3G Launched in India – Should Pakistan Follow?

Much Hyped third generation services surfaced Indian Capital yesterday when government-run Mahanagar Telephone Nigam Ltd (MTNL) launched first Indian 3G network it presence of Mr. Manmohan Sing, Prime Minister of India. We are told that this is a soft launch with limited coverage even in New Delhi. MTNL’s statement said that commercial launch, tariffs and registrations will open in 2 months or so.

Featured Services MTNL will Offer includes

• Video Telephony – Customers will watch and talk simultaneously through Video Call.
• High speed internet for smart-phones and Laptop from 256 Kbps to 2 Mbps.
• Mobile TV
• Location surveillance
• Streaming Video on Demand
• Gaming and so on

So this was about India; now let’s get back to Pakistan, and discuss what prospects and challenges we have got when it comes to 3G network and its implementation in our country.

3G Network Prospects For Pakistan’s Market

Service with better value is always welcomed by the masses. In 3G services, customers can get data speed of up to 2Mbps, while the highest possible speed in GSM is only 50Kpbs and EDGE is 387Kbps (this max speed on GSM and EDGE can vary depending on network).

With emergence of 3G it will be something like transiting from Dial-up to Broadband; means no question, what’s so ever, for comparison, but the answer that “3G will rock”.

Current data usage (SMS and GPRS) in Pakistan shows a notable upward trend. Babar Bhatti, while quoting PTA’s recent annual Report, points that during the year 2007-08, cellular mobile operators generated more than 25 billion SMS. He opines that this growth is resultant of young generation as they share majority of cellular market and prefer to communicate via SMS.

Same is the case with GPRS/EDGE, as a senior cellular official in a conversation told us that GPRS usage in Pakistan has  increased significantly in recent months. He was of the view that awareness amongst masses and the liberty of staying intact with internet while on the go is so vital and attractive, that users can pay extra if they are offered better services.

To some extent, we can use this data as benchmark, keeping in view the global drop in video call and data transfer tariffs over 3G network in recent months. For instance, in Yugoslavia Telenor offers Video calls at same rate as of voice calls.

Though it will be too early to comment on pricing, but we believe that third generation services will be inexpensive too; meaning that people will love consuming them.

Challenges

We have reported several times about current economic down fall in telecom sector, especially after July 2008 budget. We know that telecom companies are not in any mood to invest money for 3G license and then network roll out. Instead they are more interested in expanding GSM network to reach uncovered areas for more customer acquisitions. Also they may consider optimizing network instead of offering a new facility from scratch.

In such a situation, telecom companies may think multiple times before they decide anything on further investments – given that speculated bid for 3G license may hit 300 million US dollar mark.

A senior official from a cellular company (requesting anonymity) told us that he can foresee the potential return on investment in 3G network but this is maybe not the best time to auction 3G licenses. He was of the view that maybe 8 months ago was the best time or 6 months ahead could be another best possible time for 3G network rollout in the country. Lastly he revealed that all this 3G hype is created by the vendors, not the cellular companies or even PTA.

An official from (infrastructure) vendor communicated us that he is not sure if PTA will be able to auction 3G license in first quarter 2009.

It is learnt that PTA wants 2 existing operator (already operating in Pakistan) and 1 new operator to get this 3G licenses; while cellular companies want PTA to allow only existing operators to participate in bidding.

A Telecom analyst during a conversation with us depicted that Telenor is well placed to avail 3G license, while Ufone and Zong will compete for second license and third will go to a new operator.

Conclusion

As we see 3G services being launched in India, China will award 3G licenses in January 2009  and also there are reports for 3G license auction in Bangladesh by March 2009, Pakistan must react accordingly to meet the regional trends. But along with, PTA must create a better environment by forcing the government to minimize taxes on telecom services and equipment to reduce deployment cost.

Along with PTA should award 3G licences to existing operators.

Please share your thoughts in comments…!