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Thursday, December 13, 2012

First Videocon, now Tikona: 4G is all about competitive pricing

Picking up cue from Videocon, Mumbai-based Tikona Digital is also planning to price its 4G services aggressively to disrupt the market place.

Tikona plans to launch the services at 2-5 Paise /MB in Gujarat, Rajasthan, Uttar Pradesh and Himachal Pradesh in the second half of 2013.

“These tariffs will disrupt the market. We will be able to do this since we’re already offering data plans at a price point of 2-5 paise per MB for broadband on WiFi which gives speeds of up to 10 Mbps,”  the company’s chief executive Prakash Bajpai has been quoted as saying in the Economic Times.

The company is also planning to roll-out around 30,000 public WiFi hotspots in the country within the next five years. This, however, could pose a threat to Mukesh Ambani’s Reliance Industries which  reportedly has also  inked a contract with Ericsson to set up around 30,000 WiFi hotspots across commercial buildings, offices and malls  since it has the advantage of having a pan-India BWA presence.

Earlier this month, Videocon also announced that it will  launch 4G services in all the six circles (Bihar, Haryana, Gujarat, Madhya Pradesh, Uttar Pradesh East and Uttar Pradesh West) in which it recently bought 1,800 MHz spectrum for Rs 2,221 crore, but at prices lower than 2G and 3G.

Currently, only Airtel has launched 4G services in a few cities such as Kolkata and Bangalore but at a much higher Rs 13-15 per MB (Its 6GB plan in Kolkata costs around Rs 999 (plus taxes) , while Aircel and RIL  plan to launch their 4G services in another six months.

Analysts expect RIL to offer very high-speed internet services at cheap rates, which is why perhaps the company has plans to launch MiFi devices, which will convert the 4G signal to a mobile WiFi hotspot, allowing users to access 4G speeds across various Internet enabled devices on the go.  Reliance’s comparative 4G edge lies in the ability to build better economies of scale by offering a pan-India service, attracting more customers by offering nationwide 4G roaming.

Moreover, analysts are betting on RIL to be the game-changer as they have no backlog of investments in 2G and 3G unlike other 4G service providers.

With so many players in the fray, competitive pricing is the only way out for these telecom majors. As Mahesh Uppal, director at Com First (India), a consultancy firm, told ET, ”Anyone launching 4G services has to be price competitive. Otherwise, why would a consumer move to a new player if he also has to pay a higher tariff. Broadband on mobile is a vanilla product.”

However, even if competitive pricing is possible on data dongles which are available from Chinese manufacturers like Huawei,  handsets (smartphones) that can support TD-LTE ( 4G works on only phones with this technology) are relatively unknown.

Despite this hurdle, Bharti Airtel has so far added 3,180 TD-LTE subscribers through its 4G network in Kolkata and Bangalore, while state-run BSNL has provided 50,077 connections through 4G/WiMAX.

According to a recent estimate, number of TD-LTE users is likely to reach 5 million by 2013. But the growth of this market depends more on equipment manufactures such as Nokia, Samsung and Apple, which are expected to launch LTE-enabled smartphones in the near future.

Some existing 4G operators are going to offer pocket-sized Wi-Fi routers for around Rs 2,500 which would enable existing EDGE or 3G-enabled smartphones to use high-speed internet.
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