3G Technology has been rolled out by 2 operators in India and there is a possibility of a new price war scenario in this space. Last years when DOCOMO reduced calling rates to 1p/sec a new low pricing war started. Even the established players like Airtel, Vodafone and Idea have slashed their calling rates.
With introduction of 3G the same price war scenario is expected. DOCOMO has rolled out 3G during Diwali and now Airtel is ready, but in all these cases the price war is very unlikely. There are 3 reasons for it.
First reason is 3G license were very costly and plus installation cost were huge. Which will actually restrict telecom operators from reducing their rates.
Second reason is that with the emergence of so many mobile handset companies the price of handsets are decreasing significantly and selling of mobile handsets are increasing but around 70% mobile handsets do not have 3G technology built in. so in a whole group of Mobile holders only 25%-30% are potential customers.
The third reason is that the Government has allocated 3G licenses to 2-3 operators per circle. and the operators who has received 3G licenses are established players in the market. DOCOMO has cash with them to function 3G effectively and they are experienced too. Vodafone though facing legal battle for tax, still can run 3G with foreign money. Airtel too has a good debt payment record and thus their will be less problem for them to raise money and repay it. Reliance is in some pain but the policy of Reliance group is that they do not do charity.
With all these reason I think There is NO possibility of Price war after 3G starts functioning fully.
