[qi:___3g] Coming soon in India – world’s fastest growing mobile market – 3G services by the dozen. And what that means is a looming free-for-all in a market where competition is already fierce, prices super low, profits even lower and consumer is the ultimate winner.
Indian Department of Telecommunications (DOT) is getting all set to introduce about a dozen 3G licenses in some of the more densely populated regions including the South Indian states of Andhra Pradesh, Tamil Nadu (including Chennai), Karnataka, and Kerala. The information comes to us from our friends at Packetology, a Telecom research firm focused on the Indian market.
Other states getting 3G will include North Indian state of Haryana (right next door to Delhi and home to many outsourcing outfits), while ten licenses will be up for grabs in Kolkata (Calcutta) and Madhya Pradesh. In other large markets such as Mumbai (Bombay) and Delhi, the number of licenses available be far fewer because the available spectrum is in limited quantities. Delhi will have only four licenses while Bombay can accommodate upto eight licenses.
According to initial DOT 3G policy, each carrier was going to get 5 MHz of spectrum and only 25 MHz of total spectrum was available. However, more spectrum has become available, hence the boost in the number of players who can bid for the spectrum.
The availability of such a huge amount of spectrum and licenses makes India one of the few unique places to have aggressive and highly competitive 3G market from get go. Most countries have between 2-to-5 players. UK has five, US has four, Brazil has four and most Asian countries have two or three. With this kind of liberal licensing of spectrum, and the existing 2G operations in place, some regions might get over a dozen operators offering phone services.
Thanks to fierce competition in the 2G services, India continues to be one of the fastest growing mobile markets – about 300 million at last count – mostly because prices are seriously low. Still, the presence of such a high number of players makes you wonder if there will be anyone who will be able to make money. The looming WWF style competition is going to keep large US and European carriers out of the market, though there has been news that AT&T and Verizon are very keen on entering the Indian market.
The new 3G players in India will be looking to build their networks very cheaply in order to compete and offer ultra low prices to end consumers. This would mean despite a huge buildout, companies like Siemens, Nokia, Nortel, Alcatel-Lucent and others should forget about making any real profits. The Chinese vendors – Huawei and ZTE – can mop-up, because they are willing to sell at a loss in their bid to gain market share. Infonetics Research, a Campbell, Calif.-based market research firm recently said that China and India are two major drivers of telecom equipment sales.
So who wins in this? Qualcomm & Nokia! The spread of 3G technologies brings a lot of royalty money into Qualcomm’s coffers. Similarly, Nokia is the strongest mobile brand in India and has a 3G portfolio of phones to match.
The big question that looms large in my mind: by introducing so many players in the market, is DOT killing the golden goose? In other words if there are too many players – dozen odd – and no one is making money, it would (and could) lead to a situation where they start shutting down. It could in the end the competition would decline and might result in an increase in prices.
29 thoughts on “India Getting Ready For 3G Wireless Broadband”
This post warrants a second look. I have always gotten the impression that competition is good from your view point. Reading this, there is a mixed message — “is DOT killing the golden goose” — whats up with that? Low prices and proliferation of mobile services will benefit the consumer, the flow of information and hopefully the society at large.
May I suggest you pick a stance and stick with it. Trying to play it both ways does not suit you.
Om, nice post. Thanks for sharing.
Could you elaborate on the “killing the golden goose” piece please. Do you mean the gov’t is losing a source of future revenue by licensing all the spectrum in one shot? I get that.
If there was another meaning please tell.
“by introducing so many players in the market, is DOT killing the golden goose?”
I don’t think so . on the contrary DoT is trying very hard to ensure that there is enough competition in telecoms space here. Problem is that its such an capital intensive business that without very deep pocket its practically impossible to sustain.
Thanks to little smart phone penetration [ No Subsidized handset here ] Only avenue for Growth for telcos is in voice that too in bottom of pyramid [rural market] and here also much of the growth is in terms of customer acquisition not ARPU. So this is not a game for faint hearted .
all this chatter about recently issued additional license is a bit misleading . because eventually most of these guys will sell /lease their spectrum/ Nw to the Big Guy . market will eventually consolidate to 3 or 4 Telcos only .
with election round the corner it make sense to start making noise about 3G .it create a impression of progress and feel good . Plus its a good hook from a fund raising perspective as well .
Sorry about that. for some odd reason last paragraph got cut off. I updated it. I think that should answer your questions.
Any rough idea about dates?
I think you hit the nail on the head. How can so many players be profitable in such a low ARPU marker. I think there will be a shakeout sooner rather than leter. Old entrenched players like Bharti Airtel, Vodafone, Reliance etc will survive. They will also have an inherent advantage in faster rollouts because of existing network. The newer players will be bought by existing players only of they allow spectrum to be transferred. But that is also a regulatory hurdle to buyouts. Lets hope that they atleast have a 3G policy and start releasing spectrum for 3G. This policy change abouts have been going on for 2 long. Lets keep our fingers crossed for 3G in India
Om, where did you get the information about the “profits even lower” bit? If you will check, you will see that prices are low not because margins are, but because of extremely low capex and low spectrum prices. From http://www.telecomasia.net/article.php?id_article=7527, “…even as ARPU is low, EBITDA margins are high”
Prices are low, but what consumers get is even less. Ever wondered why simple reselling is disallowed, and value added Internet services such as VoIP so heavily restricted? Indian telecom regulations are friendly towards large private players and seek (almost solely) to uphold their margins. Cronyism is creating oligarchies in India, most of all in telecom. Please dont forget that the largest ministerial scams of the past decade all involve telecom ministers.
By joining the chorus of the Indian telecom establishment, you do a disservice to Indian consumers and to probity in India.
What makes you think no one is making money? Four of the top 6 players are listed (Vodafone in the UK) and we know they are making seriously good money (EBITDAs in excess of 40%).
@bunty you are very write about the profits. Om the EBITDA margins of the big operators are very high. Airtel has quarterly profits of almost half billion dollars with ARPUS of less than $9. Their EBIDTA margins are also very high. But they have the first mover advantage. Infact BSNL (government owned) and Airtel are the only 2 operators with licenses in all circles. Even Vodafone, Idea and Reliance have good margins. Maybe in Dollar terms their profits dont match up to Verizon / AT&T but they have solid margins and huge growth also.
Shyam Telecom won a license that covers almost all states. They are believed to be building a CDMA infrastructure. As you may know CDMA is the most efficient use of spectrum. I will not be surprised if AT&T or France Telecom buys Bharti. If that happens during Randall’s reign – it will be syonara for him
Hey Steve…are you listening…..pleeeeeeeease launch iPhone 3G ASAP.
India has atleast 6 deep pocket players of which atleast 4 are making big profits. If any comp goes in trouble there is always M&A. So I believe in long run having 10 players will be a smart move.
Anyone know if MVNOs are being allowed anytime soon? Anyone think it would be good in India?
Explain why having 10 players is going to be a smart move?
@Bunty, your comment “the chorus of the Indian telecom establishment, you do a disservice to Indian consumers and to probity in India.” Dude what the hell are you talking about? If anything I am challenging the establishment going too far. Six players might be nice – not 12-or-15.
A MVNO such as Voce in the US could actually work in India – Voce offered high end phones, and concierge services at prestige pricing (this strategy later changed and they then went bankrupt) – as labor is dirt cheap in India the MVNO could become a one-stop-shop for all services and offer users phones other than the typical Nokias that now flood the market and hence give users a unique experience…
Hey Sar, iPhone 3G is going to be launched in India on the 22nd August 2008 and would cost Rs.24000($570).
Om, if 3G happens in India by this year end, iPhone would become a runaway hit all over India.
We all have been waiting for 3G to happen this year, provided DOT allows it.
The only MVNO that would work in India is a prepaid one. Voce would be a total disaster. There is cheap labor all over the world (e.g. LATAM, China), yet none of these so-called premium MVNOs have launched successfully. If you’re a wealthy Indian, you’d want the best technology, and that is most definitely an iPhone tethered to a 3G network. A prepaid MVNO geared towards the youth market would make a lot of sense.
CBE: prepaid is how Virgin began in the UK. And the youth market is what they are after in partnership with Tata. But curiously it is not labelled as an MVNO apparently, in India.
yep,virgin is the ‘youth brand’ of TTSL apparently (calls its ‘brand franchise’).
MVNO wasnt allowed or regulations were not clear enough.
@Leo: can’t understand why TTSL would pay Virgin for ‘brand franchise’; ought to be the reverse! Virgin has just around 4 million users in the UK.
I don’t see why there is so much uproar about this issue. Being an IT hub, it is quite obvious that India needs a 3g spectrum desperately, any delays being nothing less than detrimental. TO OM, about a year back, a report mentioned that the Govt was in a fix over the wimax vs 3g issue, which was the sole reason of the delay. Your views on this issue and Wimax as an alternative please.
I bought an apple iPhone-3g recently. But I would like to share – without 3G spectrum available for users in India nothing much can be used out of it specially in case of using the self tracking system and nevigation.
New I saw that India is all set to launch the 3G spectrum through various market players. Again it is a matter of worry that how this service will be priced specially in a case when market players are depicted to be 4 or 5 in Delhi/Bombay or in any particular circle.
Sorry about my english. I read your comment and need some help about getting internet during my trip in India (from décember, Bombay and south, goa, kerala..).
I have a laptop 4 years old with wifi inside. Means that i can browse internet with wireless connexion from tourim offices, McDonalds for example. But what about in India ? How should i do in order to surf the internet overthere ? I thought about a kind of a 3g network with a usb key i would buy there, but i am not too much into latest technologies…So if you have any ideas, it would be kind from you if you could send me some links.
Best regard, Olivier.