“3G services will not come cheap” says Sunil Mittal,Chairman of Bharti Group.Telecom companies have shelled out huge amount of money for getting 3G and BWA spectrum.The company of the stature of Bharti Airtel didn’t go for pan india license because the prices rose beyond a reasonable level.Bharti Airtel won 3G license in 13 circles and paid Rs.12295.46 crore as spectrum fee.Vodafone got license in 9 circles and paid Rs.11617 crore,while Reliance paid Rs.8583 crore and won license in 13 circles.These three companies were top 3 spenders for 3G spectrum.Having  paid so dearly,now everyone was speculating that 3G services would be costly for consumers and the same opinion has been revealed by Mr. Sunil Mittal.

Now having paid big amount for 3G spectrum,operators are planning to keep the tariff high.Bharti Group Chairman Sunil Mittal said that  ”Take the example of Delhi itself, or Mumbai. The amount for spectrum that has been charged is close to Rs 3,500 crore each… Just to recover license fees and input cost, it works out to be Rs 700-900 per month,”.

Especially in Metros, Mr. Mittal expects ARPU of around Rs.700-900 per month from 3G customers.Other operators too will have more or less similar pricing strategy to recover license fees.

BSNL & MTNL have already  launched their 3G services in many circles and probably they had not expected such huge payout for license or they might have expected waiver of spectrum fee on social obligation ground.BSNL has paid Rs.10,186 crore and MTNL Rs.6564 crore for two metros.So together they have paid more than the highest payer amongst Pvt operators ,for pan India license.

Incumbents have Penetration pricing Strategy So far:

Oblivious of the costly spectrum,these two companies have kept  3G tariff quite low .For example in Mumbai & Delhi and MTNL customer can make Video calls at voice call rates of 20 paise/min (own n/w),50paise/min(other local),and STD at 75p/min.Data Charges are as low as Rs.1/MB.Mobile Tv charges are Rs.150/month for a bouquet of 35 channels without any additional data download charges.BSNL too is charging 30p/min for local and 70 paise/min for national video calls as promotionl offer.Data charges too are Re.1/MB.Initial SIM cost too is very low.For example BSNL 3G SIM is available at the cost of Rs.59 and that of MTNL as low as Rs.40.Other  3G VAS for which premium rates apply ,doesn’t have much uptake.So overall BSNL & MTNL are offering 3G services at a very cheaper rate.Entry cost as well as call & Data rates are very low.

Initially these companies launched the service at higher tariff but gradually reduced it to increase customer base before private operators enter in fray.But the truth is they couldn’t make much headway despite lower tariffs.

Private operators would keep tariff high,Now what should be BSNL & MTNLs Pricing Strategy:

Now in case pvt operators keep 3G costly and incumbents don’t increase the tariff then they should  be able to attract more customers.But the problem is that the  TG(Target customers ) for a service like 3G prefers young,energetic, brands like Airtel,Vodafone etc.These customers readily pay a premium for quality service and customer care.BSNL & MTNL do not score well on customer care and quick service delivery aspects.But if incumbents don’t increase their tariff then they would be loosing money in the same market place where others would be making money.So it would be interesting to watch who does what.Will private operators reduce their tariff in view of incumbents low tariff or incumbents go for tariff increase.But the statement of Sunil Mittal gives an impression that they do not find BSNL or MTNLs low tariff a threat and even on that high tariff they would be able to generate business.Let’s  see what happens.

Please share your opinion on this by writing comment.What do you feel ,what would be 3G pricing strategy of operators?