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Telecom: Providing a voice to masses

Mar 24, 2009

Have you wondered why telecom companies are going all out to spread their business across India? Or have you wondered why so many companies have applied for telecom licenses in recent times? The answer is opportunity. In this article we will take a look at how India's subscriber base has changed over the years. But, before going to the numbers, we shall briefly take a look at the structure of the Indian network. The country is broken into 4 segments- Metros, Circle A, Circle B and Circle C. These are further segregated as follows:

  • Metros Chennai, Delhi, Kolkata, Mumbai
  • Circle A - Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu
  • Circle B Haryana, Kerala, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh (E), Uttar Pradesh (W), West Bengal and A & N Islands
  • Circle C Assam, Bihar, Himachal Pradesh, Jammu & Kashmir, North East, Orissa

As such, the country is broken up to in to 23 service areas - 19 telecom circles and 4 metros. Apart from the four metros, the Indian states/regions have been divided into three circles (Circle A, B & C), based on their economic development, with Circle A being the relatively more developed regions while Circles B and C are the lesser developed regions.

Now, going back to the growth in subscriber base. To get a sense of how the subscriber base has changed over the years, we can take a look at the chart below. We have indexed the number of subscribers to 100 (as of January 2003).

Source: CMIE

The above chart shows the circle-wise change in total number of outstanding subscribers (GSM subscribers only) over the past five years. We can clearly see that the growth in subscriber base in Circle C has been the fastest. This is followed by Circle B, Circle A and subsequently, metros. Even the total change in number of subscribers has been the lowest in metros. This has been due to the relatively faster penetration in the three circles.

To get an overall perspective as to how things have changed, we can look at the chart below.

Source: CMIE

At the end of 2003, metros had a share of nearly 32% in the country's total GSM subscriber base. On the other hand, Circle A, Circle B and Circle C had a share of 37%, 28%, and 2% respectively. Five years later, the scenario completely changed. Metros now have a share of about 15%, while Circle A, Circle B, Circle C have a share of about 36%, 37% and 13% respectively.

While factors such as favourable demographics and higher disposable income are reasons for strong growth in the lesser developed states, one cannot ignore the fact that the low cost of services (lower average revenue per user charged by the telecom companies) coupled with low handset costs have added to the growth in subscriber base. In addition, telecom operators have entered and increased focus on less developed and rural markets in recent times vis-a-vis metros and bigger cities.

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