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3G handset prices poised to crash

By Surajeet Das Gupta in New Delhi
September 29, 2006 03:51 IST
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For customers who want to savour high speed data on their 3G mobile handsets, the cheapest available model is Rs 11,500. But operators say prices are expected to fall to as low as Rs 4,500 within the next two years.

Most operators admit they need to subsidise the handset price in the beginning to build volumes. So expect a basic 3G service with a bill of Rs 1,000 every month, with some free data downloads thrown in.

"Existing average revenues per user are Rs 250-300. We expect basic entry-level 3G to cost at least double, if not more," said Cellular Operators' Association of India Secretary-General TV Ramachandran.

3G services are expected to roll out from mid-2007, provided the government clears the Telecom Regulatory Authority of India's recommendations on spectrum auction.

And according to the Yankee Group, operators might have to invest an incremental $866 million in capital expenditure in the next few years to make themselves 3G ready.

So what is so great about 3G (whether it is the EVDO -- evolution of video and data only -- phones in CDMA or the WCDMA phones in GSM)? For one, it gives amazing Internet download speeds, at least 10 times faster (2.1-3.1 mbps per second) than what EDGE phones offer, or as much as 20 times the speed of the popular GPRS connection.

And in case you are using the latest GSM 3G technology, at 14 mbps per second, it is 50 times faster than an EDGE phone. Simply put, you can download a film clip or a whole song in a few seconds and play online real-time games with players across the globe.

There are already many 3G enabled mobile phones in the market, which can be used once the services are available. Tata Teleservices, for instance, has launched an EVDO-enabled Motorola Razr phone for Rs 14,000.

In the GSM space you can already pick up phones like the Nokia 6680 (Rs 15,000) Nokia 6280 (Rs 16,800), Sony Ericsson P990i (Rs 38,000), Nokia N93 (Rs 40,000) or the imate Jas (Rs 28,000).

Already, 5 per cent of the phones in the country were 3G enabled, said Indian Cellular Association President Pankaj Mahendru.

Operators say it will take them 6-8 months after they get the spectrum to roll out 3G services, so expect services to roll out in June 2007. But how big is the market? Opinions here clearly differ.

The Yankee report looks very optimistic and predicts that there will be 21 million 3G customers by 2010, which is 11 per cent of the total mobile customer base of the country (estimated at $201 million).

But Ramachandran said: "Earlier, we had expected 10 per cent of the subscriber base to go 3G. With the huge reserve price, we think it will not be more than 5 per cent."

Operators have to invest money to upgrade their existing networks and the price will depend on which band they get spectrum.

Said a senior executive of a leading CDMA operator: "If we get spectrum in the 800 MHz band, where we already operate CDMA services, the incremental cost of investment would be 15 per cent. But if we get the 450 or 2,100 MHz band, it will mean virtually creating a new network, except maybe the cost of base station infrastructure."

Even for GSM operators, investment for setting up a 3G network is more or less equivalent to the cost they incurred in a 2G network except that they can use the same infrastructure, like the base stations.

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Surajeet Das Gupta in New Delhi
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