Is the 3G hype paying off?

Thu, 8 Sep Pre-Open

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Prime time television is currently dominated with mobile companies advertising their 3G offerings. It's either Vodafone India's Zoozoos convincing you about faster speeds. Or Idea Cellular's population control campaign promoting various entertainment options like mobile TV, gaming etc. While these ads convince you that 3G is a compelling offering, what is lacking is a focus on one aspect that Indian consumers are very conscious about - price.

Not only have operators paid huge amounts to the government in order to bid for licenses in certain circles. But, they have also spent money on upgrading their network and on prime time advertising. But, it may be a good 9-12 months now before telecom operators can try and recover some of their massive investments.

There are various pains that early adopters are facing. Post-paid customers are in a state of shock on seeing their month end bills. If their mobile apps are not properly closed after use, they continue to consume data, and the billing meter keeps ticking. The 3G plans are also very expensive compared to the regular plans. The limited number of 3G enabled phones as well as the high costs of the devices is also keeping consumers at bay for the time being. Network coverage is patchy. The biggest player in India Bharti Airtel has won spectrum in only 13 out of 22 circles in India. Other players also have been very strategic in their approach to winning circles. Only 3 major operators including Vodafone, Bharti and Rcom have chosen to bid for the most expensive circles in Mumbai and Delhi. Others like Idea and Aircel have decided to capitalise on their strong regional presence only in certain geographies. Thus pan-India reach is still missing.

However, over time we expect these issues to normalize. The current handset market is growing rapidly, with new 3G phones on various platforms being launched on a regular basis. People are increasingly converting to smartphones. The social networking potential on these devices has become a big draw. Over time with increased economies of scale and growth in volumes, prices of 3G services are expected to reduce. Plus, network operators are doing a good job of educating people about the benefits of 3G networks. Thus, over the next 2-3 years, we expect these efforts to bear fruit and more subscribers to move to this superior network. Technical glitches and early adopter issues should also be solved by then. India's internet starved population is betting big on the mobile revolution to work, and 3G is one of the quickest ways forward. Until more subscribers come in, the telecom players will have to be content with the publicity that the 3G network is getting them.