Make it more - the 3G pie

     Image Courtesy : gadgets.fosfor.se

The new directions coming from the government is the idea of making the 3G license bidding regions called circles from existing 5 to 8. This is in line with the governments intention of making the most of revenue out of the 3G spectrum auction. A larger number of circles would make the amount for each region cheaper but would increase the total kitty. This would also allow smaller players to bid where it was difficult for them to foot the amount for a larger circle earlier. This move will be seen as a small bit done by the government for local players. As we can see the large players would like to have a bigger subscriber base in a bigger circle and would be ready to pay for it.

It has to be seen if the technical persons can give a go ahead about the new circle plan after looking at the feasibility of allocating spectrum in 8 new circles. There might be other objections for the new scheme from other stakeholders like telcos, other ministries, regulators and other policy bodies before a decision is visible. Auction might be possible in the near term only in Feb 09. In the meanwhile the telcos can strategize and restrategize for their best deals. 3G spectrum auction is moving at a slow and steady pace and we will have to see if all the players - the government, the telcos, the vendors and the content providers can cook up an exciting fare in time for the party.

3G rollout India - so near yet so far

Last year saw many false starts on the 3G spectrum auction in India. Of all the frenzied activity witnessed on the 3G front MTNL's rollout of services in the NCR region was the only news to show off and larger subscriber population is yet to see any so much as a date on when 3G services will be available. The government wants to make sure that it wants the spectrum auctions to fetch the highest possible price ( called market price ) in the circumstances of economic situation worldwide. However with every successive delay of the auctions the bidders are getting wary and at best show lukewarm interest as in case of the response to the pre-bid meeting.

Related consequences to the delay in the 3G spectrum auctions are the delay in WiMax auctions and even the MNP developments. The latter also involves an auction process and right now all the delays are being attributed to the policy changes initiated by various stake holders within the cabinet. The government does not have any problem in the delays as the large delays would give time for the mobile subscriber base to build which in the Indian case has been happening at a rapid clip. As time goes, the government will have a better fruit to offer in terms of a larger subscriber base and can expect a higher price. As said before, the bidders are also not very keen at this point of time to hurry up.

All said, the date for the 3G spectrum auction is still 30th January 2009. If something happens by then the auction process goes through, it will be a big surprise as the news that is available points to more delays.

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.

Entry of foreign telcos

If reports are to be believed the government is very keen on addressing the apprehensions of 3G spectrum bidders who had shown lukewarm interest in the 3G spectrum auction process initially. As per the policy change planned the foreign telcos that win a bid for the 3G spectrum can buy or merge with local players who have 2G spectrum. Whether they have to pay more for it or not, the door will be open for entering into 2G services as well. In the existing framework, winning foreign 3G bidders would have to wait for 3 years before they can get into 2G services which will have them at a disadvantage over local telcos who would have their 2G spectrum added with the 3G spectrum they would be allocated after the auction. This planned move is found to be advantageous to such players as AT&T who have been waiting for long to taste the 3G pie in India. This is also seen to be an opportunity for Indian non-telco majors to get into the scene through tieups with foreign players. Though we don't know at present how such entities will have a piece of the 2G spectrum very essential for a having a level field, we know of wishes of Mahindra and Videocon to
enter the Indian telco scene. It will be interesting to follow the spectrum sweepstakes...