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Wireless Intelligence Analysis India moves to kickstart 3G

Wireless Intelligence

July 2012

Analysis: India moves to kickstart 3G

Major Indian operators slash 3G data tariffs; look to increase number of active 3G users
Indias major mobile operators have reduced the prices of their 3G data tariffs in a bid to stimulate the market amid signs that 3G services are struggling to gain traction in the worlds second-largest mobile market. Market-leader Bharti Airtel slashed its 3G tariffs by up to 70 percent in May and its three largest rivals Reliance Communications, Vodafone and Idea Cellular quickly followed suit. The aggressive price reductions reflect the fact that 3G take-up in India has been subdued since the first 3G networks were launched by the privately-owned operators 18 months ago following the award of WCDMA licences in 2010 (state-owned operators BSNL and MTNL had launched limited 3G services a year earlier). According to the latest Wireless Intelligence data, Indian 3G/WCDMA connections topped 33 million in Q1 2012, accounting for less than 4 percent of the total Indian market. Meanwhile, the total market grew by 13 percent year-on-year in Q1 to 918.4 million, though growth has slowed dramatically over the last few years the result of a number of factors, including saturation in key urban areas, rising 2G prices and regulatory interventions. Airtel is the largest 3G player in the country with an estimated 8.6 million WCDMA connections in Q1 2012, but the operator has recently said that only about 30 percent of its 3G users are considered active. This is a phenomenon seen at the other major operators: Vodafone reportedly had just 1.3 million of its estimated 6.7 million 3G users active in Q1 (19 percent). Reliance claims 3.2 million active 3G subscribers (as of Q1), which it says makes it a market leader; it has 20 million data users overall. Idea claimed to have 2.6 million active 3G users at the end of Q1. Uptake of 3G services is also hampered by the fact that no Indian operator was able to acquire 3G licences covering the entire country, requiring them to stitch together national roaming agreements with each other in order to offer a nationwide service a tactic that the government is currently trying to outlaw. In May, Airtel which has 3G networks in 13 of Indias 22 regional circles - cut its volume-based 3G data pricing for new customers from INR 10 ($0.18) per MB to INR 3 per MB. It also raised data download limits on existing plans; users can now get 150 MB for INR 45 (compared to just 30 minutes of usage earlier for the same fee), while an INR 100 ($1.83) plan now offers 300 MB compared to 200 MB previously. Airtels three main competitors all made similar reductions within weeks, Vodafone reducing its volume-based data charge to just INR 2 per MB. Idea has stated that its tariff cuts should enable it to treble its number of 3G subscribers by March next year. Touted in the Indian media as a 3G price war, the operators' slashing of data prices is in contrast to recent trends that have seen the major players increase 2G tariffs in an effort to ease the earlier ferocious pricing war in voice and messaging. This led to India becoming one of the lowestcost mobile markets in the world with the price-per-minute of voice calls slipping well below $0.01 but severely impacting profitability at the operators. In Airtels case, the decision to cut 3G tariffs may also be a tactic to differentiate its 3G offerings from its early rollout of the country's first TD-LTE networks. Airtel is rolling-out TD-LTE using the Broadband Wireless Access (BWA) licences it acquired alongside 3G spectrum in 2010. It has already launched in Kolkata and Karnataka and also has licences for Punjab and Maharashtra. It also recently finalised a long-anticipated deal to acquire the BWA licences previously held by Qualcomm, allowing it to launch TD-LTE services in a further four circles, including the key metro
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Wireless Intelligence Analysis India moves to kickstart 3G

areas of Delhi and Mumbai. Among the other BWA licensees, Infotel Broadband a subsidiary of Reliance Industries is the only player to hold licences covering the entire country but has yet to launch; Tikona Digital Networks and Aircel are expected to launch TD-LTE services by year-end; but Augere, which was planning to launch using the ZOOSH brand, is reportedly winding down operations and looking for a buyer for its BWA licences. Jon Groves, Analyst, Wireless Intelligence: Bharti Airtels acquisition of Qualcomms BWA licences shows the faith that they have in the future of TD-LTE technology and provides entry into Mumbai and Delhi, the two key metros that are expected to drive most of the demand in the next few years for advanced mobile data services. Despite Airtel having provisioned around 9 million 3G lines itself, the market-leader's closest rival, Reliance Communications, currently claims to have the largest active 3G (WCDMA/HSPA) user base. However, Reliance, along with fellow dual-technology operator Tata DOCOMO, will face tough choices when it comes to deciding whether to continue investing in their competing EV-DO data networks as their existing technical advantages in data services are challenged by faster TD-LTE networks. Airtels TD-LTE tariffs, albeit currently limited in coverage, undercut the current high-speed data tariffs available from the EV-DO operators and future competition due later this year from Infotel Broadband, Tikona and Aircel will see competition in the advanced mobile data market intensify. However, with the so-far limited takeup of 3G services, the TD-LTE launches are unlikely to have a significant impact on the market in the near-term. The more significant development has been the industry-wide drive to lower the prices of 3G services. These tariff cuts will significantly expand the take-up of 3G services, though device affordability still remains a major barrier to wider 3G adoption.
Connections (million) Bharti Airtel Reliance Communications Vodafone Idea Cellular BSNL Tata DOCOMO Aircel Uninor MTS Videocon MTNL Loop Mobile S Tel 2 Quadrant Televentures 3 Cheers Mobile 2 181.3 153.0 Market share 19.7% 16.7% YoY growth 12% 13% % 2G % 3G 1

95% 63%

5% 37%

150.5 112.7 98.5 81.7 62.6 42.4 15.8 6.0 5.8 3.3 2.7 1.3 0.8 918.4

16.4% 12.3% 10.7% 8.9% 6.8% 4.6% 1.7% 0.7% 0.6% 0.4% 0.3% 0.1% 0.1% 100%

12% 26% 7% -8% 14% 86% 57% -16% 7% 6% -4% -9% 20% 13%

96% 98% 90% 61% 95% 100% 100% 82% 100% 100% 100% 100% 85%

4% 2% 10% 39% 5% 100% 18% 15%

India mobile connections, Q1 2012 Source: Wireless Intelligence, regulator reports

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Wireless Intelligence Analysis India moves to kickstart 3G

1 3G total includes CDMA2000 1X/EV-DO connections 2 Networks closed Q2 2012 3 Marketed under a brand sharing agreement with Videocon

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