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10 years ago, UK raised $34 billion for the sale of 5 3G licenses. Yes – 10 years ago. In 2010, India raised Rs.67,710 crore (approx $15 billion) by auctioning 3G spectrum in 22 circles. In the months, since the auction some have labelled 3G – ‘A winner’s curse’ citing UK’s example from a decade ago, where after paying hefty amounts for licenses, there wasn’t enough money left over to invest into infrastructure. But that was 10 years ago. Today, Indian network operators can upgrade their infrastructure, and already have a number of 3G enabled handsets and SIMs out in the wild. It’s all Good? Sections of the Print Media have been reporting that there is plenty of reason to be optimistic about the impending arrival of 3G. According to an article in ET – “ Telcos hit a goldmine with 3G services ” earlier this week, the number of mobile internet users had risen to 240 million by September. Thats 10 times the number of internet connections. To elaborate further, India is estimated to have 450 million users (650 million cellular connections). 6% have access Internet access through a computer compared to 65% who have access to mobile phones. Ravi Bapna, a professor of information and decision sciences at the University of Minnesota’s Carlson School of Management, also a professor at ISB stated the case quite succinctly, in an article in the India Knowledge@Wharton Series. According to him, if a big telecom company (gives the example of Airtel) is able to bring even 1% of its subscriber base up to an ARPU and Rs.1000 in the first year and increase that penetration by half a percentage point every year. I could break even in the next 6-8 years. And while the common consensus is that for 3G to succeed, it will have to focus on India’s top subrscribers(say 100 million), we also need to consider that a lot of telcos do not have enough subscribers in that bracket to sustain operations for too long. Or is it? Network operators have to be optimistic about 3G. And I say have because many of them cant afford not to. To give you an idea of the cost they incurred – Airtel, Vodafone and Reliance paid Rs. 3,317 crore and Rs. 3,247 crore for Delhi and Mumbai. Which are almost 10 times higher than the Rs.320 crore base that had been set by the Indian Government. And frankly, there are plenty of reasons to be both optimistic and skeptical depending on which side of the fence you choose to stay on. The same ET article also quoted an unnamed executive from a ‘top telecom company’ who revealed some interesting numbers. Only 10% of revenue is from data. And text messages constitute 50% of this. A fact that many reports have neglected to mention. The general tendency is to assume that all mobile data usage is to do with mobile internet. Of course, there is also the very legitimate concern about India’s low ARPU(Average Revenue Per User). The monthly ARPU for the last quarter of 2009 was Rs.144 for GSM operators and Rs.82 for CDMA operators. Both displaying a downward trend over previous quarters. The Ecosystem There are some other industries whose fortunes are closely tied to that of the telecom sector- an ecosystem of sorts. A report from Evalueserve estimates that India will have 395 million 3G handsets by 2013. Good news no doubt for content providers like mobile game makers. And maybe other rich content providers. But the people who make offer ringtones, wallpapers etc arent quite as gung-ho about 3G. If anything, increased internet surfing could mean less users depend on them for content. The Bottom of the Pyramid Throw in the fact that a lot of operators are running at over 95% of their capacity. Acquiring new spectrum is essential for growth. Since there is no 2G spectrum up for grabs. They have to go after 3G, which could perhaps also explain the astronomical 3G auction bids. They will without doubt be looking at moving users from the higher ARPU range to 3G spectrum. To free up space for growth at the bottom of the pyramid. The Inclusive Growth Revolution The other common belief is that 3G will spur the mobile internet revolution which will go a long way in bringing inclusive growth to underdeveloped areas. Just one problem there, underdeveloped regions have to equipped with the 3G capable network infrastructure for there to be any revolution. And our telecom policy is not one based on ‘Network Neutrality’ this job is largely down to the operators. But many expect them to go slow on this front until they recover some of the costs they have already incurred. Besides, how many users in rural/underdeveloped areas are likely to take to high end 3G services. Of course, throw in the fact that there is likely to be more room in 2G spectrum once 3G is rolled out. These areas could be the bottom of pyramid that telcos will keep an eye on. Until they see growth, they cannot afford high end 3G services, while others say that high end connectivity is vital to their growth. Quite a chicken and egg situation! To 3G or not 3G? The answer is obvious – To 3G. We’re 4 years off track already. But will it really deliver all that it promises? Unfortunately, because we’ve been waiting for so long. We’re looking at 3G as an end. 3G/high speed connectivity is just a means to an end! The sooner we realize that and start putting together the remaining pieces in the puzzle of India’s Growth Story – the sooner we’ll get there. Which side of the fence are you on? Or are you on the fence? Let us know! Looking For A Social Media Agency?? TRY US! Related Posts Some Telcos Favour Delinking While Some Oppose – To Link, Or Not To Link? Tata DoCoMo Unveils 3G Services – Free For A Week! October Telecom Stats: Subscriber Base At 52.56 Crores, Telecom Density Reaches 44.87 Percent … And Thus Deflates The Great Indian Telecom Bubble! 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