In Business Model, Internet Access, Mobile

“We believe the future is 4G and not 2G and 3G,” said Gurdeep Singh, chief executive of consumer business at Reliance Communications, India’s number four mobile operator.

In some sense, the statement is self evident. At some point, the next generation of mobile networks always has superseded the older networks. For Reliance Communications, the statement also is a matter of market positioning by an upstart attacker.

In the past,  other mobile operators have used new spectrum to launch attacks on the incumbent operators. The firms that eventually became Sprint and T-Mobile US in the U.S. market provide an example. Both present firms began life as start-ups using brand-new spectrum bands (2 GHz), not the 800-MHz frequencies used by the incumbents.

But the statement also reflects a business strategy, namely that pioneering fourth generation services will create market differentiation.

At the same time, turning “weakness” into “strength” is a smart business strategy, when it can be accomplished. Reliance holds less 800 MHz and 900 MHz spectrum than its competitors.

The sums spent on 900-MHz spectrum with the better coverage capabilities (signal propagation distance) tell the story: Reliance spent an order of magnitude (10 times) less on 900 MHz spectrum.

And 900 MHz is synonymous with 3G, as 1800 is synonymous with 4G.

“We entered the auction with a focus on the next 20 years in telephony and not unduly biased or driven by the past,” said Singh.

Reliance, like many, also believes consolidation is coming. “The telecom industry in India does need consolidation,” said Singh. “We have always said that there can be only five operators in the market.”

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