Rate war for 3G unlikely, says Vodafone MD

‘Services will cost more, as firms bought spectrum at a premium’.

Vodafone Essar Managing Director Marten Pieters today said third-generation (3G) telecom services would be offered at a premium. He said a rate war was unlikely.

Speaking at an occasion to announce the launch of 3G services by the first quarter of 2011, he said, “Surely, the rates will not be as high as in the US or Germany. But I don’t think they will be the lowest either. Operators have paid a lot of money to get very limited spectrum of only 5MHz, compared to 20 Mhz in other countries. They are spending money on rolling out networks, so they won’t be dumping tariffs.”

“Vodafone Essar paid Rs 11,600 crore for 3G spectrum,” he said, adding, “And is in the process of investing $400-500 million (Rs 1,770-2,215 crore) to roll out the network.”

Pieters said 3G offered speeds 10 times faster than GPRS and believed customers were ready to pay more for higher speeds. “It does not mean customers will pay 10 times more. It will be somewhere in between. Customers will be willing to pay the extra premium.”

But the Vodafone Essar boss is ready for battle if competitors unleash a price war. “A few years ago, if you predicted

that voice tariffs (rates) would fall at the levels they are at now, they would have thought

you are mentally not right. And if someone indulges in irrational pricing, you have to

compete in the market. But we will not be the ones to start,” he said.

Pieters said he did not, unlike in the West, saw any large-scale move towards bundling of mobile 3G handsets with the service, which reduces the cost of entry for the customer as he does not have to pay a huge sum for buying the phone. “In India, customers do not want to get into contracts or have mobile phones which are SIM-locked. So, I don’t see this route becoming popular,” he said.

However, he said, one way to attract customers was to provide them free downloads or data.

Pieters said the company was ready to launch the services earlier but decided against it as it wanted to ensure a network that allowed seamless movement. “From our experiences in markets like Egypt and South Africa, we realised it was dangerous to start services too early, without customers being able to communicate seamlessly. We want to ensure that in the cities we launch, at least 70-80 per cent of the area is connected through the 3G network,” he added.