3G rollout test of how much losses companies can take

The 3G roll out story of telecom firms is surely becoming a test of the extent to which you can bleed.

Vodafone Essar Ltd which demonstrated a 3G video call on its network in India on Thursday has spent about $450 million to procure necessary 3G equipment, according to Marten Pieters, the firm’s MD.

Vodafone Essar acquired 3G spectrum in 10 circles namely, Delhi, Mumbai, Chennai, Kolkata, Maharashtra, Gujarat, Tamil Nadu, Haryana, Uttar Pradesh (E) and West Bengal at an expense of over Rs11,000 crore.

Although Pieters could not provide any information on the type of pricing the firm will adopt for 3G services, the price of 3G services will be high to begin with.

“Data services are typically priced lower than voice services. But, in India voice prices are so low that is slightly different. So I don’t know. Today, there are a limited number of suppliers in the market and only 6% internet penetration. I think you can expect that once penetration goes up and there are more suppliers, prices will go down,” Pieters had told DNA in an earlier interview in April.

For instance according to a source, Vodafone will introduce a wireless USB dongle that will offload 3G traffic through Wi-Fi network at 7.2 Mbps at ‘much higher price than existing 3G USB data cards from Vodafone that offers speed of 3.6 Mbps and priced at around Rs1500’.

Meanwhile, Vodafone Essar aims to begin offering commercial 3G services sometime between January to March 2011. “We will offer commercial 3G services in the first quarter of next calendar year. It will be in a phased manner, but by the end of the first quarter we would complete roll out in the 10 circles, where we have got spectrum,” said Pieters specifying that the services will be rolled out first in urban areas ‘where such services will have more takers’.

Additionally, the firm will enter into alliances with other telcos to offer 3G roaming services to its subscribers in circles where it does not have 3G spectrum.

“We are looking into that aspect. These are customers who are mobile enough and would like continued service even in circles where we do not have spectrum. We are talking to a couple of other operators to allow roaming facility for our subscribers. In fact, each operator is talking to all other operator for such arrangement,” said Pieters.

Among its bouquet of services on 3G network, Vodafone plans to offer faster Internet access. “We will start with services that depend on faster Internet access such as download of video, video streaming etc. We will then keep adding services that are of relevance to people as we go ahead,” said Pieters.