India has achieved the magical figure of 250 mn mobile subscribers. It is
undoubtedly a commendable achievement, but no single factor can be attributed to
the success of the industry in achieving this milestone. It was a collective
effort by all stakeholders of the telecom industry and, of course, a bit of
luck.
The strongest factor, perhaps, behind this well-deserved success is the
humongous population of India-with a billion-plus people, anything that you do
becomes huge.
Once considered the weakest link in the country's growth and development, the
huge population has turned out to be the biggest strength behind telecom
resurgence.
The telecom industry's success in growing subscriber base to record levels is
also an excellent example of fruitful public-private partnership. In their aim
to achieve the 'magic figure', public as well as private telecom operators,
regulators, and the department of telecommunication have left no stone unturned.
Wireless Dominance
The last few years have proved that consumers prefer wireless mode of
telephone service to wireline services. It is evident from the rising share of
mobile phone connections in the total number of connections. At the end of
February 2008, the mobile subscriber base stood at 246.6 mn whereas wireline
subscriber base was much lower-at 40 mn.
The share of mobile phones has increased from 71.7% at the end of March 2006
to 86.07% at the end of January 2008. Another commendable fact is that the
mobile subscriber growth rate, which is growing at a CAGR of 85% since 1999, and
the wireless sector have been very consistent in adding around 6-7 mn
subscribers every month.
In January 2008, 8.77 mn subscribers were added-the highest ever increase in
a single month and definitely a world record. At the same time, the industry is
witnessing a decline in the total number of wireline subscribers.
Also, the private sector has become a dominant player in the industry. While
public sector companies added 53.6 mn subscribers during 1998-2007, private
sector companies have added a whopping 133.58 mn subscribers during the same
period. The dominance has been more pronounced in the mobile market, where
private operators have added 124.68 mn subscribers as compared to only 31.79 mn
subscribers added by public sector operators.
Manufacturing
India's telecom growth, coupled with its huge potential, compelled various
handset makers to set up their manufacturing units in India, and now the country
is gradually emerging as a handset superpower.
According to Gartner, India produced around 31 mn handsets, worth about $5 bn,
in 2006 and handset production is estimated to increase by 68% in units and 65%
in value terms. The same report says that India is estimated to record the
highest growth in the Asia-Pacific region, with a production of 51 mn handsets.
It is also estimated that India would produce a total of 107 mn handsets by
2010, registering a CAGR of 28.3%. Further, revenues are estimated to grow to
$13.6 bn, a CAGR of 26.6% between 2006 and 2011.
India's surging domestic market is also providing excellent investment
opportunities in other segments of the telecom equipment industry. For example,
TRAI estimates that the country will need about 350,000 telecom towers by 2010,
as against 125,000 in 2007. This, in turn, has attracted many leading global
telecom equipment manufacturers to set up their base in India.
Investment
The Indian domestic telecom market has been attracting huge investments. For
example, during the first nine months of FY '08, India attracted $1.04 bn in
foreign direct investment (FDI) as compared to $478 mn for the whole of 2006-07.
The cumulative FDI inflows from April 2000 to December 2007 have been $3.62 bn,
accounting for approximately 8% of the total FDI inflows into the country.
Buoyed by the rapid surge in subscriber base, huge investments are being made
into this industry, even in the current fiscal year. An investment of over
$15.21 bn is being made by Indian telecom companies in 2007-08 to finance their
massive expansion plans in terms of mobile networks, infrastructure, and
subscriber base. This, in fact, is equivalent to 60% of the cumulative
investments into the wireless segment since 1995.
A recent report by Merrill Lynch puts the Indian telecom industry's EBIDTA
(earnings before interest, tax, depreciation, and amortization) ahead of those
of developed countries like the US, the UK, Japan, and France among others, and
this propels investments into the Indian telecom industry. In fact, going by
industry estimates, the surge in the mobile services market is likely to see
investments worth approximately $24 bn by 2010.
Government Initiatives
The Indian government has taken many proactive initiatives to provide a
framework for rapid growth of the telecom industry. When the mobile was first
introduced in 1994-95, no one could have imagined that the device would soon
become a part and parcel of most people in the country. Once considered to be a
luxury, the mobile can be seen in almost everyone's hands, thanks to the
initiative taken in 2003 to make incoming calls free. The initiative went a long
way in changing the way people communicate.
The Road Ahead
According to a report by Boston Consulting Group, while only one in twenty
of the world's first 2 bn mobile subscribers live in India, as many as one in
every four of the next billion subscribers will be an Indian. The department of
telecommunication estimates the subscriber base to stand at 500 mn by 2010 out
of which 80 mn are expected to be from rural areas.
According to Ernst & Young, the Indian telecom industry's total revenue is
estimated to reach $35 bn, accounting for 3.6% of the total gross domestic
product (GDP) of the country. With such growth projections, this industry is
likely to see increased investments.
In fact, the total investment is projected at $76.6 bn during the eleventh
five-year plan period (2007-12) by industry estimates. The private sector is
estimated to continue its dominant share, accounting for 67% of the total
projected investment while the public sector accounts for the remaining 33%.
It seems this growth is unstoppable, at least in the next five years, as the
rural hinterland has remained untapped so far. And the telecom players see the
next phase of growth in rural areas.
Gyana Ranjan Swain
gyanas@cybermedia.co.in
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