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With the successful payout for the
spectrum and the availability of the service becoming imminent, a new
era awaits the 600 million telecommunications subscribers in India.
The new dawn will bring faster and more robust Internet, better access
to data services including e-commerce, social networking and
telemedicine. Also ready are mobile device manufacturers with a slew of
3G handsets; providers of hosting, billing and network management
services with expanded offerings; and content providers selling cell
phone ring tones, wallpapers and graphics.
But a lot of this revolution depends on the strategies of
telecommunications operators in India. Their price plans, coverage and
etc. will depend on whether people will migrate to 3G India. To
understand the progression of 3G, a detailed look at China, India's
Asian's counterpart, will provide a clearer picture.
The 'China' story
In its '3G migration strategies in China' report, Ovum predicts 3G
connections in China will increase to 69 million in 2010, due to
ambitious 3G subsidy plans by the three mobile operators. 3G
connections will then grow at a CAGR of 160% from 2010 to 2014. “We
expect 3G connections to make up around 40% of overall mobile
connections by 2014,” explains Tracey Chen, Senior Analyst at Ovum.
In particular, the report predicts that connections will move to 3G
faster in urban regions, leaving a higher proportion of 2G users in
rural areas. Ovum expects overall 2G connections to continue to grow
over the next three years, reaching 768 million in 2011. After that, 2G
will decline gradually due to migration to 3G.
“Operators will need to rethink their 3G data pricing to achieve their
ambitions. The three mobile operators should differentiate their
migration strategies by leveraging their respective capabilities,” said
Chen.
China
Mobile's primary imperatives are retaining lucrative 2G users,
capturing enterprise users through simple and low-priced mobile
services, and accelerating the maturity of the TD-SCDMA ecosystem. For
China Telecom, it is necessary to capture new mobile users by offering
fixed/mobile service bundling in both residential and enterprise
segments, and to pay more attention on launching low to medium prices
for CDMA2000 handsets to appeal to low-spending users. China Unicom is
aiming to attract high-end users by offering popular handsets,
favorable price packages and appealing loyalty plans, as well as using
WCDMA's scale to drive its handsets into the medium to low-end market.
Indian perspective
Before our home-grown operators can start to think of putting
strategies in place, there are a few bridges that they have to cross.
The stakes are getting bigger as India's mobile operators see their
ARPUs decline steadily under severe price competition. The monthly ARPU
was Rs 144 in the last quarter of 2009, down 12.4% from the previous
quarter, for the majority of the industry that uses the so-called GSM
technology, according to
data. The monthly ARPU fell 7% to Rs 82 in the same period for
operators using CDMA technology.
To recover their investments, the 3G spectrum winners will have to
focus on customers with high ARPUs, or the top 100 million subscribers
who want more data services. But to achieve that, mobile operators
would need to incentivize start-ups to create 3G applications. The
telecom operators need to create an ecosystem for it. They could do
that by outsourcing their billing function to application developers
and incentivize them by sharing up to 80% of the revenues with them.
With value added services, the current ARPU of Rs 100 could go up to Rs
300 or Rs 400.
Despite the hiccups, it is difficult not to be excited about the
potential for 3G in India. According to CRISIL Research, the operators
which have the existing 2G spectrum, and also have won bid for 3G,
would see a gradual improvement in their profitability margin. ARPU on
2G will improve once the subscribers start to move to 3G-based high
value services like data and rise in profitability will come from data
services over long term.
India's overall tele-density is at 53%. According to Pyramid Research,
the percentage will grow to cover 60% or 70% of the population before
any talk of market saturation. The research also forecasts India's
mobile penetration rate at 80% by 2014. With such numbers, surely 3G
will be a sure-fire success in India?
madhurak@cybermedia.co.in