Three years after the auction of 3G Spectrum in India, popular Telecom enthusiasts perception is that 3G in India so far has been a failure, with 3G data revenues accounting for less than 3% of mobile operators’ revenues. While 3G data revenue uptick is one of the most important end results operators would like to see from the 3G investments, a sole focus on this metric alone misses the full picture, and the benefits already accruing to telecom companies.
Airtel, Vodafone and Idea [A-Vo-Id] have ~35% of mobile sites in 3G circles already 3G enabled. Most of the top cities in these regions are already under 3G coverage—suggesting the near-term 3G catchment areas are well under coverage. With growing penetration of 3G/smartphones, we can only expect this 3G
capacity to get filled up.
One interesting datapoint is that for Airtel / Idea, 25-35% of subscribers on 3G network do not use data, but are just voice customers. We explore this thought further.
Acound 4.5% of the Top-end subscribers of Airtel / Idea are on 3G networks. While an accurate revenue distribution pyramid is not available, we look at data from various sources which give some indication of how much the top end of the subscriber base contributes to overall revenues. The revenue share of top-end customers could be 3-5x that of the subscriber share (this multiple is rightly reducing as we move down the list to higher subscriber shares). The simple conclusion at this point is that 17-18% of mobile revenues of Airtel / Idea could already be derived from 3G networks.
This may not be reflective of the voice traffic contribution however, since the RPM for these customers is also higher. The premium to RPM could be because of higher non-voice revenue contribution for the top-end customers. Assuming that the 3G customers on Airtel / Idea’s networks are at a 27% premium on RPM to overall average, we can say that 13-14% of total voice traffic in the mobile business is derived from the underlying 3G Network.
This shift of voice traffic from 2G to 3G network, of course, gives no incremental revenue (voice call rates are same). However, we believe there is a positive side-effect on the 2G network and the same can be used for among other things, 2G data service as well. Hope this now explains why the Ambani brothers went out of the way to lobby against A-Vo-Id’s operators 3G Intra Circle Sharing Arrangements.