A study on penetration of 3G services in Indian market

Abstract

The mobile services industry has seen more than 700% growth in India through 2G connections. Having witnessed such a growth, the Indian telecom companies spent huge amounts for acquiring licenses from the government to go on for the next 3G generation to provide 3G data services and for promotional activities. The companies which acquired the licenses are almost going into negative profit margins. Various features of each generation of Telecommunication have also been studied. We have done this study to understand the poor penetration of 3G in Indian market from consumers’ perspective. 3G has a share of only 10% in Indian Telecom Market whereas other developed countries have shown 7-8 times of penetration. United States and Singapore have shown penetration of 83% and 79% respectively. This study focuses on the current penetration level of 3G services in India which has been achieved through the positioning of 3G services and identification of the consumer behaviour related factors that affect the penetration. We have also studied the 3G market in other countries and possibility of cannibalization of 4G on 3G services in India. Based on the secondary research, six hypotheses have been formulated based on the cost perception, network effect, availability of alternate internet data sources, complementary market effect, incremental value perception and the technological complexity. These hypotheses have been validated to understand the consumer perceptions that hinder the penetration of 3G services in Indian Telecom Market. A survey has been designed and completed by 100+ respondents covering diverse set of individuals like students, IT professionals, Businessmen, Govt. Employee, etc. for understanding their mind set on 3G and their usage pattern. The results have been analysed through various regression models using SPSS and the hypotheses have been validated. The hypotheses validation has helped us in identifying few of the consumer perceptions that might hinder the penetration of 3G services in Indian Telecom Market. We also studied the telecom markets of other countries to understand what has to be done in India for better penetration. The telecom market and strategies followed by firms in Singapore have been focussed where the 3G penetration is 79% and 4G services also has started penetrating. Telecom firms in Singapore have been utilizing penetration of smart phones in the market which is as high as 72%, to push their 3G data services using enormous chunk of subsidies. The companies bundle their 3G data services with smart phones at subsidized prices with hope of maintaining their economies from 3G services revenue. Analyzing the possibility of cannibalization of 4G on 3G in India, we found that when Reliance has paid just 3% of the cost of 3G Licences to get the 4G Unified licence, the firm can leverage this reduced cost to provide 4G services at low price which might result in cannibalizing effect of 4G on 3G services in India.