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Summary:

The 3G auction in India has raised a whopping $11 billion by selling licenses to some of the country’s major telecom carriers. But I think the big winners of India’s 3G buildout are going to be Apple, RIM and Google.

Wow…the 3G auction in India has raised a whopping $11 billion by selling licenses to some of the country’s major telecom carriers including Bharti Airtel, Reliance Communications and Aircel. That is an astounding amount of money considering the low tariffs in the Indian market, where voice minutes and SMS messages are ridiculously cheap and most telecom carriers are struggling to keep their profit streams intact.

Bharti, for example, is in the process of buying the assets of Zain in 15 African countries in order to diversify from the hyper-competitive Indian market. Vodafone, which entered the Indian market with much fanfare a few years ago, is taking it on the chin these days. In its most recent quarter, the company said it was taking an impairment charge of around 2.3 billion pounds ($3.31 billion) related to its operations there.

There is no reason to believe that things will be any different in the 3G world. The 3G buildout isn’t going to be cheap and if the tariffs remain low, expect things to be tough for Indian telecoms. Given the history of telecom regulation in the country, I wouldn’t be surprised if the Telecom Regulatory Authority of India and/or the Department of Telecommunications continued to make short-term, politically popular moves that will kill the golden goose. Bharti Airtel, for instance, spent $2.6 billion on the 3G spectrum — good luck recouping that after a big network buildout.

While it might seem like an opportunity for hardware providers like Ericsson, I think the big winners of India’s 3G buildout are going to be the three smartphone giants: Apple, Research in Motion and Google with its Android ecosystem.

In fact, if Google was smart, it would be shifting much of its mobile resources to India right now. Not only could it use the demand for cheap 3G smartphones to its advantage, it could also jump-start its tablet ambitions by building low-cost devices coupled with affordable 3G Internet plans.

Similarly, Apple could offer a lower-priced version of the iPhone 3G/3GS in the Indian market — even as it introduces the higher-priced iPhone 4 in it core markets such as the U.S., Europe and Japan.

  1. Spectrum auctions are bad for the population.

    The government gains short term revenue. But that cost must be passed on to the population that uses the networks.

    Governments should be encouraging internet use. Not auctioning it to the highest bidders to gain revenue.

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    1. Doesn’t the govt revenue to back to the people ? In India’s case it goes to reduce the deficit so it is just “time shifting” of revenue.

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  2. Om,
    Wishful thinking, I guess you are dreaming a bit here :).
    While the RIMM, APPLE and Google may sell few smart phones its the Nokia who gets the ultimate benefit. The simple reason is 3G plans are anything but expensive. Combine these plans with a 20 – 40 thousand rupee worth of iPhone/BB/… you are talking only 1% of the population who can afford the plan+phone. Hopefully the the cost might go down in five years or so.

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    1. BlackBerry has a device for about 10,000 INR ( USD 220 ) and possibly going further down market.

      There are QWERTY devices ( not from the vendors mentioned here) that retail for less than USD 100.

      Finally, we understand that instrument leasing/monthly rentals are coming this summer..

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    2. I actually don’t think so. I think as the volumes have grown there is a distinct potential for Apple to sell lower priced iPhone 3G models in India and elsewhere, where it can’t charge premium prices.

      Secondly, I believe that a massive wave of Android devices is coming that is going to cause a shift in usage. Nokia has done well in the 2G age, but as mobile Internet becomes more popular you will see the big shift in market share. Look at Europe — who thought people will be eating Nokia’s lunch there, but they are.

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      1. Om,
        I doubt Apple wants to dilute its brand by selling for cheap. I tend to agree with you on Android which is made by ever manufacturer from Moto to LG. The only reason I gave Nokia a chance was, Nokia has the mind share. Indian media in general wrote praising reviews for the latest Nokia smartphones. In addition, folks in India prefer a nice 8 MP camera phone rather than a phone that has boatload of apps. The game changer is creating apps in all 14 languages, whoever does that first will have a shot at the top spot.

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        1. I think they are selling for $99 in the US and from what I hear they are about to drop prices further to about $49. So from that perspective it won’t be that much of a brand dilution. I think they just need to figure out partnerships with the right providers and right price points. At current volumes, I bet their BOM is pretty low that they can make a go of it in mid-price range.

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  3. That said, the winners are likely to include NetBook vendors. There is a large field force in India with no computers at all and a netbook is about the same cost as a smartphone. This is one market where Netbooks sales may fly.

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    1. Yes and also let’s not forget the tablets with touch screens.

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      1. Yes OM,

        There is Huge potential for Touch screen tablets to succeed here in India, Give If they are rightly priced…

        As @Jack mentioned, For big Field force – it makes sense to have tablets with Internet connectivity & it can release potential for each stake holders in a rising economy like India. Like a Telecom Operator will earn selling Data Plans, A hardware Vendor will earn selling hardware, & IT Consulting companies will earn through analyzing the Data & yes It will bring agility to the Businesses & Makes economy more competitive.

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  4. Yes Apple, RIM and Google will definitely be the winner and like you have said whoever builds a lite version of their smartphone [I always hear my friends in Indiatell me that a full smartphone is too expensive in India for the average consumer and that is why Nokia is doing so well in India on their average handset] will be the winner in this very vast market of cell phone users
    Will be interesting to see who has the first mover advantage.

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  5. RIM, Google Android, HTC ,Nokia and net book device makers might very well be the real beneficiaries of 3G. But I have my doubts on the Apple. The iPhone launch in India was a disaster, which Apple guys would not forget in a hurry. And if they continue in the same vein, they will see others benefiting from the Indian market and not themselves

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    1. If the sales and popularity of iPhone I have seen in India, with just the right push the company will do well. IN fact it doesn’t have to do anything other than partner with a 3G provider desperate for customers. :-)

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  6. Apple is the last company I would expect to cash in here. It’s a company that shut down its technology operations here just because it did not want to appear “cheap”.

    The big 3 winners will definitely be Google, Nokia, Samsung and Blackberry/HTC in that order..Indians love everything Google and I expect the impending launch of a cheaper Nexus One to be a success in India..Nokia is definitely the other biggie here that will make the most of it.

    If you are surprised by Samsung in the list, well Samsung is yet another company Indians love..So far, the company has focused on the larger consumer electronics like TV. But with 3G here, I am sure there is going to be a rejuvenated focus on the mobile phone segment…

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    1. Anand

      I remember what they said about iPhone in Japan and South Korea. Well, time will tell how far the market will respond to the iPhone on 3G in India :-)

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  7. Om the headline for your blog is cheesy (sic)
    If you have been in India, you can understand that even GSM coverage for voice is pretty poor.
    While 3G definately holds promise for data, dont forget the additional benefit it will bring for the voice network.

    Praveen

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    1. Not sure what point you are trying to make? The headline and your comment have nothing in common.

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  8. ROTFLMAO, apple, winner??

    Have you people forgotten that India’s an open mkt, with an ARPU of $3/mo?!? This means that no operator will partner with apple to subsidize it for the mass mkt, forget your $99/$49 fantasies, aint happenin. iPhone BOM cost is $180. & the killer app was & still is SMS in India, which very nicely leads to….

    RIM is doing very very well indeed. It’s features & price pts fit the mkt perfectly. They’ve got it absolutely spot on.

    Android may win if the new age local players take to it. HTC/Moto simply dont have what it takes here.

    Full disclosure: Use a Nokia E72 for anything mobile, & iPod touch for games.

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  9. [...] at the end of last year only 20 percent of the world’s mobile phones were on a 3G connection. India is in the process of auctioning off its 3G spectrum and China plans to boost its 3G coverage over the next few years, which will boost worldwide 3G. [...]

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  10. I’d love to see Apple build cheap devices for the Indian market and keep that innovation out of the US; I don’t see how they can do it..

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