Why 3G Has Failed To Make Money For Operators In India

It will revolutionize  wireless communication. It will be a source of steady and growing profit for operators. It will be a boon for the average subscriber“.

This was what was being predicted in the months before the Auction for 3G Spectrum. After a lot of delays, the auction finally took place. Operators paid astronomical figures to gain 3G licenses from the Government. They shattered all the predictions set by industry analysts on how much they would pay for the spectrum. Thousands of Crores were paid for licenses, in anticipation that this money would easily be recovered over the next 5 years or so. However, as we are seeing, things haven’t turned out exactly as planned.

When operators launched their 3G services, they gave a month or so of free trails to their subscribers in the circle.  While a lot of people tried it out, figures have shown that very few have actually continued using it at full price. While Airtel claims to have 7 million 3G subscribers, just 30% of them regularly pay and use 3G. Idea Cellular claims that 1/4th of their 3G subscribers are inactive.

What is the cause of this law rate of 3G Adoption?

According to Kumar Ranganathan, CMO of Vodafone India, it is lack of compatibility. “The growth of 3G is a little slower than what we expected. There is low adoption, as there is a fundamental problem with lack of devices, as we are unable to tell a customer about the experience without the device.”

However we find this highly highly improbable. 3G devices have been around since 2004. All Android devices are 3G compatible. A lot of feature phones too have 3G. Yet most of them prefer to stick to 2G (EDGE Services). This is due to the following reasons.

1) Cost: In a price conscious country like India, almost no one is willing to pay 10 times the amount they currently pay for 2G, just for faster internet speed. With the average 2G pack being Rs. 98 a month for 3GB data, the average 3G pack for 3GB data would cost a subscriber Rs. 850. Unless the user needs it for business or is an avid enthusiast, it is unlikely he will pay the premium.

2)Lack of Value Added Services Using 3G: Aside from offering limited Mobile TV, operators have failed to give customers enough reason to consider switching. Mobile Remote Computing, Mobile Learning and other applications of 3G should be made available to consumers.

3) Lack of Proper Connectivity: While operators claim to have covered entire cities, there remain a shocking number of dead spots where one just does not get 3G connectivity. On the other hand, 2G networks get connectivity almost everywhere and are a lot more reliable. Since 3G network is bad, it also adversely affects the mobile phone’s battery life and becomes a power drain.

4) No Single Operator with Pan India Connectivity: With the whole 3G Sharing Fiasco currently under way, it is likely that no single operator will be able to offer their consumers pan India 3G Connectivity. This is a major disadvantage for both consumers and operators.

Hence, 3G becomes more affordable, gets better reliability, gets an Eco-system of services around it and gets Pan India connectivity, we don’t see 3G taking off in a huge way.

What do you think? Will 3G boom in 2012? Do let us know in the comments below.



6 Responses to “Why 3G Has Failed To Make Money For Operators In India”

  1. Dipesh
    December 30, 2011 at 7:12 pm #

    I think because of the high 3G charges.

  2. kiran
    January 11, 2012 at 9:27 am #

    hi. No one is interested to us 3g because of high cost. 50% of indian use net , if network operators give 3g in low cost like 2g , 100% i wil say , network operators wil gain double money , how much they paid to government for getting licence. Just try this for one month.

  3. tony
    March 10, 2012 at 11:56 am #

    It is definetely the price that matters to the average indian subscriber. These operators instead of bringing down the high prices of 3G data, have chosen to increase the tarriff of 2G GPRS packs as well as slow the 2G speeds so that consumers switch to 3G and they recover their losses. But needless to say if 2G services become costiler which the average consumer cannot afford then one can be sure that even the 2G will be losing subscribers as well as revenue.

  4. F.W.Jesudas
    September 20, 2012 at 1:08 pm #

    3 G auctions have created ruin in the world. In 2000 it started with Britian and then Europe and America. When companies paid the auction money they did not have money to spend on hardware and software and the first recession was started and it is still going on. India escaped the first recession as there was no 3 G auction at that time. But India could not escape for long. In 2008, 3G auction was conducted in India with the same disastrous result. All telecom companies are bankrupt and India is entering recession now.
    Lessons learnt : Do not auction natural resources.

  5. Milind
    September 25, 2012 at 3:33 pm #

    Being as telecom enginner, I can say that technology made for Customer but if they are not getting to understand the use of it,what is mean of it. Second, Price of Handset& tariff plan of 3G is the problem.& last, Coverage issue for application matter so wrongly for the Customer point of view.

  6. December 26, 2012 at 3:51 pm #

    Hi I have put my thoughts on why 3G will not take off in India ever –http://amitkumarblog.wordpress.com/2012/12/20/3g-market-potential-in-india-reality-different-than-predictions/
    Basically 3G usage in India after May 2010 auction of $12 billion for spectrums is “pathetic” to put it mildly . To put in data terms here is what TOI reports[52] – “India’s 3G adoption worst among top 30” There are less than 20 million Active subscribers of 3G in India

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