Global Insight Perspective | |
Significance | The Telecom Regulatory Authority of India (TRAI) recommended that 3G spectrum allocation should be based on a mix of base price and auction. Both the TRAI chairman and the telecommunications and IT minister expect 3G to be launched in the country by the second half of 2007. |
Implications | The regulator has taken a significant step towards 3G deployment in the country. The TRAI recommendation has yet to be approved by the Telecommunications Ministry, but the government expects to come out with a clear policy in three months. |
Outlook | Given India's relatively low average income and the modest uptake of 3G services in developed Asian and European markets, Indian operators should remain cautious in the face of uncertain 3G demand. |
The TRAI yesterday announced the long-awaited recommendations for the introduction of 3G mobile services. Key recommendations include the following:
• The spectrum for immediate allocation for 3G services should be in the 450 MHz, 800 MHz, and 2.1 GHz bands. According to present estimates, 2 x 32.5 MHz of spectrum will be available in a timeframe of six to nine months for 3G services.
•Five blocks of 2 x 5 MHz in the 2.1 GHz band, one block of 2 x 5MHz in the 450 MHz band, and two blocks of 2 x 1.25 MHz in the 800 MHz band should be made available through an auction procedure.
• A recommended base price for the acquisition of spectrum for 3G services was set at 800 million rupees (US$17.4 million) for "A" circles and the Delhi and Mumbai metros, 400 million rupees for "B" circles and the Chennai and Kolkata metros, and 150 million rupees for "C" circles.
TRAI chairman Nipendra Misra said that the highest bidder for each telecoms zone would get to choose the spectrum with the least interference and widest reach. He added that other successful bidders would have to pay a price at least 75% of that of the highest successful bidder. The TRAI also suggested that rural roll-out obligations should be imposed as part of overall roll-out obligation in a time-bound manner.
The recommendations also included the setting up of a National Frequency Management Board to ensure the availability of additional spectrum and its efficient utilisation, and to plan for future spectrum requirements.
For further details of the recommendations, please refer to: http://www.trai.gov.in/Recommendations_content.asp?id=64.
Outlook and Implications
- Process Towards 3G Deployment: Reacting to the TRAI's recommendations, Telecommunications and IT Minister Dayanidhi Maran said that the government would come out with a policy in three months. "We are looking into the details of TRAI's recommendations and will come out with a formalised report in three months to enable faster roll-out of 3G services in the country,' he said. Speaking at a seminar earlier in the day, Maran said that he hoped 3G services would be available by the second half of next year. In addition, India's Financial Express reported last week that the government had set out an ambitious road map for 3G services by 2012 in all cities and towns with a population of more than 100,000. The newspaper said that the plan was put down in an internal note at the Department of Telecommunications (DoT). The DoT last week said that it had allocated temporary low-power 3G spectrum licences to selected operators for trials. These include state-run operators BSNL and MTNL and private players Bharti Airtel and Hutchison Essar (Hutch Essar).
- Growth and Demand: Although the recommendations signal a significant step towards 3G licensing and deployment in India, both the government and operators should remain cautious in the face of uncertain demand for 3G-based services. Although 3G is now widely available in the advanced Asian and European markets, uptake has so far been unimpressive except in Japan and South Korea (see World: 26 January 2006:Mobile Metrics - Asia Leads the Way in the Global 3G Market). With lower average income levels, Indian consumers are in general more price-sensitive—a situation that raises uncertainty over the demand for 3G services, which should be theoretically targeted at high-spending users.
According to the TRAI, at end-August 2006 there were 123.44 million mobile subscribers in India, equivalent to mobile penetration of 11.1%. Although the low penetration level indicates significant room for further subscriber growth, it is likely that the bulk of such growth will be driven by lower-income regional net additions. Nevertheless, the latest TRAI figures show that India's mobile market has maintained its strong growth momentum. Recent investment announcements by mobile operators, as well as the low-priced handset models introduced by handset makers, are expected to drive further growth (see (see India: 7 September 2006:Malaysia's Maxis Expects US$300-mil. Investment for Indian Expansion, 5 September 2006: Spice Telecom Seeks Expansion with US$2.5-bil. Investment and 24 August 2006:Ericsson Wins US$1-bil. GSM/GPRS Network Contract from Bharti Airtel).