Revenues to be higher than those of 2G and 4G in the next two years, say experts.
Three years after 3G was launched in the country at a whopping cost of Rs 67,000 crore to telecom companies (telcos), the technology has finally begun to generate returns on investment.
Going by 3G subscriber additions last fiscal (1-6 million per quarter), industry experts are confident that 3G will finally turn out to be the ‘golden goose’ for operators, growing faster than 2G and 4G in the next couple of years.
Sunil Tirumalai and Chunky Shah of Credit Suisse wrote in a report that 3G data revenues account for less than 3% of mobile sales, but popular investor perception is that “3G in India so far has been a failure”. Yet, they go on to say that “most of the top cities in 3G circles are already under 3G coverage for leading telcos, and 13-14% of mobile voice traffic is already flowing through 3G networks”.
Another advantage of 3G voice offload is, it frees up capacity on spectrum-starved 2G networks. This opens up increasing opportunities for 2G data as well.
However, this 2G data opportunity is being exploited by telcos to lure first-time internet users with attractive trial packs of relevant content, in order to get them hooked first. Then, slowly, they will likely be encouraged to uptrade to 3G, via 3G bundled offers of smartphones and popular content like live cricket streaming and videos at unbelievable price points.
“Data growth accelerated in Q4 (fourth quarter or the January-March period) to 20-25% qoq versus 10-15% in the previous three. Contribution at less than 6.5% of revenue remains low, but data ARPUs (average revenue per units) have seen a sustained positive rise,” wrote Gaurav Malhotra, Arthur Pineda and Jitender Tokas of Citi Research in a note on Monday.
In a way, 3G has picked up in the last six months thanks to the 75% fall in tariffs. Slashed tariffs sparked a 3G price war, making 3G almost as affordable as 2G. This, when 4G services and low-cost smartphones with free bundled data packages flooded the market.
Besides, latest models of smartphones are now launched in India and globally on the same day and at a much more frequent rate at all price points.
“We believe that over the next 12-18 months, Indian telcos could benefit from a smartphone price war that has recently started in India. We believe that telcos could benefit from the subsequent data uplift when their customers upgrade to smartphones,” wrote the Credit Suisse analysts.
The recent 3G inter-circle roaming disputes may have some impact on 3G revenues for operators but are unlikely to hinder growth.
“Roaming, both 2G and 3G, contribute barely 10-15% to an operator’s revenues. And 3G roaming makes up less than half of this,” said Ankita Somani of Angel Broking.
Besides, the new technology-neutral licences offer greenfield operators such as Uninor, MTS (Sistema) and Videocon a chance to offer 3G services at lower tariffs than the rest of the industry, in turn upping 3G uptake potential. With a 4G pick-up still a good 2-3 years away, 3G is unstoppable for now, say experts.
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