Launch of 3G services, network deployment by new operators and rollout of long distance network will drive an investment of around $55 billion (Rs 2,47,500 crore) over the next five years into the Indian telecom sector, said Crisil Research in a report.

Fifty percent of these investments would take place during 2010-11 and 2011-12 as the 3G winners roll out services in their respective circles. ?However, majority of this will be through short term loans from banks and equipment vendor funding. The remaining part of investment will be through internal accruals or through a private equity partner,? said Nagarajan Narasimhan, director, Crisil Research.

He further added that 3G services would continue significantly to profitability over the long-term. ?Jump in network expense will over-ride incremental revenues. Because of this, 3G services will be margin dilutive over the next few years,? said Narasimhan. However, pick up in subscriber base and higher contribution from data services will enable 3G services to be margin accretive over medium to long term.

Crisil expects the India?s total wireless subscriber base to reach 850-900 million by the year 2013-14, of which 12-15% will be on 3G network. Potential of players to introduce killer applications will ensure a premium of 10-15% on 3G services which will in turn give 5000-700 bps ebitda advantage over 2G services. ?Our estimate of 3G subscriber base is about 100 million by the fifth year of operation. Average revenue per user premium over 2G services would be at least 15%,? said Manoj Mohta, head, Crisil Research.

The report also mentioned that unsuccessful players at the 3G auctions and falling profits will trigger a round of consolidation in the Indian telecom market.