3G to Drive Roaming Deals in India
Since none of India's operators managed to secure 3G spectrum covering the whole of the country, but each of the operators want its subscribers to have service continuity across the country's 22 circles (service areas), the deal-making for intra-circle roaming is likely to be hectic in the coming months as the 3G players craft agreements with their competitors. (See India's 3G Players Ready for Swift Launch, India's 3G Auction Ends, Raises $14.6B, and A Guide to India's Telecom Market for more on India's circles.)
Regulation is already in place that allows for intra-circle roaming, although inter-circle roaming deals are not allowed.
Analysts say there are likely to be two kinds of 3G roaming deals: first, between winners of 3G spectrum as they look to broaden their coverage in the country; and second, between 3G spectrum winners and those operators that lost out on acquiring 3G spectrum. (See India Watch: The Road to 3G and India 3G: What's That Spectrum Worth?)
In the long run, it is good for the industry that no one player was able to win a pan-India 3G spectrum license. "The situation is such that they have to pitch in together," says Shiv Putcha, principal analyst, emerging markets, at Ovum Ltd. "All of them need intra-circle agreements to be able to offer national coverage to their subscribers. There are going to be a number of intra-circle deals across the country."
Operators without 3G spectrum will be especially eager to offer 3G services to their subscribers to defend against them moving to another service provider.
The biggest, and the most obvious, option for the operators is to look to tie up with state-owned Bharat Sanchar Nigam Ltd. (BSNL) , which has 3G spectrum in all of the 20 circles for which it is licensed. Its licenses cover the entire country except for Mumbai and Delhi. (See India's 3G Players Face Share Issue.)
"It is certainly not the end of the road for the companies who haven’t got any 3G spectrum," says Neeraj Jain, director of transaction services at KPMG International . "BSNL is steadily losing market share and would be looking at leveraging the infrastructure which it has got. This has also been recommended by the Sam Pitroda report." (See BSNL Suffers First Annual Loss and Is BSNL in Revamp Mode?)
The other state-owned operator, Mahanagar Telephone Nigam Ltd. (MTNL) , has already come out with a tender for offering roaming agreements in Delhi and Mumbai, and BSNL has also shown interest in a similar tender.
The operators that didn’t win, or didn't bid on, any 3G spectrum, which are likely to seek some 3G roaming deals, are Videocon Telecommunications Ltd. , Loop Telecom Pvt. Ltd. , and Etisalat . While Etisalat and Videocon did not win 3G spectrum, Loop and Uninor did not bid in the auction.
Among the new operators, S Tel Pvt. Ltd. is the only one that won spectrum in one circle. None of the new operators bid very aggressively for the 3G spectrum. The main reason for this is that they lack scale and wouldn't have been able to justify the cost of the spectrum.
One exception to the expected intra-circle roaming trend may be Uninor because, strategically, the operator is not planning to focus on data at all.
"In the case of Uninor, they would have factored in the loss of some subscribers who will inevitably move to 3G networks," says KPMG's Jain. "Since they are relatively new in the market and have fewer subscribers, they would be able to offer data services on 2G and 2.5G. However, it is highly unlikely that they would be able to retain the premium or the corporate customers."
— Gagandeep Kaur, India Editor, Light Reading