The Mobile Internet Report Key Themes*

India – Near-term Barriers to 3G Adoption
Huge Subscriber Base Drives Long-term Potential
India – Long-Term Need for 3G
India – Short-Term Barriers to 3G Adoption
3G could provide necessary relief to trafficconstrained
network
3G networks, with significantly higher voice
efficiency than current 2G networks, could
help reduce network congestion, especially
in certain high traffic areas
Mobile Internet access more likely than
desktop for affluent citizens
Expensive spectrum licenses increase carriers’
capital investment for initial 3G network /
lowers ROI
Competitive auction for limited 3G spectrum
(~10 carriers bidding for the 4 spectrum
licenses not already allocated to
government owned MTNL / BSNL) will lead
to a higher license fee initially
Competitive market could pressure ARPU
Low PC penetration + high literacy rate +
higher expectation of income growth for
upper / middle class = increased demand
for mobile Internet usage
VAS adds incremental revenue for carriers
3G adoption has the potential to slow, or
possibly even stop, carrier ARPU declines
for post-paid and high-end prepaid
subscribers by inducing higher VAS usage
Indian market could have five 3G operators
for an addressable population of ~90 MM
subs (vs. 4 main operators with ~270 MM
subs in USA), placing downward pressure
on ARPU.
3G handset costs too high for prepaid users
Prepaid users are unlikely to trade up from
their current cheap handsets of ~$30 to 3Genabled
handsets costing over ~$110
(~10% of annual income for average
citizen).
Source: Vinay Jaising, Morgan Stanley Research.
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