India in the 100 mn Club

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Thanks to a series of price wars, accompanied by a steep fall in entry-level handset prices, India entered the 100 mn club becoming the fifth largest country in terms of mobile subscriber base behind only to Russia, Japan, US, and China. In India, GSM subscribers account for 75.3 mn while CDMA-based subscriber number stands at 25.3mn. In another related milestone, the GSM subscriber base, globally, touched 2 bn, of which India's share is 83 mn.

It is also interesting to note that 90% of the current subscribers became mobile after the beginning of 2003. Thanks to the explosive growth, the overall tele-density in India stands at 13.54%. If one were to go by the government estimates, 85% of the geographical area of the country will be covered by mobile telephone by the year 2007. It is also estimated that subscriber growth rate could rise as high as 32% by 2010. There are all indications that India's net addition per month will surpass China later this year.

The Accelerators
India being a highly price-sensitive market, the main reason for this landmark is the steep fall in cellular tariff. According to an estimate, there has been a 93% reduction in call tariff since 1998. The other important reason is the availability of entry-level handsets at sub Rs 2,000 level. Added to this is the fact that all operators have been hugely successful in bundling handsets with connections, making it more attractive to subscribers. While there is the euphoria of achieving the 100 mn landmark, the situation on the non-voice revenues of operators is an area of concern. While Chinese operators earn 44% of their total revenue from SMS, ringtones and WAP downloads, Indian operators are still hovering around the 10% mark. It is hoped that with the launch of 3G services in India, the data component will rise substantially owning to increased usage by corporate mobile users. The huge milestone can also be attributed to the aggressive marketing campaigns done by mobile operators, especially Tata Indicom, offering attractive schemes.

Some of the government decisions including the migration to revenue share and corporatization of BSNL, were responsible for creating a competitive atmosphere necessary for the growth of the telephony market in India. Last, and more importantly, WLL, thanks to Reliance, despite all the controversy it generated, gave the needed push to the mobile market at a time when mobile phones were beyond the reach of the common man.

Hurdles Ahead
But in the race toward numbers, quality has remained an area of concern. According to a TRAI study, operators need to focus on improving their quality of services. It is being felt that the recent DoT notification asking operators to follow a strict verification process, may slow down the connection uptake, which is not a good thing for a growing industry. It is hoped that COAI and AUSPI, who have set up the Apex Advisory Council for Telecom in India to oversee the subscriber verification process, work towards a smooth process to avoid this situation.

Another area of concern has been the slow progress on the rural mobile telephony front. Rural teledensity continues to remain at around 2%. Most of the growth has happened in urban areas and if the target of 250 mn by 2007 is to be achieved, the private operators need to extend their urban success story to rural areas. Meanwhile, the government also aims to provide mobile access to all villages with population of more than 5,000 by the year 2006 and more than 1,000 by the year 2007. These targets are not difficult to achieve but depend on whether private operators will be willing to cooperate with state telcos on this.

Sudesh Prasad
sudeshp@cybermedia.co.in