2012: The Year Of 3G?

Last week, the India's largest operator Bharti Airtel Ltd. took the lead in dropping the 3G tariffs by about 70 percent. This was followed by other prominent operators like Idea Cellular Ltd. and Vodafone India also slashing their 3G tariffs. Aircel Ltd. has also unofficially dropped 3G rates, according to some reports.

There are two aspects to the recent reduction in tariffs by the telecom operators. The first is that though Airtel has taken the lead and launched 4G services in Kolkata and Bangalore, it will still need to make data services accessible to the masses to drive its adoption. Since voice revenue is coming down, it is extremely important for the companies to push for the adoption of 3G services. 4G will remain a niche service in short term, thanks to high tariffs and availability in only a few cities. Initially, the device ecosystem will also be a big hurdle in the growth of 4G. Also, it will take a little more time before the 4G network is up and running fully. Like 3G, the operators will have to bring down their 4G tariffs too to drive its adoption.

Voice revenue is coming down and the telcos need to focus on data to drive their revenues. High tariffs, besides poor network, ensured that 3G never really became popular. The telcos' experiment with high tariffs in 3G just did not succeed. For example, Bharti's ARPU did increase from INR 187 at the end of December 2011-quarter to INR 189 at the end of the March 2012-quarter, but this had only a marginal impact on the balance sheet. Even after the launch of 3G services about a-year-and-a-half back, the number of subscribers was depressing. According to experts, the number of 3G subscribers is not more than 10 million in the country.

Hence, after some misses, it appears that 2012 can be the year of 3G. After the drop in tariffs, the services are likely to pick up. Once they pick up, network expansion will happen which will fuel further adoption, something the analysts have already suggested. At the same time, 3G tariffs are unlikely to come down to the level of 2G in the near term.

Gagandeep Kaur, Editor, Light Reading India