BSNL and MTNL fail to attract 3G subscribers
By Sudarshan Kumar   |   Tuesday, 28 July 2009, 15:38 IST   |    5 Comments
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BSNL and MTNL fail to attract 3G subscribers
Bangalore: Bharat Sanchar Nigam (BSNL) and Mahanagar Telecom Nigam (MTNL), the state run telecom operators managed to attract just 11,000 customers for 3G in six months of their operations. BSNL and MTNL, who were pre-awarded 3G licenses, rolled out 3G services in 70 (BSNL) and two (MTNL) cities nationwide respectively. The private telecom operators are in the process of planning their 3G network infrastructure and awaiting final approval from the Department of Telecommunication (DoT) auction to start rolling out their networks. "Despite the hype around 3G, MTNL and BSNL have attracted only a few thousand subscribers for these services," said Dilip R Mehta, Mentor and Advisor, N S Raghavan Centre for Entrepreneurial Learning (NSRCEL), IIM Bangalore, in the panel discussion organized by Mobile Monday in IIM Bangalore. MTNL managed to attract just 1,000 subscribers in six months of its operations, whereas BSNL could muster only 10,000 3G subscribers in six months. Due to the failure of these two state owned companies in attracting customers to use 3G services, analysts feel that Indian government is not yet ready for 3G phones. Prabha Aithal, CTO, CanvasM Technologies said, "When 3G was launched in Europe, similar type of questions was raised." Both these operators have been underperforming in the market despite the fact that what they offer is not much different from the offerings of the private mobile operators. BSNL was able to add only 26 percent more mobile subscribers in 2008 while MTNL grew its base by 32 percent, the two lowest growth rates in an industry, where almost all others grew their base by 50 percent or more. There is more pressure on the average revenue per user (ARPU) of BSNL and MTNL than those of the private operators. Private operators have 14-15 percent higher ARPU than the two government companies. Given all that, will 3G help the two to fast track their growth and bring in more subscribers? After all, private operators are still months away from launching their own 3G services. Mehta says, "The subscribers of these two operators are at the extreme end of the society and it is highly unlikely that these companies can make any significant gains in market share with their 3G services, unless they position and market their services right. They can definitely use the next few months of no competition (in 3G from private operators) to create demand and develop a market for their newest offering." However, Chandrasekhar, General Manager for Mobility, Marketing and Sales, BSNL says, "Market is growing slowly. The customer base has grown by a good rate in the month of May and June. We are also collaborating with many handset providers to avail the 3G mobile phones in market at the affordable price." BSNL tied up with Nokia, Sony and Samsung for handset bundling, the cheapest of which is priced at 7000. In the first year of 3G operations, the operators are expecting 3G subscribers to pay about five times of the current 2G or 2.5G tariffs. This is a steep increase and will target only niche demographics. Voice tariff schemes begin from a fixed monthly charge of 350 for prepaid, and 500 for postpaid. "90 percent of mobile users in India use prepaid service," said Ashish Sinha, Chief Catalyst, Pluged.in. On the application of 3G, Sujai Karampuri, CEO, Sloka said, "3G makes possible video streaming applications such as Live TV, movie downloads, high speed data download on mobile phones. With 3G services enabled, callers can also see each other on their mobile phone screens." But analysts feel that more than all these applications, the challenge for operators will be to offer wide coverage (including roaming), high quality service and attractive content in the initial years to sustain high-paying subscribers long enough to reach the tipping point of growth. Operators can easily provide the services in metro regions but the biggest challenge is to make these services available in rural India. Aithal said, "The consumers in rural market are waiting for 3G services." It would be really interesting to see as how these 3G applications help farmers in forecasting weather for crop protection and educating their children. "Currently, we are mainly focusing on community connection to individual connection in rural areas. Once the price range of 3G mobile comes down to 2000-3000, we will start focusing on individual connections." The future of 3G services in India looks more doubtful after seeing its growth rate among IT employees. "Currently, only one percent of the total IT employees use 3G services," said Chandrasekhar. "It is both a big challenge and an opportunity. There will be a lot of space for startups and young entrepreneurs," says Mehta. Frost and Sullivan, a business research and consulting firm estimates that the number of 3G subscribers in India will be around 7-8 million by the end of FY 2009-10.

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