Impact of 3G spectrum allocation and pricing policy
CRISIL Research believes the policy will have the following impact:
On wireless operators
·
Market impact
o
The policy provides for successful operators an
opportunity to earn higher ARPUs by offering differentiated services.
o
Allotment of 3G spectrum will alleviate pressure on 2G
spectrum, especially in high traffic areas.
o
With the roll out of 3G services coinciding with the
planned implementation of mobile number portability (MNP), operators will have
the opportunity to attract high-end customers from other operators. However,
only players that are able to demonstrate better QoS and quality of content can
expect to improve their market share.
o
With 3G penetration initially expected to be low,
returns from investments made in 3G networks will take some time.
·
Bidding impact
o
There exists a high entry barrier for new entrants
since they will have to shell out around Rs 38 billion (Rs 16.5 billion for a
UASL licence plus Rs 21-22 billion as bid price) at the base reserve
price for pan-India 3G spectrum. However, players can also bid for selective
lucrative circles.
o
Mumbai and Delhi
o
In the event of a bidding war, considering that large
existing operators already have infrastructure in place and recurring cash flow,
they might be in a position to outbid potential competitors.
·
Based on the above analysis, CRISIL Research is of the
view that the 3G Spectrum Policy is favourable for existing operators. However,
new 2G licensees could look at partnering with global players having some prior
experience in providing 3G services. This will be a win-win situation for both
since the global partner will not require a UASL licence.
On wireless subscribers
Wireless subscribers will witness an improvement in the quality of
service since we believe that initially 3G spectrum is expected to be used for
voice services. Also, services such as video calling, gaming, high speed
internet access and other data services will increase the range of content made
available to consumers. However, in the initial phase, the offtake of 3G
services will be limited to high-end subscribers due to the relatively high
cost of handsets and pricing of 3G services.
On revenue inflow to the government
The government has stated that it expects to earn Rs 300-400 billion via
auction of the 3G spectrum. We expect the bidding to be at multiple times that
of the reserve price, considering the limited spectrum being made available.
Conclusion
CRISIL Research believes that the success of 3G services in India
·
The pace at which operators roll out services
·
Ability to improve the QoS and the range of
value-added services offered
·
Pricing of 3G services and handsets
·
The availability of relevant content and applications
A key risk of the 3G spectrum policy is that operators may overbid for
spectrum in an effort to steal a march over their counterparts, especially in
circles where fewer numbers of 3G slots are available. This could hurt the
business case for 3G services.
