3G in India

Indian Telecom Minister A Raja

India’s 550 million mobile customers have been waiting to enjoy live streaming videos, video con-ferencing, enterprise applications and mobile TV – all of which come with high speed.

Even without the advent of 3G, Indians experienced the mobile Internet, but without good quality and less transparent pricing. Mobile Internet – whether it’s on Vodafone Connect or Tata Teleservices’ Photon – have not reached expectations. It so far ensured connectivity with a price. It ensured poor quality, unopened videos, bill shocks to users.

Will 3G be different?

3Goperators manage to earn decent revenue in developing countries. But India may prove to be different. Nevertheless, Indians are going to spend money to experience 3G– the question is, how much?

The game plan of operators reflects the fact there is an appetite among Indians to download their Bollywood icons, cricket stars, and share the downloaded content with their loved ones. That’s why all leading operators in India put their bids at exorbitant prices. There’s another school of thought that suggests these operators coughed up money to spruce up valuations at stock exchanges. Our news hungry stock market responded on each auction days. Beyond strategies to revive the dwindling ARPUs, the open fight is to correct market valuations.

Powered by the mightier

India’s 3Gbid auction has drawn much interest among investors and leading telecom vendors. India, one of the largest playing grounds for leading telecommunications companies, is now getting ready for the 3Gservices launch. The service is expected to be launched in 2010-11.

Following the 3Gauctions, all operators including the state-run BSNL and MTNL paid spectrum fee to the government. Thanks to the transparent way the telecom ministry managed the auction, there was no litigation to thwart the auction process.

Bharti Airtel paid the highest Rs 12,295 crore for 3Gspectrum in 13 circles, followed by Vodafone (Rs 11,618 crore). State-owned BSNL and MTNL also paid Rs 10,187 crore and Rs 6,564 crore respectively for the radio waves. Anil Ambani-run Reliance Communications deposited Rs 8,585 crore. All the successful bidders will get spectrum in September this year after it gets vacated by the defense ministry.

Interestingly, all operators funded their 3Gventures. Vodafone is said to have secured long term loan from the State Bank of India to the tune of Rs 10,000 crore. Bharti Airtel is using their cash of Rs 8,000 crore. They all look forward for a huge profit in order to compensate the amount they invested. What will be the main mechanism to compensate the spectrum fee?

Bill shocks

3Gphone services allow users to download data, current videos on their mobile phone with just one touch.

Will 3G offer bill shocks to customers?

It will depend on how operators bill customers. A huge amount is being invested to get the 3Glicense. Operators will have different price points. 3Gin India will re-define the pricing in India. Operators will address both low-end and high-end customers.

Bharti Airtel, Reliance Communications and Aircel won licenses for about thirteen circles. “We are expecting at least 25 percent of the post-paid customers to shift to us immediately after we offer service,” said one of the bidders who won on two circles.

Promoting to 3Gwill be a pricy affair for all the telephone operators. When we are not sure that India will get 3G, the technology has moved to 4G. It is able to provide IP solutions in data, voice, and multimedia at anytime, anywhere at higher data rates compared to the previous generations. In order to improve the operators, they need to allocate the spectrum for 3G. The ultimate cost of distributing 3Gnetworks might discourage the operators from rolling it out to the existing customer base, because some sections may not have immediate access to 3G. The cost of distributing the networks will impact the pricing schemes for service options offered. But the mobile users in India will feel a better experience after 3Gturns to reality.

Around the globe

The wideband code division multiple access (WCDMA) technology reposed on the standards, wide range of multimedia possibilities, and possible economies came to support this technology under 3Gspectrum. There are nearly about 60 3Gnetworks all around the world. In the U.S., Europe, and in Asia the telecommunication firms use WCDMA techniques.

Who won what?

Bharti Airtel has successfully raised over certain states such as Delhi, Mumbai, Karnataka, Andhra Pradesh, and Tamilnadu, Uttar Pradesh, Rajasthan, West Bengal, Himachal Pradesh, Bihar, Andhra Pradesh, North East and Jammu & Kashmir, and Assam, where as Aircel has covered south India along with East region of India.

Aircel, another major operator in India, bagged a 3Glicense for its strong presence in the south and east of the country.

“We now cover the whole of Southern and Eastern India where we have our strong presence and in J&K, Punjab & UP (East) as well. With this we will be able to offer seamless connectivity and meaningful products and services to our consumers which will eventually change their life and open a world of possibilities,” according to Gurdeep Singh, COO, Aircel.

Idea Cellular has grabbed 11 circles at a lower price compared to the other five big service suppliers in India. It won eleven circles with a cost of Rs 5769 crore. The 2.1 GHz (3GSpectrum) footprint of Idea Cellular covers a very high proportion (81 percent) of Idea’s total national revenues. Idea believes it’s bidding strategy and the Auction results significantly enhance Idea’s competitive position in the market.

Reliance Communications has pocketed 3Gspectrum in thirteen circles which includes Delhi and Mumbai. The company plans to strongly leverage its media, gaming, cinema and broadcasting capabilities to offer its customers a unique 3Gexperience.

Tata Teleservices has dropped Delhi, Mumbai and taken three in category A and six in category B circles. In a statement TTSL said, “The company management is very delighted with the outcome of the 3Gspectrum auction, especially as we have bagged the best telecom Circles from the perspective of their cumulative market potential, particularly so when we take into consideration overall spending. Significantly, we have covered the entire geography of prosperous India on the Western side, while there is no entanglement with Category ‘C’ circles– therefore, this has proven to be a most capex-optimized bidding for us. Tata Teleservices did pursue the major metros in the country, but decided to drop out of the bidding when the sheer outlay made these a winner’s curse.”

Speed to make the difference

3Gis the next big step in mobile communications in India. The higher speed that 3Gprovides will enable users to download data more quickly. Compared with an average speed of 70 kbps offered by the current Global System for Mobiles (GSM) networks, 3Gwill enable speed up to 1 Mbps. Of course, it will improve the quality of voice calls. To get the service, the user needs a 3G-enabled phone, which currently costs about Rs 6, 000. There are two 3Gtechnologies that are being deployed – Evolution Data Optimized (EVDO) and High- Speed Download Packet Access (HSDPA). While CDMA operators offer EVDO-based 3Gservices, GSM operators will roll out HSPA. One of the noticeable advantages of this technology is that you can watch television on your mobile and have video calls with any other person who has the same 3Gtechnology. It also includes geo positioning. Multiplayer gaming, for the young subscribers, is also supported.

Lack of spectrum in India forced operators to bid at huge prices. The impact of the 3Gbids will be felt on the industry for years to come. The industry is yet to recover from the price war that culminated in the one paisa per second plan. As a result, the industry has seen little revenue growth over the past six years.

However, the high bidding for 3Ghas not affected the bidding for BWA spectrum. Six of the 3Gbidders are also in the race for BWA spectrum. The same operators will be aggressive in the BWA auctions as BWA complements their 3Gstrategies. The BWA spectrum auction is set to exceed the target of the government.

The private operators will face some problems, while the real losers will be state-owned operators BSNL and MTNL. Private operators always have the advantage of grabbing more customers than lackadaisical state-owned companies. MTNL will have to pay Rs 6,564 crore for 3Gspectrum in Delhi and Mumbai alone. BSNL too will have to pay Rs 10,000 crore for spectrum in the other 20 circles, matching the high target set by the private players.

It will be a win-win situation for both customers and operators. Both will win the race if the operators price according to the need of the customer.