India: The Fastest Growing Telecom Market
Monday, January 26, 2009
India has emerged as the fastest growing telecom market in the world, attracting not just global service providers like Britian-based Vodafone but also big handset manufacturers like Finland’s Nokia that not too long ago was reluctant to make an entry because of low volumes. For a country that stood at the bottom of the pyramid in terms of telecom penetration a decade ago, 2008 was a watershed when India’s subscriber base topped 350 million users to make its network the second largest in the world after China, displacing the US.
Going by the recent data compiled by industry watchdog Telecom Regulatory Authority of India (TRAI), the growth is being powered with equal fervor by rural areas, once regarded as low-end, low-volume markets with modest purchasing power. The significant achievement was made possible by the mobile telephony segment of communications, which was once thought to be a gizmo for the rich, with a tariff of Rs.16.80 per call when the telecom revolution began in the country in the early 1990s.
But with tariff falling to less than 40 Indian paise a call and incoming calls becoming free, mobile telephony began to appeal to the masses. In fact, 2008 also saw Indian telecom operators add a whopping 8-10 million new subscribers to the network each month, making a host of global companies to look at the country as their next big market for growth. And the statistics speak for themselves. According to TRAI, the total number of telephone connections in the country reached 363.95 million at the end of Oct. 2008 against 256.55 million in the corresponding month last year.
This, despite the fact that the number of plain vanilla landlines in the country actually fell from 39.41 million in October 2007 to 38.22 million the same month last year. Tele-density shot up from a mere 12.7 percent in March 2006 to 31.5 percent on Oct. 31. India continues to be one of the fastest growing IT and telecom market. In 2008, India was ranked as the 14th highest IT spender and it is expected to move up to the 11th position by 2012. The projection by several leading global consultancies is that India’s telecom network will overtake China’s in the next 10 years.
“The telecom sector in India has registered a remarkable growth during the last few years propelled largely by the unprecedented growth of mobile telephony,” said Nripendra Misra, TRAI’s chairman, in a report obtained by Arab News. “Three years back, a target of 250 million telephone subscribers by 2007 was considered too ambitious, but we could achieve this target a few months ahead of schedule,” Misra added.
Telecommunication access to rural India is going to be the most important development since the Green Revolution. Research analysts feel that mobile voice is overwhelmingly the engine of growth followed by next generation network, broadband and data. The sector, which will go through a major revamp with the launch of third generation (3G) mobile services, has seen a number of ups and downs in the recent past. A key development in the history of the telecom industry was when Bharti, in collaboration with 15 telecom players, signed a deal to build the first direct, high-bandwidth optical-fibre undersea cable system.
The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world’s seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake. Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE’s Etisalat for $900 million, taking the company’s book value to $2 billion. Another major foreign inflow was announced when Japanese telecom giant NTT DoCoMo picked up 26 percent stake in Tata Teleservices for $ 2.7 billion.
Not only this, December 2008 also saw the much-touted third generation (3G) services being launched by the state-run telecom operator Mahanagar Telephone Nigam Ltd (MTNL). Under the brand ’Jaadu’ (magic), MTNL ushered in the next wave of Indian telephony on Dec 11. With 3G and broadband wireless access (BWA) auctions a few days away, the government held a pre-bid conference to clarify on bidding related issues to the telecom operators and to make them aware of the rules of the game.
At present, every month, eight million new cell phone subscribers sign up for services in India. There are about 300 million cell phone users in India at present. This is expected to double to 500 million in just over two years. By 2012, one in every second Indian will be sporting a mobile phone, as the cell phone market is expected to expand to 600 million subscribers. The sector got a boost recently with the government granting licenses to over half a dozen players to operate services in multiple circles.