Airtel, Vodafone and Idea ready to exit 3G business in India

3G operators Bharti Airtel, Vodafone India
and Idea Cellular are ready to exit 3G services if the government does not
approve their internal agreement to provide intra-circle roaming.

Bharti Airtel Chairman Sunil Mittal, Idea Cellular Chairman Kumar Birla and
Vodafone CEO Vittorio Colao have written a joint letter to the Prime Minister.

They are looking for a refund of the 3G spectrum payments if intra-circle
roaming is not allowed, according to a report in CNN IBN.

The letter asks for a refund of the auction payment with interest as well as
compensation for all capital investments made in 3G.

The roaming pact between the three companies allowed them to provide 3G
services in circles where they do not hold a licence.

Telecom watchdog TRAI said this is a violation of the terms of the licence with
serious financial implications for the government. The letter asks the Prime
Minister to intervene in the matter.

The Indian 3G operators have already burnt
their fingers due to high spectrum fee they paid during the auction in 2010.
The 3G user base is not growing in line with expectations.

Indian carriers face multiple structural
challenges such as congested networks and limited available spectrum (5MHz) to
offer 3G enabled data optimized services at launch.

Also, carriers’ walled garden approach to
value added services and prevalent piracy and Indian consumers’ lack of
willingness to pay for such services pose a huge challenge for immediate uptake
of 3G services.

However, once the 3G device prices decrease
and the tariffs stabilize in the first two years, Knowledgefaber believes that
the 3G uptake will rise in 2013 and reach over 90 million by March 2014,
according to a report.

Among the various 3G enabled services
launched by the carriers, mobile internet services are expected to garner
maximum revenues of over $4.5 billion with over 80 percent of 3G subscribers
adopting these services by March 2015.

Currently location based services are in
nascent stage. Knowledgefaber believes that various services such as mobile
gaming and mobile surveillance will increasingly use 3G enabled location based
services in future.

Of the various mobile video-based services,
video calls are expected to witness significant uptake and 3G enabled music
streaming service is expected to grow, driven by increase in the number of 3G
subscribers and decrease in content costs.

As per Knowledgefaber estimates, while the
incremental ARPU for 3G subscribers is expected to be approximately $3.7 (INR
166), the incremental blended ARPU driven by 3G services is expected to be over
$0.45 (INR 20) by March 2015.

Recently, Strategy Analytics said unless
there is a serious commitment to deploying 3G and 4G networks and corresponding
value added services, it is hard to see anything but long-term revenue
stagnation for emerging market operators, according to a report.

Average annual revenue growth from 2001 through 2015 is forecast to lag
subscription growth by more than 10 percentage points. Without a boost from new
services offered on 3G networks, revenue will start to stagnate in the next few

By Team
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