3G in India :
The Current Scenario :
Telecom companies have shelled out huge amount of money for getting 3G and BWA
spectrum.The company of the stature of Bharti Airtel didn’t go for pan india license because the
prices rose beyond a reasonable level.Bharti Airtel won 3G license in 13 circles and paid
Rs.12295.46 crore as spectrum fee.Vodafone got license in 9 circles and paid Rs.11617
crore,while Reliance paid Rs.8583 crore and won license in 13 circles.These three companies
were top 3 spenders for 3G spectrum. For example , In regions like Delhi and Mumbai, The
amount for spectrum that has been charged is close to Rs 3,500 crore each .So to recover license
fees and input cost, it works out to be Rs 700-900 per month(Especially in Metros),”. So 3G
services will not come cheap ,as they have paid so dearly ,now everyone was speculating that 3G
services would be costly for consumers.
An Excellent Opportunity :
According to the Federation of Indian Chambers of Commerce and Industry (FICCI), in India,
the 3G subscriber base is expected to hit 90 million by 2013, accounting for 12% of the overall
wireless user base. By 2013, 3G service revenues are expected to generate $15.8 billion,
accounting for a share of 46% in overall wireless service revenue. Due to the 52% contribution
made by the replacement market, annual sales of 3G devices are projected to reach 81.3 million
by 2013. Correspondingly, the annual 3G device revenues are expected to increase to $11.2
billion, with 59% coming from high-end handsets. There will also be an increase in the share of
non-voice services, including data card access, and short messaging service. The Average
Revenue Per User (ARPU) from these services will rise from the present 9% to nearly 23%.
First Mover Advantage :
BSNL & MTNL have already launched their 3G services in many circles and probably they had
not expected such huge payout for license or they might have expected waiver of spectrum fee
on social obligation ground.BSNL has paid Rs.10,186 crore and MTNL Rs.6564 crore for two
metros.So together they have paid more than the highest payer amongst Private operators ,for
pan India license.
BSNL’s Pricing Strategy :
Oblivious of the costly spectrum,these two companies have kept 3G tariff quite low .For
example in Mumbai & Delhi and MTNL customer can make Video calls at voice call rates of 20
paise/min (own n/w),50paise/min(other local),and STD at 75p/min.Data Charges are as low as
Rs.1/MB.Mobile Tv charges are Rs.150/month for a bouquet of 35 channels without any
additional data download charges.BSNL too is charging 30p/min for local and 70 paise/min for
national video calls as promotionl offer.Data charges too are Re.1/MB.Initial SIM cost too is
very low.For example BSNL 3G SIM is available at the cost of Rs.59 and that of MTNL as low
as Rs.40.Other 3G VAS for which premium rates apply ,doesn’t have much uptake.So overall
BSNL & MTNL are offering 3G services at a very cheaper rate.Entry cost as well as call & Data
rates are very low. For MTNL, the ARPU from voice revenue is presently around Rs 200 and
with 3G, they are expecting this to increase. The broadband usage on mobile and other 3G VAS
like Mobile TV is expected to fatten the ARPU.
Some Innovative strategy by MTNL and BSNL :
Initially these companies launched the service at higher tariff but gradually reduced it to increase
customer base before private operators enter in fray.But the truth is they couldn’t make much
headway despite lower tariffs.So they are adopting number of methods as follows to gain
customer base,
1. In order for the customers to know and get the feel of 3G, MTNL is initially offering a
trial pack for 15 days. The customer can get a first hand feel of exactly what 3G is all
about.
2. For its 3G network, MTNL has already migrated to a NGN IP based core network for
mobile. Initially, it will have the capacity to handle 7,50,000 3G subscribers. Later, it will
install a 700+ Node-B (3G BTS) to encompass Mumbai/Thane/Navi Mumbai.
Tata Docomo stands second on the race :
Tata Docomo,which has introduced 3G services in private telecom industry, is challenging its
competitors by implementing revolutionary ‘per second’ billing method of 2G services to 3G
services also. Remaining telecom operators are also going to introduce 3G services soon, there
would be an interesting tariff prices competition in the market.
Tata Docomo starts the rivalry of tariff prices by providing 3G voice calls as cheap as 0.66 paisa
per second. According to this plan, it would cost Rs. 0.40 per minute for 3G calls while it is
Rs.0.60 per minute for 2G calling. But it depends on the package chosen. Because Tata Docomo
is offering per second plan, Bharti Airtel, Vodafone and other private operators would also be
following per second billing.With these attractive packages, 3G services would also be getting
much popularity.
According to the present tariff offered by Tata Docomo, user has to pay at least Rs. 500 monthly.
In the next few months, with the commencement of services from other operators, this amount
would come down. Lowering the tariffs due to competition in the market is now itself showing
much impact on the income of telecom operators. For the purpose of getting 3G licenses,
companies have to spend more money in bidding. In this scenario, it would be a real challenge
for telecom operators while this tariff competition would be a festival for customers.
Other Private operators stand and its effect on BSNL / MTNLs and Tata Docomo Pricing
Strategy:
The other private operators like Airtel and Vodofone are going to keep 3G service costly(so as to
recover their initial cost) and incumbents(BSNL and Tata Docomo) don’t increase the tariff then
they should be able to attract more customers .But the problem is that the Target customers for
a service like 3G prefers young ,energetic, brands like Airtel,Vodafone and Tata Docomo.These
customers readily pay a premium for quality service and customer care .BSNL & MTNL do not
score well on customer care and quick service delivery aspects.But if incumbents( don’t increase
their tariff then they would be loosing money in the same market place where others would be
making money.So it would be interesting to watch who does what.Will private operators reduce
their tariff in view of incumbents low tariff or incumbents go for tariff increase.But in this
scenario,Docomo have a great opportunity to extend its customers and also its market share.
Now with advent of ‘MNP(Mobile Number Portability),it would to easy for the customer to shift
from one service provider to the other.
Other Opportunities that are lying within 3G:
1.The telco view is that 3G will permit them to offer data related services and also some
innovative video VAS services; this, they expect, will give millions of people access to
broadband Internet in a short span of time. The demand for USB wireless modems and all sorts
of 3G devices will be considerable and this will have a positive impact on the domestic
economy.
2.This is also an opportunity for Indian software companies to join hands with service providers
to develop applications that will meet the needs of the Indian mobile user. At a later stage, these
could be rolled out into other emerging markets.
