India’s 3G auction being hotly contested

Shiv Putcha/Ovum
07 May 2010
00:00
News
Commentary

OvumAs of 5 May, 22 days into the 3G auction, the bid price for a pan-India 3G license had risen to $2.46 billion. If the auction were to conclude at this level, the Indian government would have raised nearly $10 billion from this auction.

The Indian market is the most competitive in the world, with 14 MNOs operating on sub-$5 ARPU and wafer-thin margins in a voice-dominated revenue environment. The prevailing view is that 3G will offset the rapid erosion of voice revenues with increased data revenues.

However, we believe that the primary benefit to Indian operators from the paltry 5MHz FDD of 2.1GHz 3G spectrum available via auction will be to offload traffic from high-end subscribers for capacity relief. Any incremental data revenues will represent an upside.

The bigger issue is whether Indian operators can execute on a data-driven approach. Indeed, Indian MNOs should think long and hard before introducing the latest 3G devices such as the iPhone, NexusOne, and newer form factors such as the iPad. Evidence from the US and Europe points to the astonishing – even crippling – impact on mobile networks of network overloads due to the surge in data traffic from 3G smartphone users.

Indian MNOs already do a lot with very limited spectral resources, and now face an unenviable dilemma. To hold back from launching the newest gadgets will hand over the initiative to rivals in an unforgiving and ultra-competitive environment.

Launching these devices aggressively will have the opposite effect of bringing their fragile networks to a standstill, as Indian MNOs have not optimized their networks for carrying data traffic. The only short-term option would be to introduce tiered data plans and also adopt usage caps to protect the network.

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