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Cellular: Coming of age - Views on News from Equitymaster
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  • Mar 14, 2002

    Cellular: Coming of age

    De-regulation has brought given a new lease of life to the Indian telecommunication sector. Cellular subscriber growth rates, after remaining sluggish for more than eight years, have really accelerated in the last year and a half. One must appreciate the efforts taken by the telecom regulators in opening up the sector, which has resulted in almost doubling of subscriber base in the cellular segment. We take a closer look at the subscriber growth trend in this category.

    Cellular subscriber base is nearing the 6 m mark (5.7 m in January 2001) as compared to around 3.3 m in January 2001, a growth of 75% YoY. Growth in subscriber base was higher between July'01-Jan'02 at 33% against 24% during Jan'01-June'01. This could be attributed towards entry of third operators in a number of circles and the consequent fall in air time charges. Also, during the festive season, cellular operators waived off activation charges in an attempt to lure customers. Besides, off late, pre-paid cards have shown robust growth with the entry of public sector companies like MTNL and BSNL in this segment. Post MTNL's entry into the circle, private players were forced to slash incoming and outgoing call charges for pre-paid cards from 1.99 per minute to around 1.85 per minute. This could also have aided subscriber base growth.

    The circle break-upů
    ('000 nos) Aug '2001 Sep '01 Oct '01 Nov'01 Dec'01 Jan'02
    Metros 1,751 1,876 1,958 2,053 2,161 2,254
    % share 38.5% 39.1% 39.1% 39.3% 39.4% 39.4%
    A' circle 1,567 1,659 1,727 1,790 1,872 1,965
    % share 34.5% 34.6% 34.5% 34.3% 34.2% 34.3%
    B' circle 1,068 1,096 1,149 1,196 1,253 1,306
    % share 23.5% 22.8% 22.9% 22.9% 22.9% 22.8%
    C' circle 156 167 176 186 193 201
    % share 3.4% 3.5% 3.5% 3.6% 3.5% 3.5%
    Total 4,542 4,799 5,011 5,225 5,479 5,725
    % growth 5.9% 5.6% 4.4% 4.3% 4.9% 4.5%
    Source: COAI

    Growth continues to remain robust in the four metros namely Mumbai, Delhi, Chennai and Kolkata despite higher base. Of the total subscriber base of 5.7 m in Jan'02, metros accounted for as high as 39% (2.2 m). Even within metros, Delhi and Chennai circles have registered the highest growth rates in the last one year at 89% and 130% respectively.

    Though there is enough scope for improvement on the regulatory front, the Telecom Regulatory Authority of India (TRAI) continued with its tariff restructuring plan. It had cut airtime charges for national roaming to Rs 3 per minute from around Rs 10 per minute, which is effective March 1st, 2002. The Cellular Operators Association of India (COAI) has contested the steep reduction in tariffs by stating that the actual cost of providing national roaming for an operator is Rs 10 per minute. It has also stated that, on an average, a subscriber has to talk for 45 minutes per month to break-even at the current tariffs, which seems unlikely in the near term. While the TRAI move is expected to have a negative impact on cellular operators as elasticity is still on the lower side, in the long run, revenue growth is expected to be robust.

    Bharti along with its subsidiaries continues to increase its market share, which as of Jan'02 stood at 21% as compared to 18% in Jan'01. While Reliance (6%), MTNL (2%) and Hutchison (6%) have increased market share YoY, BPL seems to have lost market share. The company's share stood at 15% in Jan'02 as compared with around 19% in the corresponding period last year. Barring Himachal Pradesh, Reliance holds a lion's share in all other circles where it operates, due to lack of competition.



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