Wow…the 3G auction in India has raised a whopping $11 billion by selling licenses to some of the country’s major telecom carriers including Bharti Airtel, Reliance Communications and Aircel. That is an astounding amount of money considering the low tariffs in the Indian market, where voice minutes and SMS messages are ridiculously cheap and most telecom carriers are struggling to keep their profit streams intact.
Bharti, for example, is in the process of buying the assets of Zain in 15 African countries in order to diversify from the hyper-competitive Indian market. Vodafone (s vod), which entered the Indian market with much fanfare a few years ago, is taking it on the chin these days. In its most recent quarter, the company said it was taking an impairment charge of around 2.3 billion pounds ($3.31 billion) related to its operations there.
There is no reason to believe that things will be any different in the 3G world. The 3G buildout isn’t going to be cheap and if the tariffs remain low, expect things to be tough for Indian telecoms. Given the history of telecom regulation in the country, I wouldn’t be surprised if the Telecom Regulatory Authority of India and/or the Department of Telecommunications continued to make short-term, politically popular moves that will kill the golden goose. Bharti Airtel, for instance, spent $2.6 billion on the 3G spectrum — good luck recouping that after a big network buildout.
While it might seem like an opportunity for hardware providers like Ericsson (s eric), I think the big winners of India’s 3G buildout are going to be the three smartphone giants: Apple (s aapl), Research in Motion (s rimm) and Google (s goog) with its Android ecosystem.
In fact, if Google was smart, it would be shifting much of its mobile resources to India right now. Not only could it use the demand for cheap 3G smartphones to its advantage, it could also jump-start its tablet ambitions by building low-cost devices coupled with affordable 3G Internet plans.
Similarly, Apple could offer a lower-priced version of the iPhone 3G/3GS in the Indian market — even as it introduces the higher-priced iPhone 4 in it core markets such as the U.S., Europe and Japan.