Wednesday, August 02, 2006

The Diffusion Group: India's Mobile Market Subscribers to Top 350 Million by 2010

The Diffusion Group (TDG) predicts "the number of mobile subscribers in India is expected to grow from just over 100 million today to more than 350 million by 2010 - an addition of 250 million subscribers in just four years."

TDG states that "while China's market is widely heralded as the most immediate and largest opportunity for mobile vendors, India's growth rate will be equally explosive. When combined, China and India (what TDG calls 'New Asia') have a population of approximately 2.5 billion people and comprise the single largest opportunity for mobile vendors in the history of mobile telecom. The evolution of these two markets will reshape the global telecommunications and technology landscape, as well as realign market share among today's mobile market leaders."

Michael Greeson at TDG said, "While India's mobile market growth will in many ways follow China, the reasons for its growth are very different. India continues to experience a level of poverty far deeper than China and has little in the way of fixed-line infrastructure to support telecommunications. More than half of India's 700 million rural inhabitants have no access to residential electricity and must rely on community pay phones. It is because of this unique confluence of factors that mobile technologies make so much sense to both India's government and to operators."

Greeson noted "modern mobile telecommunications technology offers developing nations a way to cover expansive 'greenfield' territories (in this case, areas bereft of home or personal telecommunications) in a faster and less expensive way than traditional fixed telecom infrastructure. Combined with the world's lowest per-minute charges, inexpensive handsets, and the social status of mobile phone ownership, India's mobile operators are preparing to exploit this opportunity."

Key findings include:

  • Despite 12 years of deregulation, the number of fixed-line telecom subscribers has increased less than 15% in the last three years (from 41.5 million to 47.5 million, most of which has been confined to urban areas);
  • In India, the cost of installing new fixed lines is roughly three times the price of installing a mobile line;
  • As of early 2006, about 50% of all the towns and villages in India could receive a mobile signal. The Ministry of Communication and Information Technology has set a goal to reach 90% coverage by the end of 2006 - a very ambitious goal, but one that could be within reach given the steps that the Telecom Regulatory Authority of India (TRAI) and the Indian government have taken to enable competition and increase foreign investment;
  • Despite the fact that government taxes on mobile phone revenues are amongst the highest in the world, TDG expects that taxes, levies, and spectrum fees will be reduced to cover only the Universal Service Obligation (USO) fund and administrative costs;
  • Given the rapid pace of growth, upgrading current infrastructure has taken a backseat to network expansion and quality of service in most areas is extremely poor; and
  • Total mobile service revenue will increase over 170% from 2006 through 2010 - which translates to a compound annual growth rate of 22.1%.