At the launch of the India’s first 4G services by Bharti Airtel, telecom minister Kapil Sibal, uttered what was in everyone’s mind. DNA has quoted him as saying “I dare say that though 3G was launched, the benefits are not yet seen by the aam aadmi. Now we are launching the 4G”
3G services in India did not pick up for various reasons including high cost and poor network availability. 4G services of Bharti Airtel, as the table shows, are also priced around the same price point as its 3G services.
As had been the case with 3G, these services contribute little in terms of sales in initial years. Investors are left hoping that these services will pick up at some date in the future. Till such time the companies would have already burnt a lot of capital. 4G could also move in that direction, unless subscriber base shoots up.
Bharti Airtel has already pumped in Rs 3,314 crore for acquiring the license for rolling out 4G services in Maharashtra, Karnataka, Kolkatta and Punjab. The Economic Times has reported that the company is in talks with Qualcomm to buy its license for Rs 6,000 crore. This will give the company access to launch in Mumbai, Delhi, Haryana and Kerala.
With nearly Rs 10,000 crore deployed for acquiring license for 4G, the company will need big subscriber numbers to generate a meaningful return on investment.
It has a 9-12 months lead window as the first-mover before Reliance Industries rolls out its 4G services. Reliance has acquired the right to launch the service throughout the country at a cost of Rs 13,000 crore. Given the relatively low cost and access to the entire country Reliance can adopt an aggressive pricing strategy to capture the market.
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The reason India’s telecom market has been one of the biggest in the world is because of the low cost of services offered. That is the only way numbers can build up in the country.
4G too will be reduced to a low-margin-high-volume play, sooner rather than later.