Indian Government will be licensing 3G spectrum in an auction. Indian Telcos are approaching this with fear and caution.
Delhi - Be careful what you wish for. When India announced plans to auction off licenses for superfast 3G phone service, the country’s mobile-phone companies cheered. It was August 2007, and their stocks were at all-time highs as more than 8 million new customers signed up every month. 3G, these companies thought, would surely make them richer, faster.
Now, after four delays, the auctions are likely to take place in coming months, perhaps as soon as March. The reaction of India’s mobile carriers? More fear than cheer. While the government still hopes to collect a total of $5.5 billion for four national and 22 regional licenses, a price war has driven calling rates to well under 1 cent per minute, slowing the industry’s profit growth and denting stock prices. Carriers will need cash to bid on spectrum, and building a nationwide network will cost each as much as $4 billion. “Operators need to be realistic and not overbid,” says Naveen Mishra, an analyst at researcher IDC.
The 3G track record doesn’t inspire confidence. In Europe, overbidding nearly bankrupted many operators. India’s state-owned BSNL, which the government allowed to launch 3G a year ago, now offers service in 300 cities, has just 700,000 customers, and has cut tariffs at least twice. The company didn’t respond to requests for comment, but its record doesn’t encourage rivals. “Now we have to spend billions of dollars on a network that 2% of the country will use?” grumbles a senior finance official at Bharti Airtel, the country’s leading carrier, with 116 million customers. “It’s not like everybody in a village is carrying a BlackBerry (RIMM),” adds the executive, who asked not to be named because Airtel’s official policy is that it’s eager to offer 3G to the Indian masses.
It will be great to have competition and innovation in 3G services available in India.