Over the past 3-4 years, TRAI, DOT, COAI and the Indian Telecomm industry have been in mortal combat over the so-called 3G spectrum. And finally, after much debate, postponement, and a lot of painful, heavy bidding, 6 companies – Reliance Communications, Vodafone, Bharti Airtel, Aircel, Idea cellular and Chennai based S-tel have won the auction for the mobile spectrum. While no single company has been able to obtain a PAN India presence, Vodafone has wrangled 9 circles, out of which 7 are among the most expensive and ‘premium’ circles; Reliance, Aircel and Idea Cellular have won 11-13 circles mainly in the 2nd and 3rd rungs; and Bharti Airtel has the circles in Delhi, Mumbai and the south. In order to attract more users and achieve a PAN India presence, formations of partnerships between companies seem to be inevitable.
There are several controversies regarding this. Since the 3G spectrum was allocated after so many stringent rules and widely debated policy-making, there are now questions over the previous allocations of 2G. While the government has gained hugely from this auction, which fetched them INR 70000cr – almost double of what was expected – analysts feel that the 3G spectrum has been hugely overbid, and that the companies have burnt their fingers. They will be in heavy debt for a long time before they start making profits. Companies may have to even sell some of their assets to be able to pay for 3G. For instance, the debt to equity ratio of Bharti Airtel – which has already made a $9 billion acquisition of Zain Telecomm – will now increase to 2.3. Reliance and Idea Cellular will see their financial statements stagger heavily under debt as their debt-to-equity ratios increase to 3.5.
3G is a form of mobile telecommunications technology that enables users to download faster, send and receive video streams as well as audio streams simultaneously on their mobile phones. The potential internet speed of 3G enabled mobile phones is 2-3Mbps, which means you can download a 3 minute song in 15-30 seconds, while with the current speeds it takes between 5 – 10 minutes. You can also send and receive faxes, undertake e-learning programmes, make stock transactions, and have video-conferences on your 3G enabled mobile.
However, for this to be possible and truly beneficial for the users, there need to be high-tech, state of the art towers to support the 3G waves. Also, pricing is an issue. Telecomm companies are trying to tie up with various mobile phone companies like Nokia and Sony Ericsson in order to provide affordable deals to their customers. With the government banning Chinese vendors at present, the costs of cell phones in India manufactured by other companies are sure to go up. Also, the connectivity and speed in India is very poor due to the high population density and heavy interference in the transmission of wireless signals.
Then there is the bigger question – will the Indian customers feel that switching over from their current, cheap and convenient 2G mobiles to an expensive 3G mobile is worth the trouble? Also, India is extremely backward and delayed in the entire technology department. In Europe, 3G was launched in 2003, while in India, its 2010 already, and the 3G spectrum has just been allocated. It may be well up to 2011 before we see 3G phones, and 2013 before they become affordable to the average Indian customer. Also, it will take time for the companies to detect and sort out various issues, and come up with better versions which are best suited for Indian customers. Japan and Korea meanwhile, are already upgrading their communication equipments to 3.5G technologies. In the US and few other countries, 4G technologies have being auctioned and are already in a pilot phase – probably being worked upon by Indian techies.
India has to understand that it’s not slow and steady who wins the race anymore, but fast and smart. Whether 3G catches on in a large scale, and whether companies will profit in the long run, only time can tell. Meanwhile, the biggest benefited from the entire episode is the Indian government.