New entrants in the 3G or WiMAX space will either have to set up new towers or hire them — either way, they cannot compete with the incumbent players. It gets worse for someone doing WiMAX since this does not integrate with any 3G or 2G technologies — it does not do either voice or broadband well in a mobility context. And since it is being deployed at a higher frequency than what the existing 2G networks use, it will require additional base stations (compared to 3G) for full coverage in an area. At best, WiMAX may end up serving fixed urban broadband niches, where it will soon be challenged by LTE, which has worldwide momentum and integrates seamlessly with 3G and 2G, and therefore will not need so many base stations. Ironically, the whole WiMAX pitch has been centered around rural India and affordable broadband where it cannot match what 3G can offer.
If we consider the opex, rentals are around Rs 30,000 per month per tower site today and you can add around another Rs 25,000 for diesel and other pass-through costs. Let’s assume a WiMAX player in a city like Pune deploys the same 550 towers that an incumbent operator does. Let us also assume that each base station yields 100 broadband customers. Both these assumptions are extremely generous towards a WiMAX firm. With these assumptions, the site cost per subscriber works out to Rs 550. Add the other operational costs of running a business and you would find that even if the WiMAX firm gets Rs 750 per subscriber as revenue, the business case is negative just on the opex. For incumbent players (with 3G/LTE), the opex is already paid for by voice subscribers, so the broadband revenue is the upside.
By Kanwalinder Singh
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