‘Is India’s telecom sector in trouble?’
The current outlook is poor and how the future will look is critically dependent upon government policy on spectrum and on allowing mergers and acquisitions.
Even when the economy was slowing, India’s telecom sector added roughly 10-12 million new subscribers per month — indeed, in August, more than 15 million new mobile subscribers were added and mobile teledensity stands at 40 per cent today. Fixed-line penetration is down to the levels that existed five years ago and projections of penetration for the future exclusively focus on mobile phones.
There have been many triggers for the massive increase in mobile penetration. On the demand side, there has been an enormous decline in prices. The effective price per minute for a mobile outgoing call has plummeted from Rs 15.30 in 1998 to Rs 0.68 today. That’s a 98 per cent decline and this would be much higher in real terms. Another measure of price, the Average Revenue per User (ARPU), currently rules at Rs 200-levels, compared to Rs 3,000-levels in 1998. The launch of micro prepaid cards and handsets priced at less than Rs 1,000 have further reduced entry cost for the subscriber — micro-prepaid allows recharge options for as low as Rs 10. Other features of the prepaid platform that reduce entry costs for the subscriber include ‘lifetime validity’, full value recharge and special ‘within network’ tariffs. It is not surprising, therefore, that about 97 per cent of the incremental subscriber base is opting for prepaid. On the supply side, network costs have fallen substantially to less than $85 (Rs 3,825) per subscriber.
