Telecom Circle

Updated – Sep, 2011

Indian telecom market is currently the most attractive telecom market with a lot of interest being shown by foreign players. Since in India, the fixed line subscribers are not even 10% of the mobile subscriber base, in this article, I am going to talk about mobile subscribers and its market only.

The country was divided into 23 circles when the mobile phones were introduced in the country. Separate licenses were given out for each of the circles in 1994. The circles were classified as Metros, A, B or C depending upon the revenue potential for the circle with Metros & A circles expected to have the highest potential. The following table (Table 1) lists the current telecom circles and the mobile subscriber base in each of them:

The above subscriber numbers are highly inflated by the operators as they vie for market share and spectrum. The real or active subscription levels are just 70% of the above reported numbers. The two tables (Table 2 &3) below give operator-wise and circle-wise active subscriber numbers as on 31st Dec., 2010:

There are wide variations in the ratio of active subscribers to the reported subscribers. The old GSM players like Airtel, Idea and Vodafone have relatively clean operations while the new operators and the CDMA players are struggling to keep their subscribers active. Please note that the active subscribers have been calculated using VLR (Visitor Location Registry) as a proxy. Visitor Location Register (VLR) is a database – part of the GSM mobile phone system – which stores information about all the mobiles that are currently under the jurisdiction of the MSC (Mobile Switching Center) which it serves. This means that a subscriber cannot be present in more than one VLR at  a time and hence can be used as a proxy for active subscriber base. The difference in the subscriber numbers in Table 1 and 2 is on account of BSNL CDMA which is counted by TRAI in table 2&3 but not reported by COAI and AUSPI which is the basis for table 1.

Due to hyper competition in the Indian market, the realized rate per minute is coming down and the same is not getting compensated by increase in minutes of usage. In fact, the minutes of usage is also reducing resulting in lower ARPU for both GSM and CDMA. The ARPU is down ~25% in the last one year as per the TRAI report. The tables below give a snapshot of the key indicators for GSM and CDMA:

Table 4: Key indicators – GSM

Table 5: Key operator indicators – CDMA

There are many innovations that have helped reduced the cost of ownership of mobile phones. The figure alongside (click to see the bigger picture) is a snapshot of how the subscriber base increased as the tariffs reduced due to innovations and government interventions. India is the now the second largest market in terms of mobile subscriber base after China but still it is at real teledensity of less than 50% and adding 8-10 million new subscribers every month.

The Indian Telecom market is the most competitive with over 11 operators in each circle. Nowhere in the world does any country have so many carriers. The dominant players are Airtel, Reliance, Vodafone, BSNL (state owned), Idea and Tata. Reliance and Tata offer CDMA technology while all the other players are in the GSM space. GSM has a 88% share of sbscribers and now even Reliance and Tata have launched nation-wide GSM services. Apart from the current players, there are several new players like Aircel, Unitech-Telenor, Shyam-Siestema, Etisalat that have got the license and spectrum to launch mobile services in several telecom circles. Shyam-Siestema is the only player to launch CDMA services while all the new operators are in the lucrative GSM space. The adjoining figure gives the market shares of the operators in India. It is a fragmented market with the biggest operator (Airtel) garnering only 20% share.

ARPU (Average Revenue per User)

India is a predominantly prepaid market (93% of all subscribers are on prepaid) with low ARPU and high minutes of usage(MoU).The GSM ARPU is Rs 100 (~ USD 2.2) per month with a usage of 349 minutes per month in the quarter ending Mar, 2011. Similarly, CDMA ARPU stood at Rs 66 (~USD 1.5) with a usage of 263 minutes per month. There is a wide disparity in the rural and urban teledensity with rural teledensity at 34% vs. urban teledensity of around 157%. The chart below gives the progressive tele-density (Wireline + Wireless) in rural and urban areas.

Regulatory has played a big role in development of Indian telecom market by brining in the competition at the right time and by removing bottlenecks. However, there are a few pending issues that still need to be resolved like the 3G spectrum auction and allocation, Mobile Number Portability and 2G spectrum allocation policy.

Given the low tele density in the country, the subscriber base is expected to grow at a brisk pace. The mobile base to cross 1 billion by 2014 but the real subscriber penetration would be much lower at 60-65% and most of the new additions are expected to come from rural areas where the mobile penetration is still low.

(All the data is sourced from COAI, AUSPI and TRAI which are the leading industry associations and regulatory bodies)

Resources on India Telecom Industry

1. India Subscriber Database - Circle-wise, operator-wise from year 2000 onwards (updated till Jul’11)

2. Presentation on India Telecom Market

2. Download the latest TRAI  Performance Indicator Report -Sep-11 to access key telecom indicators (Released in Jan’12)

3. ARPU Revenue Report Apr-Jun 11- Circle-wise, Operator-wise ARPU data for GSM networks (released in Aug’11)

4. Case study on How Indian Carriers make 40% EBIDTA margins at 2 cents a minute

5. Report (based on actual numbers) on Internet Usage in India – Comviva India Mobile Internet Study

6. PwC Report on Indian Telecom Market Slowdown The Indian Mobile Services Sector-Struggling to Maintain Sustainable Growth (Released in Aug’11)

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