India is the second largest and one of the fastest growing mobile markets in the world. Although in 2011 the growth rate seemed to be slightly declining, however markets are still witnessing a robust growth. The net additions in the market (wireless + wireline) have witnessed decline during first 2 quarters of 2011.
The uptake for content/data connectivity, especially in the mobile sector, is increasing. The number of wireless customers having subscriptions of data services was 346.67 mn, which is about 40% of the total subscriber base. In the quarter ending June 2011, the number of broadband connections increased by 3.89%, to reach 12.35 mn.
On the financial side, the gross revenue in the quarter ending June 2011 was `46,891.61 crore, registering a growth of 3.03% over the previous quarter. ARPU, on the other hand, after declining through the last year remained steady at `100 in the first 2 quarters of 2011. The key trends across the first 2 quarters of 2011 suggest that though the growth is still robust, it is showing some signs of slowing down in the traditional markets. However with the maturity of 3G services, widening footprint of mobile networks, and operator initiatives on Broadband Wireless Access and MVAS, we reckon the next wave of growth in the Indian communications market is just round the corner.
Indian Communication Industry: Driving Factors
Connecting the Rural Areas: At the end of August 2011, the wireless tele-density in urban areas was 157.76% as against 35.20% in the rural areas. Given the condition of near saturation in the urban markets and growing coverage of mobile networks, we expect the next wave of mobile growth to be driven by the rural mobile markets. Connecting the remote areas will be the focus in the near future. Operators have already started investing in the infrastructure and offering attractive schemes such as lifetime prepaid service, low-cost handsets, and vernacular language-enabled SMS service to tap the rural markets.
3G-The Future: With less than 2% household broadband penetration and less than 3% household PC penetration, India's internet market is grossly underutilized. At the end of June 2011, the number of broadband connections stood at 12.35 mn. Introduction of 3G was to make broadband ubiquitous, high-quality, and affordable to all. Also, high bandwidth of 3G networks will lead to the creation of new services that will attract customers. For this, 3G compatible equipments are required and hence 3G handset sales will grow to circa135 mn in 2015. Over next 5 years, operators are expected to invest around $121 bn in the 3G infrastructure. The number of 3G subscribers in India is projected to cross 107 mn mark by 2015, where the rural subscribers will comprise 24% of the overall 3G subscriber base. In 2012, we expect the 3G services to stabilize and mature and drive growth in VAS market.
Broadband Wireless Access: By June 2011, there were 20.33 mn internet subscribers in India, of which 60.7% were broadband subscribers. Digital Subscriber Line (DSL) is the most preferred technology used by the service providers to provide broadband services; and it constitutes 85.72% of the total broadband subscriber base, whereas wireless broadband accounts just for 2.78%. However in 2010, the Government of India granted Broadband Wireless Access licenses to 6 operators. Most of these are at various stages of deploying WiMax/LTE TDD networks for wireless broadband access. Wireless broadband may see some traction in the markets riding on these developments.
Mobile Value Added Services: With the growth rate in traditional business showing signs of slowing down (a bit), Mobile Value Added Services (MVAS) provides new revenue opportunities to the operators. Currently, non-voice revenue accounts only for 11% of the total mobile revenues in India, which is far less compared to some of the developed economies in the world. However, with the advent of 3G and growing maturity of mobile platforms, a study by Assocham done for Trai predicts that the MVAS market will reach `48,000 crore by 2015. Currently, MVAS market in India is mainly focused on entertainment, music, and cricket. Going forward, the scope of MVAS will widen to include other applications. In the near future, we expect m-governance and m-banking to drive the growth of MVAS market.
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