Although it represents one of the biggest mobile phone markets in the world - its 315 million subscribers equating to a lowly 31% penetration rate as of September 2008, according to a new report from the Telecoms Regulatory Authority of India (TRAI) - India is travelling a rocky road in embarking on the transition from 2G to 3G, as recent news reports will attest. But amid rethinks on the pricing of 3G and WiMAX spectrum, accusations that existing players and newcomers alike were encouraged to overpay for the remaining 2G spectrum earlier this year, and the continuation of a decade-long spat between operators of GSM and CDMA-based networks, the Indian authorities must surely be reminded of the long and tortuous process of getting mobile up and running in the first place, back in the mid-1990s.
The first GSM licences were made available - for selected metropolitan areas - in 1993/94, but the government of the day kept changing the rules governing bidding procedures, licence fees and annual revenue sharing schemes, the extent of foreign ownership permitted in an Indian mobile network operator, and the total amount of spectrum any one operator (and affiliates) could hold. Similar problems affected the subsequent licensing of smaller regions (called ‘circles’) covering the rest of the country, which were held from 1995 onwards. The net result of these constant changes was the loss of millions of dollars of investment from local and international companies, and the emergence of only patchy coverage outside the major cities for many years. This was inevitably followed by consolidation, wherein local and foreign operators were able to pick up struggling players relatively cheaply.
Does this sound familiar to the analyst community of the 2000s? It certainly seems the market will experience many of the problems and issues that dogged the emergence of mobile telephony in the last decade.
And with international players such as Russia’s Sistema Group and Etisalat of the UAE keen to invest heavily to acquire a presence in the market, the story is set to continue in the same vein for many years to come.
Yet, 3G and WiMAX is badly needed in India, for different reasons. Fixed-line connections are in short supply outside the metropolitan areas and mobile phones are very cheap to buy and cheaper still to run. As a result, Indians are heavily reliant on their mobiles for basic communications services, and there is a high level of demand for more bandwidth-intensive applications, such as entertainment and banking. So, while WiMAX will go a long way towards providing a high-quality replacement for fixed line services, 3G can expect to see healthy take-up in the upper strata of Indian society. This is the view of Juniper Research, which has recently published an updated report on India as part of a broader examination of the BRIC (Brazil, Russia, India and Russia) economies.
But, with even the most prosperous users paying comparatively little for their mobile services, can operators make any returns on their investments, even in the long run? For, while 10 million or more new mobile customers are signed up each month, on average, those operators that have been active since the mid-1990s have only recently begun recording a profit and few can expect to see a return on their cumulative investments for some time.
Forward, then, to the 1990s!
Tags: India 3G, India Mobile Broadband, India Telecoms Regulation, India WiMAX, Mobile India