India’s 3G cost way below world’s

Price Per Population Of Rs 70 Much Lower Than Global Average Of Rs 1,363

New Delhi: The government is gearing up for a Rs 30,000-crore bonanza for the public purse from 3G auctions, which begin on April 9. But what appears to be an aggressive revenue target will actually yield one of the lowest prices per population, or price per pop as its usually called, for 3G in the world. 

    The auction has nine players bidding for three pan-India slots of 5 MHz each in the 2.1 GHz band. Of the 22 circles, an additional or fourth slot is available in Punjab, West Bengal, Himachal Pradesh, Bihar and J&K. 
    The reserve price for 3G is Rs 3,500 crore and winning bids are expected to be in the range of Rs 6,000 to 8,000 crore ($1.4 to $1.6 billion). With a total population of 1.2 billion, this translates to a 3G price per pop of $1.16 to $1.41 or an average of roughly Rs 70 for 
each operator, much lower 
than the global average of $29 (Rs 1,363) per pop across 13 
countries (see chart). 
In purely financial terms, these prices will be a windfall for operators, especially as these are long-term 20-year licences. There are several reasons why India, like other developing countries, will yield some of the lowest earnings per pop for the government. 
    Firstly, competition among bidders is restricted only to the existing operators. The bidding regulations have made it cost-prohibitive for new entrants — either Indian or global — to participate in 3G bidding. 
    Secondly, the 3G uptake is expected to be slow and somewhat restricted to metros, large cities and A Category circles to begin with. The real beneficiaries of 3G are usually mobile broadband and data markets. India, on the other hand, is primarily a plain vanilla voice market which constitutes nearly 92% of the total revenues from mobile operators in India. 
    Thirdly, 3G handsets will be more expensive than 2G handsets used for voice/SMS, at least initially. This, in turn, will slow down 3G penetration across the country. 
    Fourthly, the global experience of 3G penetration has been no different from the expectations in India. Till mid-2006, less than 7% of the total global mobile population had migrated to 3G. So far, 3G has been successful only in Japan, Korea, Germany and Italy. Even the US has only seen a recent surge in data traffic after the launch of the iPhone. Save these examples, the 3G uptake in the rest of the world, especially for data and mobile broadband, has been slower than expected. 
    Finally, India's addressable market may be no more than 850 to 900 million as against the total population of 1.2 billion and it could take over a decade to reach the last 400 million.