Launch of 3G Networks in India Is No Bollywood Movie

When my lovely wife made me sit through a Bollywood movie to be reminded of her cultural background recently, I knew what to expect: a set formula, some dancing and a happy ending. Later, when I was analysing the Indian wireless sector to understand the implications of new 3G networks, the contrast couldn’t have been more different: the unpredictability of government policy on 3G networks would make Tarantino proud; few people will be making a song and dance about services, because only a handful of customers from state-owned companies have access to 3G networks; and a happy ending is far from certain.

For years the auction of 3G spectrum seemed to be just around the corner. The auction may have been postponed once again, this time after the opposition in parliament walked out over the wider issue of spectrum allocation, but it hasn’t stopped 3G services arriving in India almost by stealth. State-owned operators BSNL and MTNL have acquired 41,000 3G customers over the last seven months. Reliance and Tata have launched EV-DO networks in selected locations with hardly a mention of 3G services. And to make life more complicated 3G licenses will not be awarded nationwide but for 22 different administrative units (circles).

For observers and operators, the key question is, “What is the business case is for 3G in India?” With over 90 percent of connections on a prepaid tariff, ever-eroding average revenue and fierce competition we probably have to look beyond the usual performance indicators. I think one of the main issues is access to spectrum. With 10 operators up and running, five more about to start, and a mind-boggling 123 companies with licenses but waiting for spectrum, the crush for spectrum is almost tangible. And as much importance will be placed on positioning for the long term, when the market moves more heavily toward services and applications. It really doesn’t need spelling out that India won’t follow the pattern of more mature markets.

With the different path in evolution comes different ways of addressing the strategic imperatives. It’s fascinating to watch how operators have followed Bharti in embracing sourcing options more aggressively than in any other market. With almost all operators hiving off passive infrastructure, the intriguing question is what will be the next level of sourcing options? Network sharing? New market entrant Datacom has just inked a deal with Tata Teleservices for both network and passive infrastructure, so that might be an indicator that pace on network outsourcing is gathering momentum. And pioneer Bharti just signed a deal with Comviva to outsource its value-addded services, putting it ahead of the game as rivals are catching up.

So who’ll be dancing in the end? Much will depend on which operators secure the lucrative metropolitan circles. There’ll be more drama if revenue is squeezed further by the eventual admission of mobile virtual networks operators, although they won’t be labelled as such. Whatever happens, I know it’ll be nothing like that Bollywood movie.