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Journalism of Courage
Although telecom operators have collectively coughed up Rs 67,719 crore for the recently concluded 3G auctions,much of this is justified due to the immense opportunity that 3G services will throw up. With less than 5 of 11second generation (2G) operators winning 3G licences in each circle,successful players can target high-end subscribers of competing operators and a potential market share opportunity worth $3-4 billion (Rs 18,000 crore approximately).
India,the second largest telecom market globally,already has 149 million mobile data users,50-60 million circulating 3G handsets and an abysmal 1% broadband penetration,which adds to the opportunity for these operators. Further,the successful 2G plus 3G bidders will be able to use 3G to ease network congestion,relieving pressure on voice capacity and also offer new and differentiated applications,paving the way for incremental revenue.
Naveen Mishra,lead analyst,telecoms research,IDC India,said,Allocation of 3G spectrum will help Indian telcos launch new data services and open up revenue streams. Indian consumers would be able to access new age services such as video-on-demand,live TV etc. India being a young nation with an estimated 50% of the population under the age of 35 years,is expected to see greater demand for content centered around sports and entertainment.
Incremental ARPU (average revenue per user) benefits from 3G are aggressive,say analysts. Even after assuming such aggressive 3G ARPU estimates,the 3G benefits (revenues and capex savings) outgrow 3G costs from fourth year onwards. The key benefits from 3G will be due to lower 2G capex rather than a material increase in revenues,at least for the first five years,said an analyst from a foreign bank.
Sector experts also believe that 3G and BWA auctions can provide spectrum to operators to provide wireless Internet,and has the potential to ignite a broadband revolution in India. We believe,with advent of wireless access,the current 7.8 million broadband subscriber base can go up to 30-40 million in the next four years, said Satyender Khatter from Elara Capital.
However,low and declining ARPU base in India could be a limitation but with 578 million 2G subscribers,with a diverse mix and even a limited migration will result in a significant 3G user base.
Indian telecom sector is not going to 3G to make money in short-term. The operators bidding for the same also would not start monetising it through the 3G-based applications. India is still largely driven by voice and will be slowly moving towards data. The business case for operators will still lie in the rural expansion and mass acquisition of subscribers, said Romal Shetty,analyst,KPMG.
Zinnovs Perspective
In addition to the spectrum fee for winning the auction,the winners will have to further shell out significant sums for rolling out the 3G services.
While 3G will allow subscribers to download high speed data and stream video on mobiles,the providers are expecting to increase the ARPU with the 3G enabled services. The monthly ARPU has continued to slip down steeply for the last 6 quarters and is currently at INR 128 per month.
In due course in time,3G would also enable better citizen services specially in rural areas and mobile would be increasingly used towards rural education,transactions,healthcare,farming etc.
Qualcomm on 3G:
“We congratulate Bharti,Vodafone,Reliance,Tata,Idea,Aircel,and STel for their well-deserved wins in 3G auctions and look forward to collaborating with them to bring world-class voice and mobile broadband experience to Indian consumers. Qualcomm is itself pleased with the opportunity to now address the entire Indian wireless market with its innovations in 3G and beyond,and is committed to making 3G a mass market experience for all Indian consumers,” said Kanwalinder Singh,president Qualcomm India and South Asia.
