Nomura research: Takeaways from 3G conference

We recently attended the 3G India 2010 conference in Mumbai. Here we provide the key
topics of discussion from each presentation:
The key messages were:
 Data: Virtually everyone referring to this untapped segment was still relatively upbeat –
even for rural India.
 Applications/ content: The buzzword was ‘convenience’, or rather 3G applications’
intuitive and easy usability. Mobile broadband is widely recognised as the key growth
engine – but device prices will remain a near term barrier. Some highlighted that India is
largely an ‘emotional’ country and video calling should grow. Video content should also
gain momentum and its growth can be aided by Interactive Voice and Video Response
(IVVR). Social networking is another category of application that is expected to grow.
 Network congestion. Is there capacity for data growth?: This was a key topic and
an area of concern given the limited amount of 3G spectrum – 5MHz. Metros could start
facing congestion as soon as 12-18 months after the launch. In order to avoid such a
situation, resource allocation to potential users should be done after analysing
preferences and usage habits of users. Backhaul capacity also needs to be ramped up.
Further, ‘smart devices are not always smart’ and can result in heavy data load on the
network. Existing CDMA players (RCOM, Tata) could enjoy an advantage over GSM
players.
 Devices: Affordability of devices was highlighted as one of the key drivers of 3G/data
growth. Manufacturers recognise this and are increasingly launching affordable
phones – sub-INR5k phones that allow web browsing are easily available. India could
soon also see the advent of China-made Blackberry ‘look-alikes’. These are expected
to be priced at sub-INR4k. However, initial 3G growth is expected to be led by shared
devices (ie, devices shared by members of the family, such as USB dongles).
 Tariffs: While no ‘formula’ for tariffs was advocated, our discussions with various
participants indicated that tariffs would have to be kept low in order to drive growth.
Situations should be avoided that could lead to ‘bill shock’ for customers.
 Customer segmentation: Given the wide diversity in spending capacity of potential
users, customer segmentation becomes vital. While high-end customers may be given
very high QoS to avoid churn, lower categories would require customised applications
that are convenient to use.