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05 August 2008

TELECOM : A 3G PRIMER

India is the fastest growing telecom market next only to China.

It can be divided in a total of 22 telecom circles with major pvt players such as Vodafone,Idea,Aircel,Airtel,Reliance, Tata etc. All these companies have a pan India licence for 2G spectrum in 900,1800 MHz band i.e.they have a Unified Access Services Licence (UASL) and hence a substantial customer base, with infrastructure and interoperability aspects catered for. These companies already have 2G spectrum of minimum 4.4 MHz each.

Foreign Players
India being a high growth area in terms of mobile telephony MNCs are obviously keen to enter the market as can be seen from Vodafone - Hutch merger, Aircel tie up with Maxis Telecom, Idea (merger of Spice) and tie up with Telecom Malasiya, and the efforts between MTN and Airtel & Reliance on tie up. Mergers and acquisitions would also be the norm as indian companies try to grow to become competitive at a global level. Rural India and small towns and cities hold a lot of promise in terms of growth.
The Third Generation
The Govt of India has announced guidelines for 3G spectrum. It will initially release spectrum in 2.1 GHz. Each circle may have initially upto 5 players, while Delhi and Mumbai may have only 2 to 3 players each. This may go up to 10 companies subject to availibility of spectrum. Defence Services would be vacating some spectrum as per the agreement worked out between the Ministries of Defence and Telecom. Besides the existing Indian players, there are some new players which have UASL like Swan, Videocon & Unitech. However, these companies as of now are greenhorns with no infrastructure or experience and will need tie ups for any creating worthwhile business options. 3G guidelines have opened doors for foreign players. However,it is still inclined towards the existing UASL holders. New players will need to pay more for UASL with no guarantee of the 4.4 MHz start up spectrum(ie for 2G operations). 2G spectrum with 3G will be essential for a viable business model since 3G services will have immense competition with upto 5 payers in a telecom circle. 3G will bring in more user satisfaction in this high technology arena where people do not want to be limited by technology.
Next week we look for some companies to invest in against the backdrop of 3G launch and the likelihood of M&A.

This post has been contributed by my associate - Sumeet Shahi, who is a telecom expert.

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