Virus impact over each market - telecom operators, government agencies and regulators' responses - revised forecasts for the next 5 years.
This report provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in India. Subjects covered include:
Researcher:- Peter Evans
Current publication date:- July 2014 (20th Edition)
Growth in India’s huge mobile market had effectively stalled in 2012 and the market was looking very subdued coming into 2013. However, by early 2014 there were positive signs of a recovering market, following some major adjustments. There was also evidence that some serious restructuring was taking place.
Back in 2010/2011, mobile operators in India added around 370 million new subscribers to their networks, an average of 15 million per month over the two years, to bring the total number of subscribers to around 900 million by the start of 2012. However, in the twelve months that followed we saw some erratic behaviour of the subscriber base and by the year end there were just 865 million subscribers. The drop in subscriber numbers was a combination of falling customer demand and the effect of operators ‘cleaning out’ their data bases. The drop was predominantly in the urban markets with the rural subscriber base actually continuing to grow during this period.
Despite the big drop in mobile subscribers the key drivers were considered to still in place; the mobile market was continuing to be driven by cheap call rates, low handset prices and rising incomes among the hundreds of millions of the population that are described as the country’s middle class. While offering some of the lowest mobile tariffs in the world, India’s market had also been running for many years with one of the highest usage rates in the world with the average customer using around 500 minutes per month. (This had dropped to around 350 by 2013.) Additionally, the operators were continuing their push into the rural and remote parts of the country.
One of the reasons for the operators culling their databases was to lift Average Revenue Per User (ARPU). Mobile ARPU in India had been steadily declining over the years as competing operators offered cheaper tariffs; at the same time usage levels have remained reasonably high thus slowing the decline in revenues. At the same time, there had been a major push in recent years to take mobile services into the poorer and rural areas of the country; this inevitably weighed heavily on ARPU. Countering this trend, the long-awaited 3G licensing has seen networks across the country finally delivering mobile data services to customers. Although still struggling with coverage issues, 3G has started to see operators boosting revenue. By 2012/2013 there were positive signs that the decline in ARPU was ‘bottoming out’ as operators began reporting increased ARPUs.
By the end of January 2014 India’s mobile subscriber base was increasing again and had reached 893 million. Figures from the TRAI also showed that Mobile Number Portability (MNP) transfer requests in January stood at a healthy 2.56 million. Most importantly, there was a renewed interest in data services. For example, 4G / LTE networks were being rolled out and this was shaping as a key battleground in the market once newcomer Reliance Jio launches its 4G services in the December 2014 quarter and goes head-to-head with Bharti Airtel.
In the meantime, the fixed-line market, which had grown strongly over a number of years, began experiencing zero and then negative growth. Fixed-line subscriber numbers stood at 28 million by early 2014. With less than 3% fixed-line penetration, India has nevertheless achieved a remarkable national coverage, with 99% of the population having some form of access to a telephone. It has been the heavy investment in telecoms infrastructure over the last decade, plus a number of key regulatory initiatives that have combined to see India’s huge population delivered at least some level of telephone service.
In terms of online access, there have been a number of efforts by the government to promote broadband internet throughout the country; broadband development had long been languishing, but there was new hope for a serious expansion phase in this segment of the market. By early 2014 there were around 15 million fixed broadband subscribers – a lowly penetration (by population) of slightly more than 1%. Meanwhile, the impact of mobile broadband was finally starting to hit the market and in the medium term this was expected to lift broadband penetration significantly.
Although facing serious functional and regulatory challenges, there is much that is positive to be found in India’s telecom industry. Sweeping reforms introduced by successive governments over the last decade or so have dramatically changed the nature of telecommunications in the country. A number of factors have been responsible for the amazing growth in India’s telecom sector; apart from the obvious booming economy and the rapid expansion in the country’s middle class, the growth drivers include low tariffs, low handset prices and most notably a highly competitive market created by the government and the regulators. The government continued its commitment to opening up the market to more and more competition and investment. The launch of Mobile Number Portability (MNP) in 2011 added yet another dimension to what was already an intensely competitive market. The anticipated removal of the cap on foreign investment in the telecom sector in 2013 was yet another strong signal to the market of the government’s intentions. The government has been continuing to push on a broad front to advance the restructuring of the telecommunications regulatory regime.
Data in this report is the latest available at the time of preparation and may not be for the current year
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