India represents a land of opportunity for operators. However, the challenges of such a vast and varied market are daunting.
India is growing at a staggering rate. It is the second most populous country in the world and is expected – if current growth trends continue – to overtake China before the middle of this century. And it is a youthful country; of the estimated 1.14 billion people living in India at present, some 40 per cent are under 15 years of age and 54 per cent are under 24. The median age is 25.
The economy is diverse, though characterised at the moment by a booming services sector, boosted in no small part by the ranks of firms from ‘developed’ markets taking advantage of the cost savings associated with outsourcing and off-shoring certain of their operations to the subcontinent.
The economic strength of India and Indians is undoubtedly on an upward curve, although ARPU is low by Western standards, ranging from $4.60-$8.90 per month according to Informa Telecoms & Media’s World Cellular Information Service. Falling ARPU figures in India, are compensated by surging growth though. Penetration has more than doubled since June 2006 and stood at 21.67 per cent in March this year. With 242 million mobile phone subscribers nationwide there is plenty more scope for growth.
A licence is required to operate in each of the 19 Telecom Circle Service and four Metro Service Areas, known collectively as “circles” in India. This has resulted in a fragmented cellular landscape with carriers offering a mix of GSM and CDMA services. There are currently 13 mobile operators of varying sizes in India. Eleven are shown in table 1, the 12th and 13th are CDMA carriers called Rainbow (Shyam Telelink) which has 57,600 subscribers in the Rajasthan circle and Connect (HFCL Infotel) which has 204,300 subscribers in the Punjab circle – both have plans to roll out nationwide GSM networks.
Informa Telecoms&Media’s World Cellular Information Service currently lists a further six planned or potential networks: Agrani Telecom; ByCell; Datacom; S Tel; Swan and Unitech. However, the new, smaller entrants are going to find it hard to compete with larger national players.
In order to avoid the existing players simply acquiring the new entrants, the Department of Telecommunications (DOT) has tightened the merger rules. “The DOT has brought in new M&A regulations, the most controversial of which lowers the market share of subscriptions and revenues that a merged entity can hold in a given circle, from 67 per cent to just 40 per cent,” says Tony Brown Informa Telecoms&Media editor AsiaCom. The DOT also announced that it will not allow new Unified Access Services Licence holders to merge with existing operators until they have been operating for three years.
Further complicating matters, the scenario for 3G licensing has yet to fully unfold. The issue of 3G has been on India’s drawing board since July 2004, and the debate continues concerning a licensing framework and the likely timing of licence awards. However, the 3G auction could take place by year-end, according to an Indian regulatory source.
“The 3G auction will be held in six months maximum,” a source from the Telecommunications Regulatory Authority of India (TRAI) told Informa Telecoms&Media late in April.
The DOT is believed to be planning to hold the first of two 3G spectrum auctions by year-end, with the second to be held in March. Reports say that, most likely, a maximum of three operators will be awarded spectrum in most circles, in the first round. Also, government-owned operators BSNL and MTNL will reportedly be awarded 3G spectrum without having to take part in the auction.
“The auction’s timing depends on whether the military returns the required 60MHz of spectrum at 2.1GHz to the DOT on time,” says Brown. “The military may release some spectrum earlier which would allow a ‘partial’ auction of whatever spectrum is available with a second auction to follow once the military returns the balance of the spectrum,” says Brown. “Though the military cannot return the 3G spectrum until the DOT finishes the fibre-optic network which the military will use instead.
“The DOT must also finalise its stance on whether foreign players can partake in an open 3G auction. In its draft 3G regulations, issued in March, the DOT ignored recommendations from the TRAI and proposed allowing domestic and foreign operators to bid for spectrum,” says Brown.
But the TRAI remains vehemently opposed to an open auction, saying that the involvement of international players would jeopardise investments made by existing mobile operators. “In our recommendations of 2006, TRAI said to the government to please ensure that existing licensees get 3G spectrum only,” the TRAI source said. “TRAI believes that eight, nine or even 10 operators per circle is enough competition.”
In May, the TRAI demanded that the Finance Ministry drop its calls for the auction to be opened up to international bidders. The ministry was hoping the inclusion of international bidders would increase spectrum revenues.
“The DOT and TRAI are at loggerheads over whether new operators (especially foreign operators) should be allowed to bid for 3G spectrum,” says Brown. “This is a crucial question but looks like being settled in favour of the DOT quite soon although it might require the intervention of the Prime Minister’s Office.”
Mirroring developments in other, much more saturated markets, voice revenues are falling fast, which has caused operators to start to push data services at a relatively early point in the penetration growth curve. While the scenario for 3G licensing remains undecided, mobile data is likely to continue to be driven by non-3G applications such as ringtones ringback tones and SMS.
The content market in India has vast potential. However, there are issues that look likely to stifle the development of the premium value added services (VAS) segment of the market.
Mobile operators stand accused of being high-handed and offering little by way of support to content providers. This, say the content providers, is stifling the growth of the industry. For their part, the mobile operators in India have stated that although they want to support the VAS segment, they have to be sure about the quality of the content, as well as the revenue-generating potential.
There is further disquiet in the market linked to the revenue that operators are willing to share with third party content providers. Which, for those in the West, will make familiar reading. Of the total VAS industry – including operator revenue – consumer revenue and including ringback tones VAS providers receive not more than 12.5 per cent according to Informa Telecoms&Media.
The usual mobile entertainment suspects – music, gaming and TV – are slowly building a presence in India. Indeed, Indian consumers purchased more mobile than physical music in the first three months of 2007 and will buy almost nine times more mobile music than any other format by 2009, according to the International Federation of the Phonographic Industry and Internet and Mobile Association of India.
With internet penetration low there is a good chance that for many Indians their first taste of life on the web will be via a mobile phone. In markets such as this, mobile social networking has proved popular. However, the costs to the majority of consumers are prohibitive and until 3G networks and handsets are fully rolled out, the user experience is likely to be uninspiring. But with plenty of headroom for growth, operators still have more than enough to play for in what, one day, could well be the largest mobile market on the planet.
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| TOTAL HISTORICAL SUBSCRIBERS IN INDIA | ||||||||
|---|---|---|---|---|---|---|---|---|
| Operator | Jun 06 | Sep 06 | Dec 06 | Mar 07 | Jun 07 | Sep 07 | Dec 07 | Mar 08 |
| Aircel | 3,123,330 | 3,689,010 | 4,380,710 | 5,375,740 | 6,577,400 | 7,691,780 | 8,953,650 | 10,002,810 |
| BPL Mobile | 1,297,280 | 1,045,300 | 1,056,280 | 1,070,850 | 1,087,990 | 1,153,360 | 1,239,470 | 1,294,760 |
| BSNL | 18,293,710 | 20,936,320 | 23,618,550 | 27,428,780 | 28,423,290 | 30,303,230 | 32,701,240 | 36,209,960 |
| Bharti | 23,072,590 | 27,061,380 | 31,974,070 | 37,141,260 | 42,703,920 | 48,875,680 | 55,162,970 | 61,984,730 |
| Dishnet Wireless | 75,490 | 115,230 | 131,980 | 138,740 | 197,820 | 347,580 | 474,450 | 607,620 |
| (owned by Aircel) | ||||||||
| Hutchison | 17,544,360 | 20,357,230 | 23,306,190 | 26,441,850 | 30,751,510 | |||
| Idea | 8,537,080 | 10,363,570 | 12,442,450 | 14,010,560 | 16,126,410 | 18,671,880 | 21,054,020 | 24,001,580 |
| MTNL | 2,169,660 | 2,290,260 | 2,424,530 | 2,746,820 | 2,608,810 | 2,772,120 | 2,954,880 | 3,241,850 |
| Reliance | 19,025,020 | 21,934,760 | 25,336,110 | 24,958,860 | 27,839,780 | 31,039,780 | 36,004,160 | 39,035,470 |
| Communications | ||||||||
| Spice Telecom | 2,054,620 | 2,196,970 | 2,449,660 | 2,728,950 | 3,170,430 | 3,481,720 | 3,800,640 | 4,210,670 |
| Tata Teleservices | 6,620,120 | 8,435,420 | 10,248,910 | 11,432,930 | 12,747,160 | 14,200,000 | 15,989,960 | 17,421,400 |
| Vodafone Essar | 35,657,550 | 39,864,870 | 44,126,260 | |||||
| Total | 101,813,260 | 118,425,450 | 137,369,440 | 153,475,340 | 172,234,520 | 194,194,680 | 218,200,310 | 242,137,110 |
| Source: Informa Telecoms&Media’s World Cellular Information Service. | ||||||||
| FORECAST SUBSCRIBER GROWTH BY 2013 | |||
|---|---|---|---|
| Carrier | GSM | CDMA | WCDMA |
| Aircel | 27,304,000 | 4,590,900 | |
| Bharti Airtel | 103,995,000 | 36,778,000 | |
| BPL Mobile | 12,827,000 | 355,200 | |
| BSNL | 50,150,000 | 444,600 | 14,593,000 |
| Idea | 55,774,000 | 7,520,700 | |
| HFCL Infotel | 1,029,900 | ||
| MTNL | 3,422,000 | 688,200 | |
| Reliance Communications | 35,639,000 | 37,729,000 | 17,878,000 |
| Shyam Telelink | 10,308,000 | 1,245,800 | |
| Spice Telecom | 11,981,000 | 3,226,000 | |
| Tata Teleservices | 12,626,000 | 20,052,000 | 8,628,000 |
| Vodafone Essar | 82,912,000 | 22,489,000 | |
| Source: Informa Telecoms&Media’s World Cellular Information Service | |||
