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Cellular: The changing composition - Views on News from Equitymaster
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  • Mar 21, 2001

    Cellular: The changing composition

    It is a well known fact that the Indian mobile subscribers base is growing at a rapid pace. But the interesting point is that the growth in cellular base in the A and the B circles comprising states like Maharashtra, Tamilnadu, Karnataka, Punjab and Andhra Pradesh are higher than the metro circles.

    The top 10
    (Jan-Dec '00) (% growth)
    Rajasthan 178.9%
    Haryana 150.7%
    Kerala 150.0%
    Tamil Nadu 125.6%
    West Bengal 111.5%
    Calcutta 106.9%
    Madhya Pradesh 100.9%
    Uttar Pradesh (W) 99.8%
    Himachal Pradesh 99.6%
    Maharashtra 82.1%

    To put things in perspective, overall subscriber base has gone up by 86% to 3.1 m in December 2000 as compared to 1.6 m in January 2000. Of this, the aggregate market share of metros has come down from 43% in January 2000 to 40% in December 2000. Rajasthan, Haryana and Kerala have clocked more than 150% growth in subscriber base within a span of 9 months, however, this could be due to the smaller base. Going forward, number of subscribers in states like Karnataka, Andhra Pradesh and Tamilnadu are expected to double every six months, as they are the base to many of the top rung software companies in India.

    Since TRAI is considering the entry of the fourth mobile operator in each of the circles, one would expect tariffs to come down sharply. Competitive pressure will force service provider to reduce air time charges, which is apparent after the entry of state owned telecom company, The Mahanagar Telephone Nigam Limited (MTNL). Private service providers like Bharti and Sterling slashed air time charges by more than 40%-50% to combat MTNL

    Besides, the government has introduced concessional rates of duties on specified categories of telecom equipment, which would lower the costs of setting up infrastructure for the cellular service providers. Also, cellular handset prices are on the decline, which augurs well for mobile operator.

    The circle mix
    Circle Jul-00 Aug-00 Sep-00 Oct-00
    Metros 40.1% 40.2% 40.0% 39.6%
    A circle 30.2% 30.0% 30.2% 30.5%
    B circle 27.1% 27.2% 27.1% 27.2%
    C circle 2.6% 2.6% 2.7% 2.7%

    As a result, the cellular subscriber base is expected to touch 50 m by FY05. In fact, the growth in cellular base will be higher than the penetration levels of computer in the country. But in such a competitive scenario, service providers have to necessarily differentiate themselves from their peers. This could be possible only by providing value-added services like SMS (short messaging services for which service providers currently charge Re 1 per message).

    However, prospects are not as rosy as it may sound. Since the Telecom Regulatory Authority of India (TRAI) has permitted basic service providers to offer Wireless in Local Loop (WLL) services, both existing and new subscribers may opt for WLL as user charges are comparatively cheaper (Rs 1.20 for 3 minutes).



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