Service sector is one of the most significant sectors of the Indian economy, contributing nearly 55% to the GDP in 2007–08. The Indian telecom industry continued its growth momentum for another consecutive quarter with the overall sector registering a modest revenue growth of 24% for the quarter ended September 2008 as compared to September 2007.
The telecom industry is an important infrastructure industry. The industry is highly capital intensive and the payback period for investments can often be very long. An efficient telecom network is vital for the economic development of a nation. The telecom services available in India include basic fixed line services, mobile services (based on both GSM and CDMA technology), national long distance services, international long distance services, internet services and pager services. Teledensity, which is defined as the number of telephone connections per 100 persons, is used to measure the reach of telecom services. As of March 2008, India had a teledensity of 26.22%, up from 3.64% at the end of March 2001. This growth was achieved on account of a stupendous increase in the number of GSM cellular subscriptions. The telecom subscriber base as of 31st March 2008 was 300.48 million compared to 6.4 million and 3.6 million at the end of the March of 2002 and 2001 respectively. The growth is being led by companies like BSNL, Bharti, Reliance Communication and Vodafone Essar, which together accounts for over 75% of the telecom market share. As of quarter ended March 2008, BSNL leads the pack with a market share of 24.07%, thanks to its near monopoly in the fixed line services. Indian Telecom Industry is one of the fastest growing telecom markets in the world with the telecom subscriber base standing at ~ 300.48 million as of 31st March 2008. The DoT has indicated that it has a target of 500 million telephone connections in India by December 2010. The earlier DoT target of 250 million subscribers by December 2007 was achieved in October 2007 highlighting the rapid growth in tele-density in India. The wireless service market has seen tremendous growth over the past few years owing to a series of factors like favourable demographics, increasing affordability, availability of handsets at dirt-cheap prices and decline in tariff plans thanks to the cut-throat competition amongst the Telcos to grab the largest slice of the telecom pie.
As of 31st March 2008, there were approximately 261.07 million wireless telecom services subscribers in India. Currently, there are 12 wireless carriers operating in India with the leading six players holding approximately 92% market share. For the quarter ended March 2008, the total number of telephone subscribers reached 300.48 million as compared to 272.87 million in the quarter ended December 2007. The overall teledensity increased to in 26.22% March 2008 as compared to 23.87% in December 2007. The total wireless subscriber’s base reaches 261.07 million at the end of March 2008 from 233.62 million in December 2007. The wireline segment subscriber base stood at 39.41 million with an increase of 0.16 million QoQ. The rural wireless subscriber base has increased from 52.52 million for the quarter ending December 2007 to 62.28 million during this quarter, registering a growth of 18.58%. The number of wireline subscribers has been registering a fall with exception of this quarter. Subscribers prefer wireless phones to the wireline counterpart. Mobiles have a mass appeal owing to the affordable prices at which the services can be availed. The easyto- get feature of the mobile connection is another area where it ups the wireline connections which take a lot of time has become operational. The mobile tariffs have come down considerably, making mobile phones attainable even for the low-income groups. This leads to the next point – the recent trends in ARPUs and MOUs. Over the years the telecom operators have witnessed falling ARPUs, mainly due to competitive offers by the players to lure more subscribers. However it is noteworthy that the MOU numbers are showing a steady rise. The mobile mania is widespread in the urban population. The operators are now targeting the rural Indians to drive this telecom growth to the place where two-thirds of India lives. To make their products more attractive to the target consumers and retain the existing ones, the companies have been charging ridiculously low charges and in many cases, have devised such tariff plans where the calls are free. As a result the ARPUs are steadily heading south however the MOUs have registered an upward trend. The players are now focusing on increasing their MOUs with the objective of garnering more revenue. The rising MOUs are expected to compensate for the falling ARPU numbers.
The all India blended ARPU per month for the GSM segment has increased by 1.15% from Rs. 261 in Dec-07 to Rs. 264 in Mar-08. ARPU for postpaid service has shown an increase of 1.59% from Rs. 628 in Dec-07 to Rs. 638 in Mar-08. Prepaid service has shown a higher growth rate in ARPU of 2.3% from Rs. 219 in Dec -07 to Rs. 224 in Mar-08. MOU per subscriber has increased from 464 in Dec-07 to 493 in Mar-08, thereby showing an increase of 6.25% as against 0.46% in quarter ending Dec-07. All India blended ARPU (per month) for the quarter ending March 2008 is Rs. 159/- as compared to Rs. 176/- for the quarter ending December 2007 registering a decrease of 9.65%. All India Total Blended MOU per subscriber per month has shown a decline from 375 minutes for the quarter ending December 2007 to 364 minutes for quarter ending March 2008. There are 11.1 million wireline Internet subscribers at the end of March 2008 as compared to 10.4 million at the end of December 2007. Due to limited fixed line coverage, low PC adoption and service pricing, Indians have not embraced broadband service in the way mobile phones are. There are 72 broadband service providers having subscriber base of 3.87 million subscribers. Out of 72 Broadband Service Providers only 13 Service Providers are having subscriber base more than 10,000 subscribers and the information provided by TRAI covers performance of these 13 broadband Service Providers. The number of Broadband subscribers (with a download speed of 256 Kbps or more) was 3.87 million at the end of March 2008 as compared to 3.13 million at the end of December 2007, a growth of 23.64%. India has one of the highest MoU globally with USA having 838 minutes per month, India at 461 minutes per month, China at 303 minutes per month, Russia at 88 minutes per month. As the penetration in the rural areas increase, the MOUs are expected to increase, which justifies need for adequate infrastructure. As per a study conducted by TRAI, usages of cell services are much higher in India compared with China and minutes of usage of GSM and CDMA based cell services in India are 32.0% and 70.0% respectively higher when compared with Chinese services. According to a report from PricewaterhouseCoopers, the Indian telecom market has grown to become the second largest communications market in the world. India’s telecom market has grown rapidly in the last few years with revenues of over US$22 billion and an average annual subscriber growth of about 45% and revenue growth of about 25%. Indian telecom sector will scale new heights on back of its strong foundations of fulfilling the demand for a connected economy, fast paced rollouts and coverage, realistic pricing and more importantly a nascent rural market with low tele-density.
India, which is seeing over 8 million wireless subscribers being added every month (8.62 million in May 2008), is the fastest growing telephone market in the world. No wonder the whole world has set its eyes on India, a glimpse of which can seen from the recent acquisition of Hutch by Vodafone and consolidation phase which has just begun. The government has reiterated the target of 500 million telecom subscribers and 20 million broadband connections by 2010.