3G goes global

3G has entered a new phase in both mature and emerging markets. While operators in mature markets migrate their networks to HSPA+, a “perfect storm” of drivers is rapidly accelerating the roll-out of 3G to customers in emerging markets, bringing them entirely new experiences.

Operators around the world are already reaping the business benefits of helping the next generation of customers, many of whom are on lower incomes, to bridge the digital divide. This is especially true where fixed broadband is expensive or unavailable. Take TEF, the most successful 3G operator in Chile. After deploying 3G technology it saw traffic soar to 4 TB a day from 450 GB in just 60 days. In South Africa, MTN and Vodacom joined forces to launch 3G. The two networks now serve almost 5 million 3G customers.

For many users, the key to 3G take-up is not mobility, but simply access. Handheld devices can satisfy this demand for the mass market. As Abdul Razzak, CTO of Egyptian provider, Etisalat, has commented: “The mobile handset is becoming the most important means of accessing the Internet in Egypt.”

As well as enabling the Internet to reach new users, another reason for operators to deploy 3G in emerging countries is to offload voice traffic. With the massive uptake of mobile phones and the vast populations of many cities, some operators are running out of 2G spectrum. They are, therefore, installing 3G overlay networks to handle the increased volume of voice traffic cost-effectively.

Smart deployment

The increasing affordability of 3G is making new deployments more attractive for operators looking for a profitable way to serve lower-income consumers.

Infrastructure costs are dropping, partly owing to economies of scale and partly thanks to developments in the technology and deployment of 3G. For example, deploying 3G on lower frequencies allows a four-fold increase in the cell radius compared to the cell coverage provided by the original 3G specification. This means that a quarter of the number of base stations can provide the same coverage. In addition, 3G networks are often deployed on the back of existing 2G networks and the majority of base station sites can be used by both in tandem.

The cost of devices for subscribers is also coming down, whether 3G handsets or USB dongles. Nevertheless, shared access is a crucial aspect of affordability for many customers, and operators have implemented a variety of business models to make it possible for a single device to connect many users.

Defining a 3G strategy

Any operator with a firm basis as a voice connectivity provider can expand its offering into providing 3G broadband Internet access relatively easily and without extensive organizational changes. The two services are very similar, especially in the sense that both are about packaging a fairly simple product in such a way that it is attractive and affordable to the target market.

However, for operators that are ready and willing to transform their business and operations fundamentally, 3G provides a platform to gain new revenue through value added services such as mobile TV, social networking, various local and regional information services and business communications.

The first mover advantage

Whatever the business model, the experience of operators with 3G in developed countries suggests that the providers who move to deliver 3G first in emerging markets will do better than late starters. What’s more, operators going for 3G now should be able to learn from the experiences of 3G pioneers in the now mature markets, helping them to make the right business decisions first time.

It is the operators who launched first in established markets that now dominate the 3G landscape, according to data from Informa Telecoms & Media and Oliver Wyman. The first wave companies have achieved market share of over 60 percent in some cases, while those who waited longer have had to content themselves with around 10 to 30 percent. Companies who entered the market later still have found their market share to be 5 percent or less.

Answering tomorrow’s business needs

As emerging markets see greater 3G penetration, the focus will gradually change from signing up subscribers as rapidly as possible, to addressing increasing competition. Offering a quality user experience, advanced customer relationship management and finer segmentation will be the key to those segments that already have access to 3G.

Meanwhile, another source for growth will be expanding the 3G service to segments with an even lower income, with appropriate charging, billing and data management solutions. On this front, the ever-declining prices of low-end 3G devices will provide new opportunities.

The 3G market in emerging countries offers great potential to be in the driving seat in one of the true growth areas in 2009 and beyond.