As part of Developing Telecoms’ coverage of 3G in India we publish a press release from Wireless Intelligence covering problems confronting Indian 3G. Such challenges are the RoI timetable, restrictions on the 3G consumer marketplace, late roll-out and network sharing to cut costs and thereby survive.
The high cost of acquiring Indian 3G spectrum in the country's forthcoming auctions will mean that many mobile operators will not see a return on their investment for at least three years, according to a new Wireless Intelligence study. The study also found that 3G data services are likely to remain a niche offering in the short term targeting mainly affluent consumers and business users in the large cities of Chennai, Delhi, Kolkata and Mumbai (the so-called “Metros”).
The new Wireless Intelligence study - Indian 3G Market Assessment - forecasts that the total 3G market in India will reach 60 million connections by 2013.. It predicts that leading GSM operators such as Bharti Airtel, Vodafone Essar, Idea Cellular and Reliance Group will acquire 2.1GHz 3G spectrum in the January 2010 auction and roll-out their first 3G services in fourth-quarter 2010. The two state-owned operators BSNL and MTNL have already received spectrum ahead of the private auction and are currently rolling-out 3G services.
However, the recent decision by the Indian government to almost double the reserve price for 2.1GHz licences to approximately US$750 million could affect operators' ability to extend their 3G networks to poorer rural areas. Joss Gillet, Senior Analyst, Wireless Intelligence, comments, "3G operators will be expected to bridge the Digital Divide and contribute to India's economic and social growth but market conditions are difficult and telecoms players will have to overcome the challenges presented by a dominant and price-sensitive prepaid market in which growth is driven by demand in unconnected rural areas...To trigger the fast adoption of high-speed network services, operators will have to focus on two key factors: affordability and availability. However, high licence fees and the high cost of deploying 3G networks across the country means that RoI is not likely to happen until operators have tapped the mid-term market potential, which we estimate will take at least three years."
One of the most important success factors for 3G in India will be network sharing between operators, the study says. Many current Indian GSM networks already deploy network sharing as a key strategy, especially to overcome long-term cost management issues, one of the best examples being the Indus Tower initiative between Bharti Airtel, Vodafone Essar and Idea Cellular. "We expect such initiatives to fuel the speed of adoption of 3G networks in rural areas and help operators to manage capital and operating expenditure," said Joss Gillet.
The study also points to the slow adoption of BSNL and MTNL's 3G offerings to date as evidence that operators could struggle to market 3G services and devices at affordable price points. The two operators are forecast to reach a combined 3G connections base of just 280,000 by the end of 2009. Joss Gillett again: "Even though mobile operators will focus on entry-level WCDMA devices below US$150, notably via partnerships with Original Design Manufacturers (ODMs), we expect them to target the high-end consumer segments at launch to counter inevitable collapsing margins."
This early focus on affluent urban customers will mean the Metros will initially drive 3G growth but will be outpaced by demand in the A and B Circles towards the end of next year (see graph).
Wireless Intelligence predicts that during the initial phase of development, 2.1GHz networks will mainly be used to improve voice quality and reduce the existing congestion in the country's 2G networks. 3G data services are expected to remain a niche service in the short term, targeting specific market segments such as business users.
* Wireless Intelligence is a reference source for global cellular operators data and analysis. It has a subscriber base of over 550 of the world's mobile operators, equipment manufacturers, software vendors, content suppliers and consultancies. Its service covers all cellular technologies and includes 2,215,000 individual data points spanning 800 mobile network operators in over 200 countries.