Hello, hello ... India calling
South Asia
By Indrajit Basu
KOLKATA - While the Global System for Mobile telecommunications (GSM) celebrates over 1 billion connected customers worldwide (achieved in February) in just 12 years against 12 decades of fixed lines, with China and Europe taking credit for most of the growth, the fact is that India, unexpectedly, is emerging as one of the fastest-growing mobile markets in the world today.
"Undoubtedly, most of mobile telephony's growth has occurred in China," said a recent Deutsche Bank white paper on wireless telephony called "Brilliant Past Bright Future", "but India represents one of the most exciting growth opportunities for mobile." The paper adds, that with its billion plus people, India is the second most populous country on the planet, but has just 33 million wireless/mobile telephone subscribers. It is expected that the subscriber base will grow to 290 million by the end 2008 and 500 million by 2010. "This makes India one of the fastest-growing markets of this decade," Deutsche Bank said.
Indeed, in the space of less than a decade, with the introduction of wireless telephony in 1995 when the first mobile phone call was made at a princely cost (by Indian standards, because fixed line telephony tariffs were charged at Rs 1 per 5 minutes) of Rs 16.80 per minute (40 cents US), India's emergence as a global growth story on steroids is noteworthy. Perhaps no single telecommunication technology has had as profound an impact on the Indian society as the "wonder" technology called wireless telephony. Take for instance Basheer, one of 100,000 fishermen of modest means in the southern state of Kerala, who uses the mobile phone daily to strike the best deal once the catch is in his boat and well before it reaches shore. "Not just that, we feel more secure in the sea and we can communicate immediately for assistance in rough weather," Basheer says.
Many farmers in the Indian state of Punjab, too, depend solely on mobile telephony to sell their harvest in far off commodity exchanges called mandis right from their farms instead of browsing through newspapers or visiting the mandis first to track rates. And Jiva Institute, a Delhi-based organization for social development, uses the mobile phone exclusively for its TeleDoc, which helps in providing medical attention to remote Indian villages with no easy access to treatment, by transmitting diagnostic data to an information technology-enabled central clinic and then prescribing medication and treatment.
India is not just the fastest-growing market, but also the most competitive, and hence the cheapest. Intense competition in the telecom sector over the past two years has led to a crash in prices for everything from handsets to talk time. Talk time tariffs for instance have come down by 74 percent over the past two years, and handset prices, which were sold at a premium of as high as 40 percent over international prices even until a year back, are now at par. "The telecom service sector has shown unprecedented growth during 2003-04, mainly driven by intense competition and aggressive pricing," says the Telecom Regulatory Authority of India chairman, Pradip Baijal.
And by virtue of its size, growth rate and competitiveness, the country is setting the benchmark for the global telecom industry as well. The recent deal between India's newest and fastest growing wireless telephony company, Reliance Infocomm, and United States-based Lucent Technologies, is a good example of how India is setting the benchmark for lowest equipment prices in the world.
Industry sources say that Reliance Infocomm's negotiating capabilities managed to bring down the equipment cost of infrastructure to under US$40 per subscriber from $100 two years back. Equipment rates for Reliance in fact have slipped even further to come down to $25 per subscriber - once again, among the lowest in the world.
In another landmark agreement, Sweden's equipment vendor Ericsson agreed to a revenue-sharing deal with the Indian mobile telecomm operator company Bharti Televentures that will allow Ericsson to earn a percentage of revenues every time a subscriber downloads video or plays a Java game. This kind of cooperation is quite unusual in the global wireless world, say global vendors, admitting that participating in the Indian market has forced them to radically reduce costs in their own companies.
But how does the Indian telecom story compare with that of China, the other amazing Asian growth story? Although China continues to lead globally in terms of telecom spending and new customers, India's initial pace of growth has been more impressive. In 1996, nine years after China opened up to wireless telecom, it had 6.8 million subscribers. After nine years, India had over 30 million subscribers and was adding 1.5 million more every month, says Vince Mazzola, president and chief executive officer of Lucent Technologies India. "China has reached a high level of teledensity and the wireless spending is relatively flat. While China has already surpassed 250 million mobile subscribers, the rate of growth has slowed down over the past six months."
However, it is not as if India will become a more important market than China, just yet. China's spending on telecom last year was $25 billion and the mobile market is still adding 5 million new subscribers every month. Telecom spending in the Indian market is going to touch $3.1 billion this year, although by the end of the year, India is likely to overtake Korea and Malaysia. Mazzola figures it will take at least five years for India to catch up with China, but where India may surpass China is in the sophistication of the telecom services. Already, some of the cutting edge data technologies that the world has to offer are being tested by Indian operators: Qualcomm's Push to Talk technology by Tata Teleservices, live video downloads on GPRS by Hutchison and the EVDO wireless broadband from Lucent Technologies by Reliance Infocomm are some of these instances. "Innovation in the wireless world will continue to come from the vendors, but increasingly, India features among the first ports of call for rolling out new technological solutions," says Mazzola.
Nevertheless, despite the scorching growth prospects that India offers, the road ahead for wireless telephony players in the country may not be without hurdles. That's because once the government raises the bar on foreign investment to 74 percent, a move that is expected to come through after the ongoing general elections, the level of competition is likely to be among the highest in the world.
Interest among foreign operators is already evident. According to global consultancy firm McKinsey's, virtually every week the consultancy firm gets a call from a major operator evincing their interest in India. Moreover, recent reports suggest that Singapore Technology Telemedia and Temasek Holdings (a Singapore-based investment company), as well as Telekom Malaysia, have shown keen interest in acquiring the 33 percent stake in India's mobile telecom provider Idea, of which AT&T wishes to sell out. Vodafone, the leading European wireless player, too, is reportedly scouting around in the country for opportunities "to play the game".
(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)
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