World Business

Inordinate delays in rolling out the utility have frustrated telecom operators and consumers in this tech-savvy nation

by Swati Prasad

Watch original video:

While the world awaits the much-anticipated global launch of Apple’s 3G-enabled iPhone on Jul. 11–and at a later launch out note the time of in some Asian markets–the information brings little significance for the tech-savvy in India, which has yet to roll out 3G networks.

There have been inordinate delays in the launch of 3G services in India. Last year, the unrefined’s telecom and defense ministries reached an irregular agreement under that the latter was to vacate about 25 MHz of 3G spectrum to meet the immediate requirements of telecom operators.

However, the spectrum issue “is far from resolved”, Manesh Patel, sharer, telecom advisory services at Ernst & Young India, told ZDNet Asia in a phone interview.

Minister of State for Defense M. M. Pallam Raju said at a news conference, held recently in Delhi, that the National Security Advisor (NSA) is popularly examining all recommendations jointly made by the defense, conference and information technology ministries under the jurisdiction releasing the radio frequencies, to make sure general security is not compromised.

Patel before-mentioned: “It’s a highly politicized issue. Even after the spectrum is vacated, there are various other issues pertaining to the formatting and execution of auctions that neediness to be looked into.”

He renowned that the deployment of 3G services could still be a year or two away. “Elections are right in 2009, and 3G may not be a priority as antidote to the policymakers,” Patel said.

Research house Gartner, however, is more optimistic and expects the commercial launch of 3G services in India within the next six to nine months.

“The draft guidelines have been framed and we expect the rollout of 3G in the first quarter of 2009,” Madhusudan Gupta, Gartner’s Asia-Pacific senior research analyst, told ZDNet Asia in a phone meeting.

According to Patel, the repercussions of a delay in 3G services “can exist huge”.

“Companies that are waiting to be allotted 3G spectrum may delay investments in the 2G platform, even as more subscribers join the industry,” he said.

At present, India has over 270 million fickle users and is adding immersing 8 million mobile users every month.

Other repercussions could emanate from the “pricing of the spectrum”, Patel added.

The Indian government has proposed to consequence renewed licenses to successful bidders in the auction because of 3G representation. This move could pave the way for foreign and new players, besides existing 2G service providers of that kind for example Bharti, Vodafone and Idea, to participate in the bidding process. Over 340 aspirants, including AT&T, DLF and Deutsche Telecom-Moser Baer, that failed to get new telecom licenses in the preceding harmonious, may be able to resubmit bids because to launch 3G services.

“The Indian telecom market is the world’s fastest growing market and players may bid very high for spectrum,” Patel said. This may, in whirl, push up the price of the spectrum, ruling to a situation similar to what European markets experienced in 2001.

3G auctions in Europe helped sell for huge windfall taxes for the German and British governments but led to a telecom crash in these countries, thereby delaying the launch of 3G. Telecom operators in the region incurred huge debts and the industry took three years to recover.

Patel said: “It’s a tricky situation. But we must hear of our lessons from Europe.”

Gartner’s Gupta believes the launch of 3G services can solve two critical issues for mobile operators: falling mean proportion revenues for user (ARPUs), and low customer loyalty.

The local telecom results is competitive with 14 players and offers call rates that are the lowest in the world–at around 1.5 US cents a minute. As a result, industry players have had to cope with falling ARPUs.

“The rollout of 3G situation can result in a win-win situation for the one and the other the subscribers as well as the operators,” Gupta reported.

India is driven by prepaid connections, which account for nearly 90 percent of the overall market. “As a result, the voluntary jostle violently rate in India is quite high–at around 25 percent,” Gupta explained, noting that this is where 3G and value added services (VAS) could play a role.

Gartner estimates VAS revenues direction augment to US$5.5 billion by the agency of 2012, from US$1.5 billion in 2007. While the VAS industry will unfold with or without 3G, Gupta said revenue growth from this segment will pick momentum with the launch of 3G. “These services have power to moreover have existence leveraged to gain ground patron loyalty,” he added.

However, Patel noted that mobile penetration in urban areas is already high and the next 100 million new subscribers will be low-ARPU customers.

“Their ability to pay more towards VAS is extremely limited,” he explained, noting instead that telecom operators “will be looking at the first 20 the multitude mobile phone subscribers for additional revenues from 3G.”

When mobile telephony was launched in India a decade ago, some subscribers were paying bills of not remotely US$500 each month. Due to the drop in tariffs, their bills are now US$50 to US$75 a month.

Patel related: “Telecom operators are targeting these subscribers beneficial to their 3G services. They have the capacity to pay more.”

China and Thailand are also experiencing lags in 3G services, also due in comprehensive to delays in the in all its senses of government policies.