Mobile operators in India are battling for 3G spectrum—while the world is getting 'hands on' experience on 4G technology. Moreover, going by the telecom minister's statement, mobile operators will have to be ready to shell out more money for 4G even as they roll out 3G networks
Even as mobile operators in India are battling with each other for 3G spectrum, the world is gearing up for 4G technology. In February, the Telecom Regulatory Authority of India (TRAI) had also started consultation for the next level of telecom services or 4G, which offers download at faster speeds (ultra-broadband) and high-definition video on demand, among other such services.
Even as the bidding process for 3G spectrum is going on, the minister for telecommunications A Raja's statement regarding 4G is sure to disturb incumbent mobile operators. According to media reports, Mr Raja has said that the auction for 4G spectrum will begin as soon as operators roll out their 3G networks. This means that operators, who are spending huge sums for acquiring 3G spectrum, will have to shell out even more for 4G spectrum—immediately after rolling out their 3G networks.
"Given the supply-demand mismatch (for three 3G spectrum slots) and its importance from a long-term growth perspective, we expect significant overbidding to take place. We expect the auction amount to reach Rs80,000 crore compared with the base price of Rs35,000 crore at a pan-India level. We expect all the leading operators to strive to get 3G spectrum in most of the key circles such as ‘Metro’ and ‘Circle A’ areas. Failing to win 3G spectrum in these areas could place them at a disadvantage versus competing players. As a result, operators will likely end up bidding aggressively, incurring higher cash outflows," said Ambit Capital Pvt Ltd, in a research note.
TRAI chairman, JS Sarma, while rolling out the consultation process for 4G, had said,"3G has been delayed badly. I don't want 4G or LTE (Long Term Evolution) to meet the same fate. Other countries are catching up with 4G and that is why we are taking advance action."
In fact, a number of foreign players like US-based Motorola and Ericsson have already started testing 4G or LTE technology in various parts of the world. To be more precise, on 3 March 2009, Lithuanian Radio and TV Centre (LRTC) announced the first operational 4G mobile WiMAX network in Eastern Europe. This was followed by Swedish-Finnish network operator TeliaSonera and its Norwegian brand name NetCom (Norway). These network operators, on 14 December 2009, deployed the first commercial LTE in Scandinavian capitals Stockholm and Oslo.
Back home, mobile operators are in dire need of cash flows, not only for deployment of 3G networks, but also to win the bids. According to the Department of Telecommunications (DoT), on Tuesday—the fourth day of bids—the price for a pan-India licence rose 31% to Rs4,582 crore over the base price of Rs3,500 crore. The Indian government has set itself a target of Rs35,000 crore by selling 3G spectrum and broadband and wireless access (BWA) services.
The Gujarat circle, for the first time since the e-auction started, moved to the top in the provisional winning bid price at Rs459.52 crore against Delhi's Rs437.65 crore. Telecom players have been showing keen interest in Delhi, Mumbai, Maharashtra, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu circles out of the total 22 circles.
Ratings agency CRISIL has said that large debt funding of the additional investment on 3G spectrum licenses may exert pressure on the financial risk profiles of CRISIL-rated players over the near to medium term. The pressure on the players’ financial risk profiles will be offset by their strong cash flows, underpinned by a mature pan-Indian presence for most rated players or support from their parents, it added.
In technical terms, 3G allows simultaneous use of speech and data services and higher data rates of up to 14 megabits (Mbits) per second on downlinks and 5.8 Mbits per second on uplinks. On the other hand, 4G offers a data rate of at least 100 Mbits per second. While 3G allows services like wireless broadband access, multimedia messaging service (MMS), video chat and mobile TV—4G, in addition, can offer new services like HDTV content, minimal services like voice and data, and other services that utilise high bandwidth. 4G may also allow roaming with wireless local area networks, and can be combined with digital video broadcasting systems.