Mumbai: Idea Cellular Ltd, India’s third largest mobile telecommunications company by market value, will sell third-generation (3G) services on $300 (Rs13,950) smartphones.
Growing use of basic data services such as text messaging in the world’s second largest mobile phone market indicates demand for video calls, mobile banking and other 3G features, said Akshaya Moondra, Idea’s chief financial officer.
Prices on the smartphone handsets may go down by as much as two-thirds in 18 months, he said on 26 May.
“It’s almost like entering a whole new industry, with no historical frames in India,” said Moondra. “You can’t really predict consumer behaviour. What you have are trends from developed markets in Europe, the US and Japan.”
Idea and the Indian unit of UK-based Vodafone Group Plc were among the nine telecom firms that agreed on 19 May to pay Rs67,720 crore in a government auction of 3G rights. The winning companies have said they will use the new spectrum to ease network congestion and woo high-end subscribers with faster data plans and the promise of new services.
Mobile users in India spend around $40 to buy their phones, and only 50 cents a month on data services, said analyst Manoj Mohta of Crisil Research in Mumbai.
Initially, 3G is going to be restricted to big cities, the urban youth and also corporate customers, who are less price-sensitive, said Rahul Jain, a Mumbai-based analyst with Angel Broking Ltd, who recommends investors reduce Idea stock. Over time, as handset prices decline and consumers adapt to using mobile apps, 3G would percolate to smaller cities.
Idea slashed call rates to as little as one US penny a minute to keep customers after overseas carriers NTTDoCoMo Inc. and Telenor ASA entered India last year with cut-price plans.
Reduced tariffs have caused a steady decline in average revenue per user, a key metric in the telecom industry. If 3G services gain traction, they could slow the slide in revenue, Jain said.
Shares of Idea rose 0.60% to Rs50.50 on the Bombay Stock Exchange on Monday. Idea has fallen about 40% in the last year. That compares with a rise of about 15% for the key Sensex index in the same period.
India has 584 million cellphone users, and added 20 million new users in March alone. Bharti Airtel Ltd, India’s largest telecom service provider, said this month that only 5% of Indians own smartphones.
Idea will focus on domestic expansion in the next two years as more Indians use smartphones to access the Internet, Moondra said. “There’s no lack of opportunity here.”
Idea’s success depends on whether the telcos are able to sell services with bundled applications as Apple Inc. does with its iPhone, said Moondra.
“When the iPhone came out in the US, there was no remarkable dip in voice traffic, but there was a huge uptake in data traffic,” said Rajat Mukarji, chief corporate affairs officer at Idea. “I’m not saying that India is going to replicate that for sure, but that’s one experience.”