Cellular Rollout–The Crucial Moment

3G will offer immense revenue opportunities to mobile operators and

service providers in India. But they need to develop the correct strategy and

business plans.

Over

the past few decades, the speed of technological advancements in the telecom

industry world over has continued to increase at an amazing pace. And cellular

is not an exception, with a host of technologies waiting to be tested and

deployed in or along existing networks. The biggest challenge today to cellular

operators is how to upgrade existing networks to a common network infrastructure

that can seamlessly handle voice and data traffic and still be able to help

operators/service providers to maximize their revenue from their current range

of services and existing customer base. The final aim is to migrate to an

"anytime, anywhere and anyplace" 3G network, which will be able to

meet the demands of narrowband voice services, wideband real-time multimedia

services, high-speed packet data services including browsing of

Internet/intranet, and information delivery (news, weather, traffic, finance)

via push techniques.

First Generation Convergence

Universal

Mobile Telecom System (UMTS) is one of the systems selected by International

Telecommunication Union (ITU) as part of IMT2000 process to define "Third

Generation Mobile System (3G)" for use worldwide. UMTS is the First

Generation convergence. Mobile operators must grasp its significance, as it will

fundamentally change the way they operate. Those who adopt stand to benefit and

reap great rewards. The capacity of 3G promises an explosion in the availability

of applications (see figure 1) and subsequently lead to tremendous increase in

the revenue stream which is the bottom line for mobile operators.

Thus, the ultimate goal is to give a new focus to the

development of mobile systems that will offer voice and mobile multimedia to the

mass market. However, it is not feasible for Indian operators/service providers

simply to concentrate their network evolution on the provision of data-based

Internet Protocol (IP) services since majority of their traffic and the revenue

comes from voice services. This will continue to be the case for many years to

come. Consequently, they should adopt a strategy, which will not only allow them

to maximize their revenue from their current range of existing services, but

also help them migrate towards futuristic network growth, coupled with full

network and service convergence, which will lead to UMTS concept (See Figure 2).

The migration strategy to 3G assumes importance for Indian operators because new

services and applications will enable them to provide support to society and

community in ways not viable to fixed operators. Such a socially responsible

approach also makes commercial sense, not only by reducing churn and enhancing

an operator’s image and status, but also by creating a competitive advantage

and increasing share holders’ value.

New Business Plans

Indian

cellular operators/service providers have reacted positively to these

technological changes. Financing new rollouts would be a daunting effort keeping

in view that the money invested by them in the telecom infrastructure is yet to

receive due appreciation from domestic/foreign investors.

Strategic decisions are often justified by creative business

plans that are based on optimistic penetration and migration levels. The issue

for operators, content providers, suppliers and partners is whether these

business plans are viable and based on sound assumptions or do they merely

reflect the hype of experience based on the phenomenal growth in 2G systems?

Balancing political and commercial priorities within a sensible regulatory

framework is an essential starting point. Enabling global circulation of

terminals and ensuring appropriate allocation and prudent management of spectrum

are necessary conditions for provision of seamless service.

3G mobile systems require even higher level of investment

than 2G systems. Financing 3G mobile involves very high investments over

relatively long periods in an area characterized by extreme competition and

considerable uncertainty. But is 3G significantly different from other

businesses? What are the available financing options for 3G? How can the 3G

opportunity be viewed from the perspective of investment bankers, sources of

private equity and other investors? Mobile operators have to find an answer to

all these questions in a reasonable time frame. It is certain that new business

opportunities and revenue sources will arise from the 3G-value chain. How the

operators take advantage of advertising and sponsorship revenues, service and

transaction fee is up to them.

With the opening up of Domestic Long Distance (DLD) services

and dismantling of the DTS monopoly, the quality and bandwidth issues will get

resolved in due course of time. This will give a tremendous boost to the 3G

services and related applications. Indian operators/service providers need to

gear up for this new opportunity in order to be lead players in their area of

business.

VP Singh is vice president, Engineering & Operations, Birla AT&T

Communications