Telecom service providers, who collectively coughed up Rs 68,000 crore for the coveted 3G auctions, feel it would be a long haul before their companies can break even on their 3G investments. Bharti Airtel, Vodafone Essar, Reliance Communications and Idea Cellular, amongst others, have already ordered their 3G gears and will be launching the services by the end of this financial year.
?Breaking even on the 3G investments is a long haul process,? said Samaresh Parida, director-strategy, Vodafone Essar. ?We cannot predict what kind of uptake 3G services will see in the initial days. Anyone who is saying and setting a time-frame for break-even is only guessing. All I can say is that it will be a long haul process,? he added. Vodafone will spend around Rs 23,000 crore over a span of two years as 3G capex.
Having paid heftily for 3G licences, operators are looking for ways to cut down the capex for 3G services. Apart from the equipment, these companies will be sharing the same towers that they have been using for 2G, with an additional 3G slot.
?Deriving a business case out of 3G as a standalone model will be difficult. Operators need to look at it as a way to secure their underlying core 2G or 2.5G businesses. Only a few operators have secured 3G licences out of existing 14 players in the market, thus, giving them an opportunity to position themselves differently in the market,? said Arvind Subramanian, partner & director, Boston Consulting Group, India.
Subramanian believes that for the next three years subscriber revenues from high speed data services will not be significant. As an early phenomenon, it will be limited to top 10-20 cities in each circle and on a pan-India level in 200-300 cities.
?Breaking even on the investments will take a long duration as it also depends on at what price points users find it attractive. 3G being delayed in the country has led to the ecosystem being more mature, resulting in availability of wider equipment and handsets,? said Akshaya Moondra, CFO, Idea Cellular.
Prashant Gokarn, business head, 3G, RComm said the return on investments from 3G will start just after users start using these services. However, breaking even will take about 5-6 years from the day of its launch.