BSNL and Soma may be reused in future deals, according to Gartner. It, however, warns of three types of financial risks in this model. First, an overoptimistic expectation of ARPU and market size may lead to low margin, and in extreme cases, to a vague ROI. Also, responsibility for holding inventory to roll out the service, and employment of a system installation and technical support team on an extended scale, may cause serious cash flow problems for vendors.
Thirdly, vendors, who do not have the financial capability to invest in resources, will have to get investment from the capital market. These activities will either dilute vendors’ share, or increase its debt ratio and disturb the balance sheet (loaners usually charge a high return rate for risky projects. This will also eat into a vendor’s margin). Both may hurt the healthy growth of a company.
The solution sounds simple. Service providers need to establish a long-term vision with a competitive road map and end-user targets to be able to frame a ROI framework around content, quality of experience and quality of service convergence and security for 802.16 e-2005, 802.16-2004 and mobile broadband.
At the same time, competition with 3G would play a big role in deciding its fortune. Analysts believe that the timeline and bandwidth of 3G and WiMax licenses will heavily impact the future mobile broadband access market share between 3G and WiMax. The permission for mobility in the WiMax license will also influence the future of WiMax growth. Also, 3G seems to have, in comparison to WiMax, a better ecosystem in place.
Though the industry continues to debate its short-term market potential, it could turn out to a game changer in the long run. To being with, it is likely to be restricted to enterprise market and high-end residential users. As Gartner analysts point out, long term potential of the Indian WiMax market heavily relies on spectrum allocation, WiMax ecosystem maturity level and the timelines of WiMax and 3G licenses....
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