The Indian Telecom industry currently in the state of deep mess for 2G Spectrum Scam is quietly rolling out 3G services in lucrative areas. Today we will evaluate the roll-out Costs & Economics for 3G Services in India. For the purpose of our Research, we have classified Operators in 3 different categories – Small, Mid-Size and Large.

Rollout Cost / Cell Site including Spectrum Charges
Small Operator – Upto 20,000 Towers – $35,000 / Tower + Cost of Spectrum depending on the Circle
Mid-Size Operator – Upto 50,000 Towers – $28,000 / Tower + Cost of Spectrum
Large Operator – > 60,000 Towers – $25,000 / Tower + Cost of Spectrum

Users / Cell Site / TowerCurrently the most efficient operator in India, Airtel has ~1,350 2G users per cell site. Assume a third of 3G users / Cell site ~ 400-450. 3G data bandwidth for users sharing the same cell site is a shared resource. Hence, higher the number of users per cell site, lower the available bandwidth per user. 3G cell sites can be configured for a capacity ranging from 3.6 mbps to 21 mbps by way of network upgrades from WCDMA to HSDPA to HSPA.

Incremental Revenues per 3G user An average 3G Data users consumes 400-500 MB data per month. Current 3G plans in the market imply a blended price/MB of Rs0.5-0.6. Over a period of time, expect 3G price/MB to come down in India over time. Incremental revenues for operator can come only from higher usage and not higher unit price – this again would pose capacity challenges at the access as well as backhaul layers and has capex implications.

3G Services & Data on Smart PhoneThe top-173 cities & towns in India have a total population of 215 mn. Hence, a 120 mn 3G subs base can be seen as a ~55% penetration in the top-173 cities or a 35% penetration in top-173 cities + a 5% penetration in the rest of India. This translates into ~15% of UNIQUE Wireless Subscribers. Once can expect an incremental ARPU from 3G services of Rs 150 / Month / Subscriber in the next 3-4 years. 3G & Smart Phone Handset availability is being addressed to a large extent and the base model should have all the features like video Calling, Ability to Browse and Install Apps coming at a cost of ~ Rs 6000 within the next 12 months.

3G Data Services for Laptop, PCs, iPads and Tablets Most users in this segment are looking towards connecting to the Internet. India’s broadband penetration is still <1% (~11 mn BB subs). This segement of the market will have many competing technologies including DSL, cable, fiber, 3G, EVDO, and LTE. Now, realistically we can expect the Broadband Subscriber Base in this segment to touch 4 times in the next 4 to 5 years to 45 Mn. The expected ARPU from this segment currently at Rs 900+ is expected to reach Rs 600 on a much wider subscriber base ~ 45 Mn. And Finally, Data as a Percentage of Total Revenues for Wireless Operators will grow from current 2.5% to 20% in the next 4 years. What say ?