Business Today

The 3G rat race

MTNL and BSNL have the firstmover advantage.

Print Edition: October 5, 2008

The countdown to the launch of third-generation (3G) services in India has well and truly begun. Already, state-owned telecom operators BSNL and MTNL appear to have stolen a march over private players. With the Department of Telecommunications (DoT) issuing BSNL and MTNL spectrum for all-India services, they plan to launch 3G services within the next six months. While BSNL gets spectrum in 20 circles, MTNL gets spectrum in the lucrative Delhi and Mumbai markets. Meanwhile, private players are still standing in the queue, waiting for the auctions to get underway.

BSNL’s Goyal: Ready to launch
BSNL’s Goyal: Ready to launch
MTNL has started trials in Delhi and plans to have a 3G network on the ground as part of a two-million line rollout by December. BSNL is on the verge of placing a mega $9-billion (Rs 40,500-crore) order for additional GSM (2G) and 3G equipment to expand service by another 93 million lines. A quarter of these lines are expected to be 3G and a rollout is expected by mid-2009 across the country. There are also reports in a section of the press that BSNL might introduce the much-hyped Apple iPhone 3G on its network Currently, Apple’s device is available only on Airtel and Vodafone and does not support high-speed data access. Apple has not confirmed the reports and does not offer the iPhone to more than two operators in any territory right now.

But despite being the first off the block, there are still challenges for both BSNL and MTNL. To begin with, the spectrum will not come cheap. BSNL and MTNL will have to match the price paid by the highest bidder in each of the country’s 22 circles. In particular, it’ll be a costly exercise for MTNL. In an attempt to maximise the mop up from the auctions, the government will allow only two private players in Delhi and Mumbai (there are four in other circles).

However, the first-mover advantage if exploited well could see companies cash in on their investment faster. But both BSNL and MTNL still suffer from the problems of a bloated bureaucratic set-up, which has often hampered their expansion plans in the past. BSNL, for instance, was till four years ago the clear, undisputed market leader in mobile services. But long tendering processes for new equipment has meant that the company is now the country’s fourth-largest mobile operator. MTNL, too, is languishing behind private operators in Delhi and Mumbai. It, then, remains to be seen whether the PSU giants can build on their head-start in the 3G space and outsmart the private players.

Kushan Mitra

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