This year, the second year of true growth, also marked the bidding of the fourth license, preparing existing companies to plan for protecting their existing markets and challenging in the new market, simultaneously. No new player entered the fray, though. Both in terms of revenue and subscriber base, the industry had a good growth.

Subscriber Base
The total subscriber base as on 31 March 2002 stood at 6.43 million, up 79.8 percent from a figure of 3.57 million on 31 March 2001. This was marginally lower than last year’s growth rate of 89.8 percent.

However, for the first time in four years, the metros recorded a higher subscriber growth as compared to the circles. The four metros grew at an impressive rate of 88.4 percent, while the circles grew at 74.4 percent. This could be explained by the fact that in the circles, the subscriber growth is largely proportional to the spread of network, which slowed down last year. In metros, the cost of subscriber acquisition has gone down and competition is heating up, with MTNL giving the private operators a good competition in Delhi and Mumbai, and with the fourth operators likely to begin their operations much sooner than they do in circfles.

Metros accounted for 40 percent of the subscribers while circles accounted for 60 percent. Delhi, with 1.07 million subscribers, was the biggest market in India, followed closely by Mumbai with 0.97 million subscribers.

Idea Cellular Ltd, previously known as Birla-Tata-AT&T, had the highest subscriber base as a company with 0.81 million (12.56 percent) subscribers in its four circles. As a group, Bharti with 1.44 million subscribers was the number one, with about 22.4 percent of the national subscriber base, followed by Hutchison with 1.27 million subscribers (19.7 percent). The four groups—Bharti, Hutchison, BPL, and Idea—together had 68.62 percent of the subscriber base amongst themselves.

The highest growth in terms of subscribers was achieved by MTNL—a whopping eleven-fold, or 999.3 percent to be precise—albeit from a lower base of only about 19,000 subscribers in 2000-01. Among the big companies, the most impressive growth was by Bharti Mobiles, which operates in three circles—Karnataka, Andhra Pradesh, and now Punjab. The other companies that recorded three-figure growth in subscriber base are Idea Cellular, Reliance Telecom, Usha Martin Telekom, and Bharti Mobinet.

Subscriber growth primarily came from the lower end, with pre-paid accounting for about 68 percent of the new additions nationally, and about 75 percent new additions in circles. By March 2002, 59 percent of users were on pre-paid, and even 92 percent in category-C cities.

Revenues
The mobile services market in India was Rs 5,515.9 crore in 2001-02. That was a growth of 39.3 percent over our last year’s revised figure of Rs 3,960.9. It may be noted that the last year’s V&D 100 had put the revenues at Rs 3,865 crore. We have since revised the figure. All our calculations are based on the revised figure.

Idea Cellular, with a Rs 600-crore turnover, was the number one mobile company in India, followed by Hutchison Max Telecom (Orange) in Mumbai at number two with a revenue of Rs 556.2 crore. Last year’s top company, Bharti Cellular, was down to number three position.

Among groups, Hutchison was the number one cellular service company in India with a combined turnover of Rs 1,379.7 crore (25 percent of the total market) by its four companies. Bharti was number two with Rs 1249.9 crore (22.7 percent of the market). The four groups—Hutchison, Bharti, BPL, and Idea—jointly accounted for 73 percent of the total market.

Metros accounted for Rs 2,415.4 crore of revenues. That is 43.8 percent of the total market. Delhi and Mumbai together accounted for as much as 35.3 percent of the market. It means that more than one-third of India’s mobile revenue came from just two cities.

The comparison of metros and circles, subscriber-wise as well as revenue-wise, shows that they are quite at sync, which means that the average revenue per user (ARPU) in metros is only marginally higher than the ARPU in circles.

The ARPU continued to fall with more subscribers being added at the lower end. The average ARPU for India was about Rs 780 per month, with pre-paid ARPU at Rs 430 and the post-paid ARPU at around Rs 1,220. This includes roaming revenues as well. While some metros/circles like Mumbai and Karnataka had four-figure ARPUs, others like Kerala and Kolkata had the lowest, touching even Rs 400.

For the first time, companies consciously positioned themselves for segment and target-specific markets. All Hutchison Group companies, especially Hutchison Max Telecom in Mumbai, and Sterling Cellular in Delhi, are looking at a value game. These companies are looking at a post-paid led growth, as opposed to the rest of the industry, which is still betting on signing as many subscribers as possible.

Network, Services and Usage
The GSM mobile service was available in about 1,400 cities and towns in India in March 2002, as compared to 1,100 in March 2001.

Watch out for CDMA!

No matter what the two camps say, there are two facts that are important in the CDMA vs GSM debate. And no, one of them is not what is allowed or not allowed. We are assuming that in the medium run, they will anyway be allowed.  These two facts are CDMA has certain key technological advantages GSM is cheaper to the end user, largely because of lower handset costs The relative importance of these two facts in a comparatively new market like India is 40-60, the cost-effectiveness of GSM being more important. What does that mean? If one company or a group of companies together can bring down the handset price by some means, CDMA can give a tough competition to GSM. Our take: Tough or not, expect fairly good competition from CDMA.

The average tariff was Rs 2 per minute after a major drop in tariff in the first quarter of 2001-02. However, for most part of the year, though different permutations and combinations were offered to users, the tariff as such has not dropped.

The average usage of mobile services was about 220 minutes per month, according to Cellular Operators Association of India (COAI). Also, according to COAI, about 83 percent calls originating from mobile phones were local, 16 percent STD, and 1 percent ISD.

WAP services, which were started with a lot of fanfare in 2000-01, turned out to be a nonstarter. Only one commercial GPRS service was launched in the entire year by BPL Mobile in Mumbai, which has not really taken off. Bharti Cellular in Delhi is now GPRS-ready and may launch any time. However, with hardly any applications, the success of GPRS remains a question mark.

SMS usage, however, caught up in the metros and category-A circles, with some operators claiming to have made about 5-6 percent of their revenue from SMS. However, most of the usage remains person-to-person. The awareness about content services is low and the perceived need is lower.

However, some efforts made by content companies have paid off, though to a limited extent. Indiatimes’ 8888 services has been the only mass success story (moderate though) to write about. Other media houses such as India Today group have also started offering news and polls on SMS.

While experiments on other content-based applications have continued, the reason they have not been so successful is the lack of adequate commitment. Not only have the mobile operators failed to market, they have also not ensured a smooth operation. In Delhi, for example, most of the useful interactive applications offered by Bharti Cellular like Railways enquiry, MTNL directory search, and movie information, are not properly working anymore.

However, the efforts are continuing. Today, a few companies like Yahoo and Phoneytunes are offering ringtones and picture downloads. But the success depends upon various factors, such as charges, convenience of payment, and so on.

Industry
At an annual growth of 39.25 percent, cellular services is one of the fastest growing service industries in India. Among telecom segments, it is at an unenviable position, accounting for about 45.4 percent of the total FDI inflow into telecom in the last decade. The segment attracted a total of Rs 2,215.4 crore from August 1991 to January 2001.

The segment had its issues with the regulation and policy. It was lobbying for not allowing limited mobility, which now is subjudice. The lobbying to implement calling party pays (CPP) has also met with no success so far.

Year 2001-02 marked the beginning of the transition from an era of limited competition to a truly competitive regime with the award of fourth licenses in circles and the government operators making their mark as a potentially strong competitor to the private sector.

Five companies together bid Rs 1,633.97 crore to bag the licenses for the fourth operator slots in four metros and 13 circles, making it a total of 17. Bharti emerged as the No 1 bidder with eight new licenses, followed by Escotel with four, Hutchison with three, and Reliance and Idea cellular with one each.

Significantly, there were no new bidders.
The M&A wave, which started in the previous year with Bharti’s acquisition of stake in JT Mobile and Hutchison’s acquisition of Fascel, Usha Martin, and Sterling Cellular, continued with Bharti acquiring Skycell (now called Bharti Mobinet) and Spice Cell (called Bharti Mobitel). Bharti also acquired the Punjab license of Essar and started operations, giving competition to the lone operator there, Spice Communications. Bharti is likely to merge all its cellular companies into one entity—likely to be called Bharti Cellular—this year.

Bharti Televentures launched a successful IPO. Though Bharti now has multiple service businesses, it is primarily with the strength of its mobile operations that the group impressed investors.

With new competition coming in, operators are now looking at specialization. While Bharti is playing on its large subscriber base with a large pre-paid base, Escotel—thanks to its experience—is playing on providing more value to the small town/rural users. Hutchison is focusing on the high-end of the market in bigger markets and is trying to progress on a post-paid led growth path.

Forecast
According to a Morgan Stanley projection, Indian cellular subscriber base will grow at an annual CAGR of 73 percent while Gartner puts it at a comparatively lower 52.5 percent, through 2001-2005. According to Gartner, the cellular subscriber base is likely to be 31 million by 2005.

VOICE&DATA estimates that the subscriber base in 2002-03 will grow by a robust 70-72 percent and will touch 11 million by March 2002.

The revenue is likely to increase by about 35-40 percent to reach approximately Rs 7,500 crore.

Cellular Subscriber Growth 2000-01—2001-02

Shyamanuja Das