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Data Is India's Next Tariff Battlefield

Light Reading
News Analysis
Light Reading
11/28/2010
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India's voice service tariff war, which sent per-minute prices crashing to rock-bottom levels last year, is set to be repeated in the emerging data services market as the country's mobile operators launch their 3G offerings, according to Tata Teleservices Ltd.

The operator has just launched its 3G services, having won 3G spectrum in nine circles (service areas) earlier this year. (See Tata Docomo Unveils 3G Packages and India's Tata Ready for 3G Launch.)

However, it's soon set to be joined by many of its key 3G rivals. (See Bharti Gets a Makeover Before 3G Launch, Aircel Earmarks $500M for 3G, India's Vodafone Essar Names 3G Suppliers, and India's 3G Players Ready for Swift Launch.)

"We believe that the data space is going to be more competitive as... other operators launch 3G services," said Lloyd Mathias, president of the corporate monitoring group at Tata Teleservices, speaking to Light Reading Asia on the sidelines of a recent press conference.

That spells good news for consumers, who, as tariffs drop and device makers launch ever-cheaper 3G handsets, will find 3G increasingly affordable.

But a mobile data price war won't be such good news for the operators or their investors, as the service providers need to find ways of generating a profitable return on their 3G license and infrastructure investments. (See India's 3G Auction Ends, Raises $14.6B and India's 3G Equipment Market a 'Bloodbath'.)

CDMA dominates mobile data landscape
Currently there are just three prominent players in India's mobile data services market -- Tata Teleservices, Sistema Shyam TeleServices Ltd. , and Reliance Communications Ltd. -- and, not surprisingly, all of them are CDMA operators that have upgraded their networks with EV-DO technology.

Tata, in fact, has just started to promote a netbook that hooks up to its CDMA EV-DO network, offering downstream mobile broadband speeds of up to 3.1 Mbit/s. (See TTSL, Acer Offer Connected Netbook.)

Tata and Reliance have an additional string to their mobile data bows, though, as both operate CDMA and GSM networks, and both hold 3G licenses that have enabled them to upgrade their GSM networks with 3G/HSPA technology. Sistema Shyam, which trades under the brand MTS India, has only its CDMA operations. (See MTS India Puts Its Faith in Data.)

Now Tata, which unleashed the voice price war by cutting its tariffs last year, is confident it can capitalize on the head start it has over its competitors, and benefit from its CDMA EV-DO experience.

"We believe we have an advantage over others, since we already have more than 1 million [mobile data] subscribers across the country. The technology and the spectrum we have is superior. We are already ahead of the other operators," said Mathias. (See Huawei Bags India 3G Deal.)

The likelihood is, then, that rivals such as Bharti Airtel Ltd. (Mumbai: BHARTIARTL), which has previously said 3G service prices are unlikely to be as low as 2G, might be drawn into a data tariff war along with all the other 3G players, with Tata Teleservices the probable leader in cutting prices. (See Bharti Gets a Makeover Before 3G Launch, Bharti Needs More Data Drive, and Tata Docomo Unveils 3G Packages.)

Though Tata's Mathias didn't comment on the data services ARPU (average revenue per user) across all of Tata Teleservices, he said Tata Photon Plus, the operator's CDMA EV-DO service, currently has a monthly ARPU upwards of 800 Indian rupees (US$17.45).

— Gagandeep Kaur, India Editor, Light Reading

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