Sunday, January 23, 2011

Plan to PostPone 4G

India's telecom watchdog (TRAI)Telecom Regulatory Authority of India  must postpone the consultation paper on 4G (LTE) considering the current financial health of domestic telecom industry.
None of India's telecom operators will be able to spend funds to buy 4G spectrum if the government decides to release spectrum through an auction. Most of the operators have burnt their fingers following the heavily contested 3G and BWA auctions last year.
Since operators spent $23 billion to buy 3G and BWA spectrum, most of the operators are yet to commence 3G services due to paucity of additional funds. Companies such as Reliance Communications and Tata Teleservices, BSNL and MTNL have launched 3G in select circles only. BWA launch by private operators will take more time. Telecom equipment vendors are concerned about the delay. Further delay will result into less support for GDP growth. If India is looking for regaining the 9+ per cent GDP growth, a part can come from the broadband-driven economy.
Scarcity of spectrum and the auction format had forced all telecom majors to place extremely high bids at the BWA auction and many withdrew later. If the government is looking at LTE auction in 2011-12, it will be not be a good idea. At this point of time, TRAI must consult with the industry to assess the priorities of operators. Operators should be looking for bringing down cost, recoup from 3G licence fees, improve profit margins, increase mobile broadband through different technologies and rural expansion.
Operators grabbed 3G spectrum at exorbitant prices as it was the last effort to get some spectrum from the government. There's no appetite left with the operators. Instead of a consultation paper, TRAI can get views from the industry on the preparedness of operators. Let us watch the 3G and BWA space. Operators will take 3-4 years to break even after launching wireless broadband services. Cash starved telecom equipment vendors, especially from Europe and the US, are not in a position to bail out Indian operators if they go wrong.
India's 4G spectrum consultation will be attractive to few LTE operators in international markets. But without the support of Indian telecom majors, they may not be able to make a mark in Indian soil. Indian operators, who missed out on 3G and BWA, are already reeling under pressure from 2G roll out obligations. So, where's the space for LTE? I am not against LTE. India should have leapfrogged. But 3G-BWA auction put us in a bad condition. We do not want to create telecom companies which can write off bad debts at the cost of shareholders. India must rethink on LTE / 4G plans.

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