If the 3G and WiMax spectrum auctions happen in the current fiscal, they would see operators grabbing the opportunity to bid for the much needed bandwidth. But is 3G and WiMax indispensable for India? Have their services revolutionized the markets where they have been launched? Not really.
The performance of the third generation technology around the world has been a mixed bag. Though it opened the market for data traffic, the additions were not huge. WiMax deployments faced delays and we cannot even assess their success. According to COAI, for operators in other countries the non-voice revenue is not a major contributor to the total revenue.
For Japanese operator NTT DoCoMo, the contribution of non-voice data is a little over 32%, while for O2 in the UK it is 33%. In the US, for Verizon the non-voice revenue share is 33% and for Orange and SFR in France it is 18% and 16.3% respectively.
None Feeling the Impact?
Interestingly, case studies show that 3G hasn’t been able to bring any magic to the operators’ revenues. SingTel rolled out 3G in Singapore with high hopes, but the technology could see increase in penetration only by end of the second year. By the end of Q3 2005, the penetration was around 3.4%. It grew to reach 44.1% by Q3 2008. Its total wireless customer base in Q1 2006 was over 1.5 mn, and by Q2 2008 it grew to between 2.5 mn and 3 mn.
In Malaysia, 3G penetration hasn’t shown a great upswing. For Maxis, the penetration went up from 1% in 2006, to 8.6% by Q3 2008. 3G did not have a great impact on its wireless base either. In Indonesia the technology did not help increase the wireless base. Though the penetration touched 4.6% by end 2008, the number of additions were not very high. The total number of wireless customers were somewhere between 2.5-3 crore by end 2008. Thus, with such a mixed response to 3G in these markets, it is difficult to imagine what the technology will do in India. The poor response at a recently held 3G WiMax spectrum auction review meeting by the government also raises many questions.
The 3G experience in the UK should be a lesson for the Indian telcos. The rollout got delayed here because of the walloping costs incurred by operators for acquiring licenses. The major issue for operators was to break-even on the huge investments made toward bagging the 3G licenses. In the Indian context, over 70% population lives in rural India where the basic requirement is plain voice services. Therefore, getting the RoI is not going to be a cakewalk for operators. However, the reserve price set by the government will be a silver lining.
China Exception
Chinese operators are currently rolling out 3G. The Chinese government hopes the two-year $41 bn investment in the 3G network infrastructure would trigger a total investment of about two trillion yuan in the next three years.
Non-voice revenue in China totaled $157 bn in 2007, according to data by Informa Telecoms & Media, up from $116 bn in 2006. In Q2 2008 non-voice revenue surpassed $50 bn for the first time in any quarters. For 2008 as a whole they are expected to exceed $200 bn.
Revenues are heavily skewed toward emerging markets. Asia Pacific captured 39% of the global data revenue in Q2 2008, but the region is dominated by China, because of its sheer size, along with Japan and South Korea. Europe was the second-largest region, with 25% share of global revenues, followed by North America at 19%. Other regions contributed only 17% to the global revenues. Frost & Sullivan says that WiMax revenue in the APAC region could be around $11 bn, at a CAGR of 45% during 2007-13.
3G will be obsolete soon in some markets. NTT DoCoMo plans to begin commercial 4G use by 2010 in Japan. Technically, 4G is 2,000 times faster than 2G in transmitting data, and almost 20 times faster than standard copper cable-based ADSL services. 4G promises to deliver high-quality video and data transmission.
The WiMax Story
In the mobile computing domain, WiMax is a relatively new technology. It has yet to see mass deployment at a global level. The technology was developed in 2000 and can provide data rate of upto 70 Mbps from larger distances which can reach upto 30 miles.
According to projections by the WiMax Forum there would be over 133 mn WiMax users globally by 2012. Additional data from the study estimates that approximately 70% of the predicted WiMax users by 2012 will utilize mobile and portable WiMax devices to access broadband Internet services. Currently, more than thirty-five WiMax Forum member companies are creating WiMax base stations.
The ease of regulatory environment in many foreign countries have helped operators and companies to scale up opportunities in the WiMax space. Although the technology has made little progress in Asian counterparts such as Indonesia and China, industry experts feel that with the help of government polices, China alone can have over 40% of global WiMax subscribers by 2012.
In one of the most awaited WiMax auctions of Europe in 2006-07, France allotted forty-four regional WiMax licenses in 3.5 GHz spectrum to operators and local governments. As per the earlier plan, 3,564 WiMax locations should have gone live by June 2008. However, merely 14% of the total sites planned have been built during that period. According to reports, the reason for this was the poor performance of the technology. WiMax failed to meet the desired expectations of operators in the country. Also, the late approval of e standard, ie, mobile WiMax, was one of the main reasons for the slow advancement of the technology in the country.
Positive Signs
The technology is shaping up well in Latin America. There are over ninety-five WiMax deployments in the Caribbean and Latin America region. In Argentina alone over 100 companies have expressed their willingness to bid for WiMax. According to Infonetics, the number of mobile WiMax subscribers in Brazil is forecast to skyrocket from fewer than a thousand in 2007 to 3.6 mn in 2011; a compound annual growth rate of 940%. In the Asian region, Japan is likely to have dual mobile WiMax-LTE services by 2011.
Korea Telecom, with nearly 190,000 subscribers, and Wateen Telecom (Pakistan) with more than 25,000 subscribers have been the biggest WiMax deployments in 2008.
There are several factors which are in favor of an increase in WiMax deployment in India. Many Indians will access the net for the first time on their mobile. This trend is similar to wireless subscribers. A significant percentage of Indian households didn’t have access to fixed wired telephone services and many subscribers got connectivity for the first time through wireless infrastructure. The same trend is predicted for broadband wireless Internet access services such as WiMax which will provide hi-speed data services over a wireless data infrastructure.
The technologies are heading to take a new leap in some of the Asian countries, though past experiences and regulations can make the transition tricky in the years to come. Indian operators, who have shown better financial and network efficiencies to global operators, should take a cautious approach when they start investing in both 3G and WiMax.
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