India's 3G price cuts to kickstart growth

Shiv Putcha/Ovum
13 Jun 2012

The Indian mobile market has recently experienced a series of 3G tariff cuts.

India's 3G adoption has been underwhelming so far, with optimistic estimates stating that there are currently 39 million 3G subscribers. However, we believe that the actual number of active 3G subscribers is approximately 25 million.

The latest round of price competition has been sparked by Airtel’s decision to cut its 3G tariffs by up to 70%. Airtel was not the first operator to reduce its tariffs, with BSNL and Aircel previously reducing their prices. However, the scale of Airtel’s tariff cut has forced other operators to react, and Vodafone, Idea and Reliance Communications (RCom) have all made similar 3G price reductions.

Ovum believes that the price cuts will have a positive impact on the affordability and adoption of 3G services in India.

While they will also have a net positive effect on the top-line revenue growth of 3G operators in the short to medium term, their impact on margins will take time to determine. However, as 3G adoption increases, operators may face challenges from their limited spectrum holdings.

If additional 3G spectrum is not made available, there is a risk that the 3G network could encounter the same quality issues that have negatively affected 2G services in India.

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