The Hindu : Business : Phone subscriber base to double in five years

Online edition of India's National Newspaper
Wednesday, Dec 29, 2004

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Business

Phone subscriber base to double in five years — study

By Our Staff Correspondent

MUMBAI, DEC. 28. The telecom services industry will continue to record a strong growth in the next five years, according to a report by CRIS INFAC. From a meagre 2.8 per cent in March 2000, teledensity has increased to 8 per cent in September 2004 and CRIS INFAC expects this to continue to increase and reach 18 per cent by March 2009.

In unit terms, the subscriber base is forecast to grow at a Compounded Annual Growth Rate (CAGR) of 27 per cent to touch 212 million by March 2009, driven largely by the continuing growth in the mobile services space.

Mobile services to dominate

CRIS INFAC expected the telecom services industry revenues to double from an estimated Rs. 49,400 crores in 2003-04 to around Rs. 100,000 crores in 2008-09. Mobile services will contribute more than 85 per cent of this increase with the balance being contributed by Internet services and leased circuits.

In the report, CRIS INFAC says that mobile services, which accounted for almost 95 per cent of the additions made to the telecom subscriber base in 2003-04, will account for 90 per cent of the additions to the subscriber base over the next five years as well. Consequently, by 2008-09, mobile subscribers are expected to account for nearly 75 per cent of the telecom subscriber base, up from 43 per cent at the end of 2003-04.

CRIS INFAC forecasts the mobile subscriber base to increase from 33.3 million at the end of 2003-04 to around 155 million by 2008-09 at a CAGR of 36 per cent and the subscriber base of fixed services to increase from 42.6 million to 56 million during this period.

Rajnish Rastogi, Head, Research, CRIS INFAC, says, "The growth in the mobile subscriber base will be driven by supply-side factors such as increase in coverage by operators, strengthening of marketing and distribution networks and increasing affordability of mobile services due to rising income levels and declining tariffs.''

Further, Mr. Rastogi estimated that the mobile subscriber base would be in the range of 140-170 million by March 2009 depending on the extent of coverage expansion and decline in cost of service.

Huge investment

Mobile service providers are expected to make huge investment over the next five years to expand their networks and meet increased demand. According to CRIS INFAC forecasts, investments to the tune of Rs. 65,000-70,000 crores are expected over the next five years, as compared to Rs. 35,000 crores in the last five years.

Declining tariffs and addition of new subscribers with relatively low usage has resulted in the blended Average Revenue per User (ARPU) of mobile operators falling at an annual rate of 22.8 per cent to Rs. 469 a month over the last four years. CRIS INFAC expects the blended ARPU of mobile operators to fall to Rs. 296 a month by 2008-09. (Blended ARPU is the weighted average of pre-paid and post-paid ARPU). Mobile tariffs for local and long distance calls will continue to drop, driven by a decline in regulatory costs and increasing competition among operators.

In spite of the steady decline in ARPUs, the profitability of mobile service providers is expected to improve, due to economies of scale and the expected decline in regulatory costs. The gross ARPU of fixed services operators has fallen at an annual rate of 9.5 per cent to Rs. 641 a month over the last four years. CRIS INFAC expects the same to decline to Rs. 543 a month by 2008-09.

Policy decisions

Further, Mr. Rastogi added, "historically, the sector had been dogged by uncertainty regarding policy decisions. But recent positive developments such as the implementation of Unified Access Service Licence (UASL), introduction of Calling Party Pays (CPP) regime and reduction in license fees, have improved the regulatory environment significantly. We believe that the regulatory environment will improve further with the proposed unification of licenses for all telecom services and a reduction in the regulatory burden on the industry in terms of charges such as license fee, ADC and spectrum charges.''

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