3G bids seem high, but may not pinch | india | Hindustan Times
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3G bids seem high, but may not pinch

india Updated: May 20, 2010 21:12 IST
Manoj Gairola
Manoj Gairola
Hindustan Times
Highlight Story

Have telecom service providers bid too high for 3G services?

That might seem so from the huge offers for airwaves to usher in video phone calls and downloads, but the industry may not really be sitting on a "winner's curse" — a term used to describe situations where a win loads liabilities on the victors.

Experts say there are benefits to be had for service providers, even if the Rs. 16,750-crore tag on a pan-India spectrum seems on the higher side.

This is because the duration of the benefit is 20 years, which is a long time in which the operators can see both growth and prices matching up.

"Spectrum price is not high considering that it would be amortised over 20 years," said B K Syngal, former Chairman of Tata Communications. He said one megahertz of 2G spectrum gets Rs.2,000 in annual revenues, while it costs less than one-tenth of the sum.

In India, there are 36 million fixed line phones, and about 550 million mobile phones. "Therefore, mobile telephony will provide the first broadband experience to most of the Indians, especially in rural areas," said Ashish Basil, partner, Ernst and Young.

"In next six to seven years, between 25 and 30 per cent of the total revenue of a telecom service provider will come form data services," he added. It is now 10 per cent.