Tom Luxsox Coins

Roll Indian

3G Roll Out In India

 

 1.   What is 3G?

The third generation mobile phone technology is known as 3G.  This technology is expected to provide enhanced multimedia and broadband width and high speed above 2 Mbps on mobile phones. This will facilitate applications like mobile TV,  mobile commerce, location based services, video chats and mobile gaming.  Downloads will be faster. For example, a 3 minute song  which will take 9 minutes to down load in 2G can be downloaded in 90 seconds in a 3G phone.

The first generation phase (1G) of mobile telephony began in 1970s and the 2nd phase on CDMA and GSM technology platform began in the 1990s. During the last 2 decades, this technology of mobile telephony continuously offered increased bandwidth and introduced multimedia. The GPRS (General Packet Radio Service) which was launched during 2000 offered broadband speed up to 114 kbps.  In 2003, EDGE (Enhanced Data Rates for Global Evolution) was launched with the speed of 384 kbps. The present state of mobile wireless communication in India is known as 2.5G.

 2.     Global scenario

The first commercial launch of 3G services was done by NTT DoCoMo in Japan in Oct 2001, followed by SK Telecom in South Korea in Jan 2002. Today nearly 132 countries across the world have deployed and India is amongst the last few countries to adopt this technology. Initially a large number of 3G subscribers worldwide returned to 2G due to the lack of value added services available in 3G. However with the growth in VAS, 3G subscriptions have also been growing steadily and now stand at 888 million subscribers which work out to approximately 13% of the global mobile subscriber base.

The 3G penetration in Europe is estimated at 33% and Japan has already reached 80%. In China where 3G was launched during 2009 the number of 3G users is projected to reach 80 million by 2010 end. The 3G penetration is US is around 40%. In Europe, music and gaming have emerged as the top growth drivers of 3G network. In Indian market, video is expected to play a major role in 3G growth.

While India is launching 3G services, rest of the work is gradually migrating to 4G technology, better known as long term evolution (LTE). India has a long road to catch up with other countries.

3.     Spectrum auction

3G services will have a major role in Indian economic development as it is estimated that for every 10% increase in the penetration of broadband services, there will be an increase in economic growth of 1.3% points. 3G will take the broadband to the rural India which has got a very low PC penetration.

Currently India has 2 million 3G subscribers serviced by Government owned BSNL and MTNL. These operators were allocated 3G spectrum almost 2 years ago and thus have had a head start over the private players.

During May 2010, the Indian Government concluded the 3G spectrum auction for the private operators. The Government initially estimated a target to collect 30,000 cr ($6.7 billion). But the final bid came as a surprise to both operators and the Government and it brought a revenue of 67710 cr ($ 15 billion) to the Government. As a result, no single operator managed to bag all 23 circles which touched 16750 cr ($3.72 billion). Highest price was paid for Mumbai and Delhi circles at 3247 cr ($722 million) and 3317 cr ($737 million) respectively. The winning bidders were awarded 5 MHZ of sepctrum each.

The foreign operators did not participate in the bid, due to regulatory uncertainties with respect to eligibility of 2G spectrum along with a winning 3G bid. Secondly it is felt that a pure 3G play may not be attractive for operators as it would not make any business sense.

4.     Reasons for high spectrum cost

The 3G bids have obviously gone beyond anybody's estimation and it has already put pressure on operators. Major reasons which drove the spectrum prices beyond reasonable level are the auction format, severe spectrum shortage and the policy uncertainty.

As there was an acute shortage of spectrum for the operators, particularly in the metros of Mumbai and New Delhi, the operators decided to bid higher prices for 3G spectrum hoping that they will use the 3G spectrum to move some of the 2G subscribers to 3G network.

Though appears to be an aggressive bid, it actually works out to one of the lowest prices per population. The final all India bid for 23 circles is Rs 16750 cr (3.72 billion) for a total population of 1.2 billion. This translates to a 3G price per pop of $ 3.1 (Rs 140) per operator. This is much lower than the global average of $ 29 (Rs 1300) per pop

5.     Implications of high spectrum costs

However, the industry observers are worried about the "winner's curse" of successful bidders paying too much for spectrum, which ultimately could decrease margins and dampen future investment. They fear the repeat of disaster that followed U.K.'s 3G spectrum auction in 2000. At that time, the U.K. Government raised US$ 34 billion for five 3G licenses; The UK operators paid too much and didn't have the infrastructure to get started. However  India's 3G operators will have a support system of compatible mobile devices and a range of applications at affordable prices, which the British operators didn't have a decade ago.

It is observed that some of the marginal players have gone beyond their bandwidth and reach. With the intense price competition steadily eating into mobile operators' earnings, it could force some of these  players to eventually succumb to a wave of consolidation.

In view of the high cost of spectrum and the investment required for 3G roll out, 3G is likely to be rolled out initially only in top 100 cities and it is estimated that even major operators will take about eight years to recover their 3G investment. These investments will be required for network roll out costs, incremental marketing and customer delivery costs, apart from the spectrum fee. The urban markets would account for 80% of the total 3G customer base in the next three years. 

In any event, India's 3G operators will need to contain the cost of debt they raise to finance the 3G investments.

6.      Market potential of 3G

As there is an upper threshold limit to the voice ARPU, the Indian operators are looking at higher revenues to come from data and other 3G value-added services. But to achieve this, mobile operators would need to incentivize content aggregators and other VAS players to create 3G applications. 

According to a recent report by a research firm, services such as video download, music downloads, Internet applications and search will see an upsurge. The VAS players are also optimistic about the huge growth in VAS when the 3G impact takes place. The average revenue per user (ARPU) is likely to go up. MTNL says it has seen a rise of 15% to 20% in its ARPU of Rs 140 after 3G services were launched

7.     Pricing of 3G services

3G mobile pricing will take into account the following factors. 

1.  Recovering the spectrum fee
2.  Recovering the high network roll out cost
3.  Cost of content development and pricing of VAS
4.  Prices offered by competition, currently by BSNL and MTNL
5.  Migration of existing high end 2G subscriber base to 3G

Now having paid huge fee for 3G spectrum, operators have to keep the tariff high. One operator estimated that In the case of Delhi or Mumbai, where the spectrum has been charged at Rs 3,300 crore each ($ 737 million), the monthly charges will be around Rs 900 ($ 20) just to recover license fees and input cost.

It is interesting to watch how BSNL and MTNL who are currently operating 3G services are going to charge their customers. At present they have kept the charges very low. Initially these companies launched the 3G service at higher tariff but gradually reduced it to increase customer base before private operators enter the market. However, they couldn't make much headway in subscriber additions despite tariff reduction.

MTNL now charges half a paise per second for a video call made to another MTNL subscriber. It would be 1 paise per second when made to other networks once they start.  For downloads the charges are 1 paise / sec. According to one observer,  private players are unlikely to charge more as the field is competitive.

As a first step, the telecom operators will move the high end 2G customers to 3G. The other likely categories of customers who will move to 3G are youth and heavy users of data. The introduction of MNP could see major churn of postpaid segment from non 3G operators.

8.  To Sum up

The Indian telecom industry is facing challenging times ahead. Intense competition, lower tariffs, lower margin and huge investment required for 3G roll out are some of these challenges. The industry observers are watching what is going to the strategy of these private operators and how and by when they are going to replicate their 2G success in 3G.

9.  Circle wise 3G operators

Metros

Delhi          - Airtel/Vodafone/Reliance

Mumbai      - Airtel/Vodafone/Reliance

Kolkotta     - Vodfone/Aircel/Reliance

 

A Category

Maharashtra      -  Vodfone/Idea/Tata

Gujarat              -  Vodafone/Idea/Tata

Andhra Pradesh - Airtel/Aircel/Idea

Karnataka          - Airtel/Aircel/Tata

Tamil Nadu         - Airtel/Vodafone/Aircel

B Category

Kerala                 - Aircel/Idea/Tata

Punjab                - Aircel/Reliance/Idea/Tata

Haryana              - Voadfone/Idea/Tata

UP East               - Vodafone/Aircel/Idea

UP West              - Airtel/Idea/Tata

Rajasthan           - Airtel/Relaince/Tata

Madhya Pradesh - Reliance/Idea/Tata

WB                      - Airtel/Vodafone/Aircel/Reliance

C Category

HP                      - Airetel/Reliance/Idea/STel

Bihar                  - Airtel/Aircel/Reliance/STel

Orissa                - Aircel/Reliance/STel

Assam               - Airtel/Aircel/Reliance

North East         - Airetel/Aircel/Reliance

J&K                    - Airtel/Aircel/Relince/Idea

 

About the Author

The author can be reached at vsmoni@hotmail.com. visit indiatelecomonline.com for more articles.

Indian $899.99 Indian

The Indian - $12.99 The Indian -

Roll of the Indian Medical Service 1615-1930 - Volume 1 $27.99 Volume 1 of 2.An excellent research tool which lists 6586 former IMS personnel, giving details of their services, honours and awards, campaign medal entitlements, etc. This very large book also contains interesting information concerning Indian Medical Colleges and places of instruction. A primary source, by the same author who wrote the preceding entry, containing a huge amount of biographical detail which could be obtained from other sources only with great difficulty.

Roll of the Indian Medical Service 1615-1930 - Volume 2 $27.49 Volume 2 of 2.An excellent research tool which lists 6586 former IMS personnel, giving details of their services, honours and awards, campaign medal entitlements, etc. This very large book also contains interesting information concerning Indian Medical Colleges and places of instruction. A primary source, by the same author who wrote the preceding entry, containing a huge amount of biographical detail which could be obtained from other sources only with great difficulty.

Indian Summer $14.99 Track Listing: 1. Life Less Ordinary, 2. What About Everything?, 3. Changeless, 4. This Is My Song!, 5. Grey Sky Eyes, 6. Raise the Roof, 7. Paloma, 8. One Prarie Outpost, 9. Let Your Troubles Roll By, 10. When I'm Alone, 11. Sea, The

Roll With It $8.49 Roll With It

Roll On $8.99 Roll On

Roll $8.99 Roll

Roll On Roll On $12.49 Roll On Roll On

Neon Indian $50 Neon Indian

Indian Boy $39.99 Indian Boy

Indian Girl $19.99 Indian Girl

Indian Babe $39.95 Indian Babe

Indian Brave $49.99 Indian Brave

Indian Dagger $7.99 Indian Dagger

Indian Maiden $39.99 Indian Maiden

Indian Princess $9.95 Indian Princess

Old Indian $10 Old Indian

Glow Indian $10 Glow Indian

Last Indian $10 Last Indian

Indian Violin $10 Indian Violin

Caughing Indian $10 Caughing Indian

Singing Indian $10 Singing Indian

Indian Gobbledigook $10 Indian Gobbledigook

Indian Outraged $10 Indian Outraged

Indian Comedian $10 Indian Comedian