Having launched 3G services in the first half of 2011, the nine licensees are now focusing on forming intra-circle and intercircle roaming alliances. This trend was expected as no single operator won pan-Indian 3G spectrum. Reports about intercircle and intra-circle 3G roaming agreements first surfaced in January 2011. However, formal tie-ups materialised in July 2011.

The first operators to sign such agreements include Bharti airtel, Idea Cellular and Vodafone Essar. This deal has allowed them to cover 21 of the 22 telecom circles. The only exception was Orissa where Aircel, S Tel and Reliance Communications (RCOM) won spectrum.

Bharti airtel’s and Vodafone Essar’s spectrum would allow the three operators to serve the high-revenue circles of Delhi and Mumbai as well as lucrative metro circles like Kolkata, Chennai and Bangalore. On the other hand, Idea’s participation in the deal would offer wide 3G coverage in 11 circles, including most of the Category B service areas.

This is not the first joint platform for the three operators, which together have a share of over 50 per cent in the subscriber base and a revenue market share of almost 65 per cent. In the past, these companies have collaborated for infrastructure sharing. Indus Towers, the world’s largest telecom tower company, was formed in 2007 as a joint venture of Bharti airtel, Idea Cellular and Vodafone Essar. The 3G agreement is another step towards optimising their synergies and consolidating their position in the market.

Soon after this deal, TATA DOCOMO tied up with Aircel to share 3G networks on an intra-circle and intercircle basis. TATA DOCOMO has launched 3G services in Karnataka, Kerala and Punjab through an intra-circle roaming agreement with Aircel. The operators plan to roll out services in the remaining circles, where one of the two won spectrum. While intercircle roaming deals are crucial from a coverage perspective, intra-circle agreements are also important as operators can leverage the superior coverage of their partners in overlapping circles.

The operators, however, have not disclosed the terms of these agreements. The details of the commitment clauses and pricing of services for using the host operator’s spectrum would be crucial in understanding the dynamics of these agreements. Analysts believe that under no circumstances can there be pricing flexibility in these arrangements. An operator signing intra-circle roaming arrangements will always be dependent on the host operator’s pricing strategy. This would lead to parity in 3G pricing between the two companies.

These deals have marked the beginning of a key trend. The 3G mobile segment has already crossed the 9 million user mark. This subscriber base is expected to reach 100 million by 2015 and, therefore, it is only a matter of time that other major players like RCOM, which won spectrum for 13 circles, sign similar deals to increase their 3G footprint. State-owned Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited are also looking to enter into roaming agreements to utilise their combined pan-Indian spectrum.

This is an interesting way of offering pan-Indian 3G services without paying the spectrum charge for all circles. It would also help improve the quality of service, ease the pressure on operators’ networks and provide them substantial scale to offer services.

However, the impact of such tie-ups on pricing patterns remains to be seen. These deals may become an added cost pressure on operators who may pass on these costs to customers in the form of higher tariffs. Moreover, by providing pan-Indian services without paying for licences in all circles may cause losses to the exchequer. Such partnerships may also result in an oligopolistic trend in the market.