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4G- Can Telecom Operators count on 50% data revenue contribution for their business cases?

Posted in Industry updates by Manas Ganguly on May 24, 2012

Even when the base price for 2G is being debated and the 3G tariffs are registering a free fall, 4G services are supposed to be taking over as the revenue engines for Telcos riding on the data wave. However, a recent research report from PWC states that it is highly unlikely that data use revenues will grow from the current level of around 14 per cent of total revenue to 50 per cent by 2020.

TRAI, while figuring out per unit 4G spectrum rates, had assumed that data services will contribute more than half of an operators’ revenues by 2020. Analysts and industry operators are now arguing that this basis of pricing spectrum is wrong. At present, non-voice revenues as a percentage of total revenues stand at 14 per cent, out of which pure data services contribute only 5 per cent and the rest comes from message-based services.

PWC has a sound basis- Even in mature telecom markets such as Denmark, Italy and the US, the contribution of data services to revenue is only 19.6 per cent, 27.2 per cent and 33.20 per cent, respectively in 2010. In fact, not even Japan has 50 per cent data revenues as a proportion of total revenues today.

Sometime this week, Mukesh Ambani put off the launch of RCom 4G services by an year. Even while Airtel has been quick to launch 4G, for all purposes this is a soft launch. RCom entry has been deferred because the markets are not matured yet. Lack of demand may also see two foreign operators — Augere Wireless (backed by France Telecom) and US chipmaker Qualcomm — quit the 4G data segment.

So now the question that begs to be answered is given sluggish market maturity, lack of demand – and the fact that most mature telecom  markets havent performed at 50% revenue contribution levels, was the industry APEX body – TRAI over setting its targets and the spectrum pricing? For those who invested in, the case of a break even seems a little distant already.

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