Phenomenal growth, but penetration unfulfilling

7 Oct 2004

The number of GSM mobile subscribers in India grew by more than 80% in the twelve months to the end of September 2004 as operators extended their networks and slashed call prices, according to the latest figures published by the Cellular Operators Association of India (COAI). At the end of the month there were 33.56 million GSM users in the country, up from 18.31 million at the end of September 2003. In any other market, such strong year-on-year growth would be considered nothing short of phenomenal, but in a country of nearly 1.1 billion people it means that just 3% of the population own a mobile phone.

Importantly, in a country where around a quarter of the population live in poverty, tariffs are falling. A price war among operators was sparked around the middle of the year when Reliance – which offers wireless services via both GSM and contentious WiLL technology networks – cut its pre-paid rates by up to 60%, reducing the cost of a one-minute national call from INR2.49 (USD0.05) to INR0.99 (USD0.02). Rival operator Bharti Tele-Ventures quickly announced its own cuts and others have since followed suit. There has been some speculation that the country’s smaller players – those without international backing – may not be able to survive the price war and some companies may be forced out of business as ARPU levels drop to unsustainable levels.

Operators are slashing prices in an attempt to attract new users to their networks as they expand coverage into the poorer rural areas. India’s second largest mobile operator BSNL continues to be leading market growth. The mobile arm of the fixed line PTO launched services to much fanfare under the brand name Cell One just two years ago, and by the end of last month had a user base of 7.4 million, just 900,000 behind market leader Bharti Cellular. BSNL saw its subscriber figures boosted by the recent rollout of services in four new regions – Jammu and Kashmir, West Bengal, Bihar and Orissa. It recently revealed plans to achieve nationwide GSM coverage by March 2005, and currently has coverage in 21 of India’s 23 regions.

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