3G: High expectations in India

The 3G spectrum auction is finally over. While the government will laugh all the way to the bank after netting over Rs. 67,000 crore (nearly $15 billion), double the anticipated revenue, the jury is out on whether or not the bruising bidding war will break the back of the telecom companies.

The world over, telecom companies overpaid for 3G spectrum and suffered losses for several years. It was expected that companies in India would learn from those lessons. The question is: Did they?

The fact that the bids were nearly double the expectations might suggest the telecom companies ended making the same mistakes as their counterparts in Europe and elsewhere. But various analyses suggest they may not have. Let me cite just two pieces of evidence to back that theory.

One, all the telecom companies gave up their attempt to secure a pan-Indian license because they quickly realized it would hurt them real bad. Telecom companies showed sanity, rather than recklessness, in the bidding. The lack of the ability to offer seamless service across the country is a setback for customers, but that will have to do, for now, until some consolidation takes place in the sector.

Two, many bidders carefully weighed their geographic strengths and the markets, and made winning bids that were about two-thirds of their current revenues from the respective telecom circles. This indicates welcome pragmatism about how they can really sell the 3G services and probably a measure of what the market can bear. Only a few like Idea took risks by raising their bids in some circles higher than their current revenues.

Nevertheless, risks exist for the telecom companies in a cut-throat competitive environment in which call rates already are the lowest anywhere in the world. But, clearly, the biggest risk was not securing a 3G license. That out of the way now, the telcos are relieved and can plot their marketing strategies.

If the data market takes off in the cities in a manner remotely comparable to the voice traffic, the telecom sector could again emerge as a rapid growth sector. It very well could with 3G services such as video and live television. Besides, there is a latent hunger in larger cities for such services as 3G handsets have been sold here for nearly two years now. I bought mine 18 months ago and, of course,have been able to use 3G service from BSNL. Prices of 3G handsets have plummeted in recent months. By the time the 3G service is rolled out towards the end of the year, or even early next year, these could be available for as little as Rs. 2,500.

In my mind, the killer apps in India will, unsurprisingly, be Bollywood videos and live cricket. For sheer popularity, the two are quite unmatched, though you could just as easily add live soaps and a lot of imagination to spice up the offerings. Shall we say, just bring it on!

---

---

---