3G service to spur mobile growth: Study

The mobile user base in the country is expected to reach 201 million by 2010. With the commercial launch of the 3G (third generation) service in early 2007, 11 per cent or 21 million of these users will be 3G users, according to a report.

The study "Enabling India's Broad Band Economy-The 3G Way" is a market report by Confederation of Indian Industry (CII) and research firm Yankee Group.

The report's estimate is against the government's target of 250 million fixed and mobile lines by 2007, 200 million of which would be mobile connections.

The report's forecast takes into account a less marked reduction in handset prices and tariffs expected in the future, stated incomes, network coverage and annual spending on mobile services.

For 3G to succeed in India, spectrum allocation should be according to need and not be subscriber-based as this ignored congestion in certain towns where the total number of subscribers in the circle might not satisfy the criteria for additional spectrum, said Farid Yunus, senior analyst, Wireless/Mobile, Asia Pacific, Yankee Group.

Capital expenditure on 2G radio network equipment in India will rise to $4.2 billion in 2009, according to the report. 3G network costs will be incremental, adding $866 million in cumulative capital expenditure from 2005 to 2009.

The average revenue per user (ARPU) in India, which is among the lowest in the world, is expected to decline to below $5 a month in 2010 from $9.50 a month in 2004. The report adds that revenue growth will more than double, from the market total of $4.6 million in 2004, to $10.6 million in 2010.

Voice will continue to be the main revenue driver in the Indian mobile market. Once 3G is allowed, data, both video and multimedia, is expected to account for 13 per cent of total service revenue in 2010.

For faster conversion to 3G, Yunus said domestic manufacturing of 3G handsets, which are currently priced high, will help bring down costs. There will be a need to educate consumers on how to get the most out of 3G applications.