Operators to spend $6 bn on 3G services

Indian mobile operators are on course to spend up to $6 billion to offer third-generation (3G) mobile services to users.

According to initial estimates, which do not include the spectrum fee (at least Rs 1,050 crore each for a national rollout), operators are planning to set up 75-80 million 3G-enabled connections.

Bharat Sanchar Nigam Ltd alone is setting up 30 million lines, while the other operators will add another 45-50 million lines over the next 2-3 years.

With the total subscriber base expected to double from the existing 100 million, the operators' investment can be assumed at an average $80 per subscriber for enabling high-speed web surfing and streaming video services.

Users will need to buy handsets separately, which will be around Rs 5,000-7,000 for the average entry level device.

The $80 price is derived from the $65 MTNL recently paid for a partly 3G network. The final price will be available as soon as BSNL's existing tender is finalised. Bharti Airtel's tender for 3G is also expected soon.

The estimates for investment take into account the fact that 3G services are likely to be made available first in metropolitan and other big cities. Even there, the target users will be the top layer of the subscriber base.

The average cost would be much higher at $135 per user, and 3G users would be confined to the "creamy layer", said Cellular Operators' Association of India Director-General TV Ramachandran. This is a figure substantiated by NK Goyal, president, Indian Manufacturers' Foundation.

The Telecom Regulatory Authority of India (Trai) had recommended a minimum spectrum fee of Rs 1,050 crore for a pan-India 3G spread.

Compared with the entry fee paid by the fourth mobile operator some years ago, the Trai formulation is 47 per cent lower. The final price to be paid will depend on the department of telecommunications' decision on minimum fee as well as the bidding by the operators.

Operators need to erect an overlaying network "" one parallel to their existing networks "" to start 3G services. Investment for GSM operators is expected to be much lower than for CDMA operators who, an equipment vendor said, would need to upgrade substantial portions of their network.

For GSM operators, the upgrade will primarily be incremental, and involve installation of new base stations. They will mostly be able to use their existing towers. For CDMA operators, it will virtually be a new network.