Indian 3G spectrum auction process begins Monday

     Image Courtesy : bioteams.com

The process of allocating 3G spectrum to telcos is to kickstart on Monday with the pre-bid conference to select the overseer of the e-auctions for the 3G spectrum for both GSM and CDMA services. 3G spectrum winners will be known by early October. The auctions are expected to raise U.S.$ 10 billion or more of revenue for the government which would make the telecom department one the the biggest profit centers for the government.

Now what is to be seen keenly is how the telcos - both domestic and foreign take to the e-auction. There have been misgivings about competing in the 2G space from foreign bidders. The DOT had changed the rules so that foreign telcos could merge or buy stake in local players on entering the Indian market and this ought to assuage their feelings.

One more aspect to be watched is the final cost of the 3G spectrum and its effect on the 3G rollout. A high floor price would push the final prices so high that bidders would use up their revenue on the licenses and would have to wait for deploying the network infrastructure - the next step for telcos. This has happened in EU markets most notably in UK. In spite of the delay in launch of 3G services, 3G penetration had picked up fairly well. In the Indian scenario such a thing though wished by telcos might not be so easy. This would need very competitive end-user tariffs and very impressive differentiated services. This would call for huge spends upfront before a good monetization trend sets in. Setting an optimum floor price would hence be the challenge for the telecom ministry.

The challenge for TRAI would be to oversee proper timely rollout of 3G services in all circles with undue delays by the telcos. TRAI would also have to keenly look at how and what kind of recommendations are to made on the MVNO policy. This would also be critical as many foreign players might prefer to enter the market as MVNOs in order to avoid high license fees. TRAI's recommendations would some day tell on the rate of penetration of 3G services in India.

The challenge for the telcos would be about offereing high quality differentiated services and  make enough money to reinvest in their new new 3G networks. In this respect the telcos would also need to fix attractive tariffs that would work for them too. Another aspect telcos would be focussing on is MVP - mobile number portability - which might necessitate a rethink of telcos' strategies about retaining and growing subscriber bases.

The challenge for the user is to embrace 3G technology without falling for hype and demand high quality services from the telcos by rewarding the best offering and not to look at price alone.

Number Portability Directions

Mobile number portability has been introduced in the U.S. , the U.K., Australia, Korea, Japan, Canada, Pakistan and most countries in Europe. Introduction in India needs a push from the telecom department in terms of setting firm goals for the telcos. Telcos obviously are apprehensive about the move since they have to invest a lot all for opening the gates of churn. But they have to realize that number portability would make them more competitive and better organizations striving to meet the expectations of their subscribers and raise their levels.

Since number portability has been on the table for quite some time now, I am sure telcos would have had devised their strategies for it. The telecom department can go ahead on this front boldly as the move is after all a long overdue benefit due to the consumers. One opportunity for the telecom department is to mandate number portability for all new 3G service rollouts. This can be a given for the telcos so they do not have to complain at a later stage. This is good also as 3G with its focus on value-added-services has an inherent deterrence on churn.

There is one more point in favour of the telcos going in for number portability. What it is! Their new 3G services will take off well with number portability introduced across the spectrum of services. 3G adoption will be faster with number portability.

One more thing I can see is that telcos would start looking at new markets including rural hinterlands as part of their number portability strategy offsetting telecom department's apprehensions on this front.

To conclude this piece, I believe after the initial churn Indian telcos would learn to manage it quite well by building value and devising strategies.

Spectrum Wars in India

Okay this story continues on the last one. Spectrum... In a story attributed to IE I read about the big problem at hand for the regulators in India on allocating spectrum to the existing and new licensees.

The players like - Bharti Airtel, Vodafone and Reliance have among themselves earmarked $8billion worth of plans for expansion and this is not going to happen without addtional spectrum.

On the other hand there are new players who are awaiting their licenses and in turn their spectrum allocations - AT&T/Mahindra (see previous post), Verizon/Videocon are some. The regulators would like the new players to come in as it is bound to be beneficial to the consumer with better services and better tariffs - but can they ignore the existing players and their long pending requests for addtional spectrum ?

Well the spectrum allocation issue is bound to get very contentious and the authorities should given premium to greater transparency and do a fine balancing act with respect to existing players and new licensees. The government has said that it will announce new terms and condtions for the sector within a week. If there is going to be no change in the first-come-first-serve policy of spectrum allocation followed by the government, then the existing players who have long pending applications would walk away with the spectrum and the new entrants would have to wait for 3G spectrum auction whenever that happens. However in an ET report , CCI has approached the authorities to moot an auction mechanism which by which the available spectrum can find a market determined price. It is not known if this proposal cuts favor with the government.

In the ensuing scenario, new players may find that they will have to defer their expansion plans for want of spectrum. They may have to wait as the existing players did for their expansion plans. If the spectrum allocation has to be so finely balanced then entry of more than one new player would be a doubtful at least in the present scenario. Of course there is the M&A route too.