Mobile India – Future of the mobile industry in India

As per the latest reports, number of mobile subscribers in India has crossed the 250 million mark. By April 2008, India is projected to become the second largest wireless market in the world.

So, is it time to pop that bottle of champagne and celebrate ?

Definitely. Second largest wireless market in the world -WOW !!! that’s indeed an incredibly mind blowing statistic.

But the celebration will probably be short-lived.

Why ?

Because as the graph below shows, even though we are well on way to become the world’s second largest mobile market, our average ARPU remains one of the lowest in the world.

As per the latest performance reports from TRAI, all India blended ARPU for GSM at the end of the latest quarter was Rs 261 while that for CDMA was Rs. 176 .

If you look at the stats over the past 9 months, they appear even more bleak. Over the past 9 months, ARPU has dropped 17.41% for GSM while it has dropped 10.20% for CDMA. Minutes of Use (MOU) per subscriber has increased by a measly 2.2% over the past 9 months for GSM players while it dropped by 11.56% for CDMA players.

Of this ARPU, what is the revenue breakup for various services / applications ?

Here’s a chart highlighting the revenue breakup for GSM:

Here’s a chart indicating the revenue breakup for CDMA players in India

This 9 month trend is more than likely to continue. Fierce competition to add new subscribers will continue to drive down the ARPU further. Number portability will only exacerbate the problem – operators will need to drop prices to keep the churn rate at a minimum and stay competitive. Voice and rental revenues – the two biggest contributors to the current ARPU, will continue to dwindle due to market pressures and as the market matures.  Operators will soon need to start looking for additional means to offset the ARPU deficit. And most likely, its going to come from data services.

So, will 3G be the saving grace ?

Globally, operators have yielded huge revenue gains from 3G rollout. Almost all have seen an uptick in data usage and in several cases (KDDI, DoCoMo, 3 UK, O2 UK etc.), data services are contributing more than 30% to the overall ARPU.

Will a 3G rollout in India exhibit similar behavior ? I’d definitely like to believe so.

But there are a number of challenges for 3G to be successful in India:

• Clear revenue sharing guidelines between operator and content producers. Currently, operators get a 60% chunk of the revenue, while the content owners get about 25% and 15% goes to the copyright owner. This breakup seems to unfairly skewed in favor of the operators. Seems like some progress is already happening on this front.

• High percentage of prepaid customers. About 90% of all GSM & CDMA subscribers in India are prepaid customers. Prepaid customers are low usage customers and contribute only 25-30% ARPU’s as compared to the post-paid segment (for GSM, post-paid customers contributed Rs 628 in ARPU while pre-paid customers contributed only Rs 219. for CDMA, post-paid customers contributed Rs 499 in ARPU while pre-paid customers contributed only Rs. 140). As mentioned earlier, the introduction of number portability will further worsen the attrition scenario, since it’ll make easy for users to change operators and keep their same number. Operators will have to devise means and offer plans to retain subscribers and also convert some of the pre-paid customers to post-paid ones.

• More choices for affordable, 3G capable handsets. While there exists a subset of subscribers who would pay more for a premium phone, affordability would be an issue for quite large section of the subscriber base. Currently, only 5% of all handsets in India are 3G capable.

• Copyright and piracy issues need to be addressed. The proposed amendments to the Indian IT Act, will most likely take care of this point.

• Getting users out of the vice like grip of SMS will be a challenging task

Inspite of all the hurdles, the challenges seem puny as compared to the benefits that India stands to gain from the 3G deployment. Rollout of 3G will give the much needed bandwidth that all stakeholders are hoping for. Without 3G (read high speed network), the cliched term “Mobile will be the Internet platform in India” will never become a reality.

Operators like Bharti Airtel seem to be raring to go – they’ve successfully tested 3G services in Delhi, Mumbai and Bangalore and are waiting for the spectrum to be allocated. Mobile users, of course, can hardly wait for 3G to go live in India.

Similar Posts

• Mobile is 20 years old. What lies ahead ?
• Google Adsense for mobile advertising in India
• TringMe introduces VoIP feature on low end mobile phones

Comments

5 Responses to “Mobile India – Future of the mobile industry in India”

1. Amardeep SIdana says:

   April 23, 2008 at 11:20 am

   Excellent article, can u possibly send me more figures from the MObile industry? Like total Market, with market share among service providers. Future technologies etc
2. pranav says:

   April 24, 2008 at 12:51 pm

   amardeep,

   check out the TRAI website http://www.trai.gov.in and the section on performance indicators. there you will find several reports on the data you are looking for.

   tx,
   -p
3. Nilesh Trivedi says:

   May 4, 2008 at 12:55 am

   Comparing countries by absolute ARPU does not make sense. What matters for the industry is what percentage of the disposable income are consumers spending on telecommunication services.

   In other words, give us a plot of ARPU/Disposable Income. That would be a relevant industry parameter and not ARPU alone because the Telecom industry industry alone hardly has any influence on the Average disposable income of a country,

   cheers
   nilesh
4. pranav says:

   May 5, 2008 at 11:47 am

   @nilesh – true…in fact, in india, telco operators are talking in terms of Average Margin Per User (AMPU) and not ARPU.

   However, you need a uniform metric while comparing this data at a global level. And even though ARPU may not be the best suited metric, it is still the most frequently used metric for reporting this data.
5. Abhishek Sharma says:

   June 27, 2008 at 8:13 am

   Hi Pranav
   Its an interesting article but FYI the first figure shown by you is absolutely out of context. You wrote, “Because as the graph below shows, even though we are well on way to become the world’s second largest mobile market, our average ARPU remains one of the lowest in the world.”
   On the other hand the data in the diagram talks about data as a percentage of ARPU…
   In plain English- Data usage (GPRS, SMS, etc.) in a ratio to total ARPU (inc voice).

   Hope u rectify…