Mobile services have recorded a compounded annual growth rate of 97.22% over the last five years. The target of 200 million subscribers by 2007 set by the government looks very plausible. But will the current growth rate continue and is the target achievable Predicting growth of subscriber-base is critical to service providers for planning network roll-outs and capacity expansion, and for investor strategies.
Economic literature postulates that a networks value depe-nds on the size of the existing subscriber base. For any individual subscriber, the systems utility increases with an increase in the set of users he wishes to communicate with. This phenomenon, known as network consumption externality has been proven true in the growth of the Net and phone network in the US.
When the cellular network system was introduced in India in 1995, there were 10 million land-line subscribers. Cellular services subscribers then derived a positive net utility, being able to talk to existing landline subscribers. As more and more started subscribing to cellular services, the systems utility increased, resulting in a marginal number of non-users subscribing to the system. This induces further growth.
However, when the population of potential subscribers is finite, the growth pattern tends to be S-shaped. There is also the diffusion of innovation theory which defines the process by which innovations, such as cellular and internet services, are communicated through certain channels over time among members of the social system. The adopter distribution over time is governed by the rate at which the innovation diffuses through a population. This theory also postulates that the total number of such innovation adopters as a function of time is expected to be an S-curve.
A typical S-shaped growth curve has three phases. In the initial stages, growth is less as subscribers arent fully aware about the utility they derive by joining the system. But as their number attains a critical mass, it is enough for the growth process to become self-sustaining. Growth increases near exponentially in the second phase. The last stage indicates stability in growth as the saturation level of subscribers is reached.
By June 2005, India had reached a teledensity of about 9.70
Mobile services have been growing at a compounded annual rate of 97.22%
The growth curve indicates that we were in the first stage until 2000, after which the critical mass of three million propelled growth. Now, we are in the second exponential growth stage. Our model indicates that by 2007, India will have about 89 million mobile subscribers. And witness the onset of the third stage, of saturation, at 92 million around 2010. So attaining 200 million by 2007 is a mirage.
Some critics of the S-curve growth pattern have proved that internet growth is still exponential and the saturation point has been surpassed. Specifically, S-curve theories ignore external factors such as government policies, technological advancements, and service innovations. However, the growth rate of mobile subscribers in recent months has been slow.
Operators need to look bey-ond subscriber numbers. Incre-asing average revenue per user should be their objective. They should look at value-added services, such as data connectivity and mobile commerce to incre-ase revenue. Improving service quality and reducing the churn of subscribers should get priority. Category B and C circles provide opportunity for growth. Positive government policies and innovations by operators might help growth. The governments inclination to go for spectrum auctioning for 3G services to rake in the moolah might affect growth. For continued growth, service providers, the government and the regulator should try their best to break the S-curve saturation.
The writer is a professor at the Management Development Institute, Gurgaon