Here is some insight on how 3G has shaped in Asian Economies. We second TRAI’s decision to go with Auction of 3G Spectrum because of Transparency over the Beauty Contest Method which can be tilted anyway the Bureaucrats want.
Most countries have awarded 3G spectrum to service providers when 2G wireless subscription had reached approximately 50% of population [pop].
- South Korea with a population of ~ 126mn fetched around $3 bn for auctions in 3 phases between 2000 and 2001. $/MHz/pop = $1.0
- Hong Kong adopted beauty contest but had insufficient bidders [Policy must have been really strong] Fees of $6.5 mn/year for 5 years + 5% of 3G revs/year after that – min $169.7 mn. With mere 7 mn population, $/MHz /pop= $0.72
- Italy and Netherlands fetched $10 bn and $ 2.5 bn in auctions in 2000. $/Mhz/pop is $1.2 for both the countries.
- Malaysian Govt adopted beauty contest method in 2002 and is probably the cheapest licensor for 3G. One interesting thing to note about Malaysia is the HSDPA based broadband service for residences has been the key driver of 3G. [ Can we Expect this to happen in India as well ? ]
- In India, with the base price of 3G Spectrum at $0.04 / MHz / pop, we can expect it to reach $ 0.60 in the auction.
We expect the auction to be extremely intense in Mumbai / Delhi [RCom likely to join GSM biding war]. and aggressive in Karnataka, Andhra Pradesh, Tamilnadu, Punjab, Gujarat and Kolkata circles] Bharti Airtel, Vodafone, Reliance Communications and a surprise new entrant [I don’t know either] will bid aggressively. Expect a foreign Telco to back one of these new entrants.
Success of 3G in India: We are neutral to slightly optimistic about the success of 3G in India hoping the auction doesn’t cross $0.60 / MHz / pop. Key factors include,
- Network Infrastructure: If the auction stretches more than expected, then Telcos are likely to bleed as they have a huge CAPEX ahead of them
- Availability of Handsets: Since they are widely available [~ $200 a piece, slightly expensive], the only factor handset manufacturers must focus on is to have better usability using browsers for internet access
- Availability of Applications and Content: Currently most of it is focused on on youth and
entertainment. Get Killer applications to generate higher revenues - Pricing: Voice usage is inversely proportional to the tariff. Revenue sharing for VAS should be chalked out to make it affordable to masses.
Feel free to share your thoughts about 3G in India.