Telecommunications has been the biggest success story in the liberalised Indian economy. The government target of 500 million subscribers by 2010 was achieved over a year in advance. With close to 550 million mobile subscribers, India has the most mobile users after China. Today, mobile telephony has come of age and is changing the way India communicates.
The sharp growth in the subscriber base has been driven by intense competition, key policy decisions and regulatory initiatives. There are close to a dozen telecom service providers in each of the 22 telecom circles. This includes a clutch of international operators making India among the most globalised telecom markets. The introduction of Mobile Number Portability (MNP) and Mobile Virtual Network Operators (MVNOs) later this year will raise the level of competition by a few notches.
Over the next few years as the Indian telecom market matures, there will be consolidation. It is quite likely that there will be 5-6 large nationwide telecom service providers offering the entire gamut of services?be it 2G, 3G, mobile broadband and IPTV. By then, some of the leading domestic operators are expected to extend their footprint across the globe. Already, some of that has begun to happen.
The launch of 3G services later this year will result in an improvement in the quality of service. Call drops should come down substantially as operators start migrating high-end customers to the 3G network. That will in turn create additional capacity on their 2G networks.
The continued growth in subscribers has ensured that teledensity is now just below 50%. Yet, there is enough scope for further growth. As new subscribers from rural India get connected, the average revenue per user (Arpu) is expected to fall from the current $4.5. That however, is not a cause of concern for telecom service providers.
Over the last few years, telecom service providers have redefined the way services are provided. Today, some of these are being replicated by operators in other emerging markets. For one, Indian telecom service providers are interested in ensuring that their network is utilised at all times. They treat airtime as a perishable commodity and attempt to maximize network capacity utilisation at all times. Service providers reduce tariffs to benefit from usage buoyancy. Operators have also kept capital expenditure in check by outsourcing networks and IT needs to global vendors.
<>The author is telecom industry leader, E&Y