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Mobile Subscribers Yearwise comparision

'Mobile Broadband – Outlook 2015': A report by Pricewaterhouse Cooper

September 30, 2010
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The Indian telecom sector has charted an impressive growth trajectory with the market growing at a compound annual growth rate (CAGR) of approximately 30 per cent since 1995. The sector’s high growth can mainly be attributed to the increasing uptake of mobile services, which grew at a CAGR of more than 117 per cent during the period 1995-2009. With more than 14 million subscriber additions per month in 2009, the telecom subscriber base grew to 601 million as of April 2010, second only to China.

The increasing mobile penetration has had a cascading effect on the Indian telecom manufacturing sector, with the demand for mobile handsets and telecom equipment increasing over the years. India ranks fourth in telecom equipment manufacturing in the Asia-Pacific region, and held a 6 per cent share of the region’s total telecom equipment production in 2009.

Key challenges

Low rural penetration: Telecom growth has been limited mostly to the urban areas, with the majority of the rural population still unserved. Only 21 per cent of Indians living in rural areas have mobile phone connections. There are still more than 500 million unserved people located mainly in rural areas, with moderate to low capacity to pay for telecom services.

Stagnant data usage over the years: The rapid growth in mobile subscriptions has been accompanied by an equally rapid decline in ARPU on account of the continuously falling tariffs and marginal subscriber additions. Operators look at value-added services (VAS)/data services for bridging the ARPU gap and to differentiate their offerings. Data revenues have, however, remained stagnant at 11-12 per cent of mobile service revenues in the past two-three years. Nevertheless, the silver lining is that the data usage pattern of mobile subscribers has been changing. The share of SMS services decreased from 44 per cent of data revenues in 2007 to 36 per cent in 2008, implying an increased usage of non-SMS data services.

Limited broadband services: Broadband uptake in the country has been abysmal so far. Wireline broadband subscriber numbers stood at only 8 million in December 2009. In terms of wireless broadband, there are currently more than 149 million mobile subscribers who are capable of accessing the internet through  handsets, and more than 2 million data card subscribers. However, despite a large number of subscribers being able to access the internet, the growth of data services through wireless has been largely inhibited due to the lack of high speed access to data through the GPRS, EDGE and CDMA 1X technologies deployed in India. CDMA operators have launched EVDO-based services that allow high speed access; however, the uptake has been limited due to the high prices of end-user devices.

Future uptake of 3G and BWA services

Given the context of non-scalable wireline infrastructure, broadband is expected to be delivered on a wireless platform in India. Wireless broadband offered using TDD LTE (time division duplex long term evolution/Wi-Max is expected to be adopted by enterprise consumers and high net worth individuals while broadband volumes are likely to be driven on the mobile platform leveraging 3G.

The uptake of 3G-based mobile broadband services (MBS) in India will be driven by both supplyand demand-side factors. The introduction of innovative applications, enhanced user experience and decreasing prices of 3G-enabled handsets will be the key drivers for mobile broadband growth in India.

3G subscriber numbers are projected to cross 107 million by 2015, growing at a CAGR of 190 per cent between 2011 and 2015. Further, 3G penetration is expected to reach 13 per cent by 2015. Initially, MBS will be availed of almost exclusively by urban India; however, rural subscribers are likely to comprise 24 per cent of the overall 3G subscriber base by 2015.

There will be greater 3G adoption among post-paid subscribers in the initial phase as these users have a higher propensity to pay for the services. Also, going forward, most of the post-paid subscribers are expected to migrate to 3G services, especially in urban areas where all post-paid users are likely to migrate to 3G by 2015.

With the increasing affordability of 3G services, availability of low-cost 3G handsets and a higher aspiration value for 3G services, 3G uptake should take off among prepaid subscribers as well. With India being a predominantly prepaid market, the overall 3G subscriber base will largely comprise prepaid subscribers by 2015.

3G subscribers will pay a premium of 15-35 per cent following service rollout by private operators in 2011. Going forward, the pricing of 3G services is expected to fall on account of increased competition among operators to capture a larger share of the potential 3G market, leading to a decline in ARPUs. The ARPU from 3G services is expected to be Rs 712 in 2011 and Rs 265 in 2015. This decline would be on account of a fall in service tariffs over this period and the addition of low-ARPU customers in the overall 3G subscriber mix. The share of data revenue in the 3G mobile ARPU is expected to be around 24 per cent in 2015.

The total revenue from 3G subscribers is expected to reach Rs 264 billion by 2015, growing at a CAGR of 150 per cent, of which Rs 102 billion would come from data services.

Mobile broadband

The demand-side factors driving the uptake of MBS include the presence of over 600 million users, availability of low-cost handsets, limited availability of broadband services, the growing number of 3G-enabled handsets, India’s young demographic profile, growing demand from the enterprise sector and higher use of VAS by other sectors.

On the supply side, mobile broadband makes a better business case than fixed broadband (the capex per subscriber for fixed line broadband is in the range of Rs 45,000-Rs 90,000 while for mobile broadband, the capex per subscriber is expected to be Rs 3,000-Rs 4,500 only). Moreover, given the highly competitive market and the introduction of mobile number portability, it is getting increasingly important to differentiate offerings. The intense competition has also put pressure on ARPU and EBITDA margins. Therefore, it is imperative that operators look at differentiators beyond price. MBS will help operators to increase the share of data revenue and, more importantly, create differentiators.

Some of the future trends in this space will be:

•           In line with international precedents, web browsing is expected be the most used service among mobile broadband users in India. Music-related services are likely to witness the second highest uptake, confirming the popularity of mobile music in India. In fact, digital music has been projected to dominate the music scene in India, cornering over 80 per cent of the segment.

•           High speed access will enable content developers and aggregators to generate additional revenues by offering diverse interactive content such as videos and interactive gaming.

•           Open internet access will enhance the content’s value proposition for customers, resulting in increasing the bargaining power of content developers and aggregators.

•           Content will be the key differentiator in the future uptake of services. New alliances between handset vendors, operators and application developers will be formed to attract customers.

•           Mobile service providers will leverage proprietary content to create customer stickiness.

•           Boundaries may blur with handset vendors and operators likely to enter the content space.

Cascading impact of MBS

MBS is expected to generate incremental revenues worth Rs 940 billion in 2015 for the telecom industry as a whole, constituting roughly 1.5 per cent of India’s real projected GDP in 2015.

•           Incremental 3G data revenue for mobile operators is expected to cross Rs 67 billion in 2015, growing at a CAGR of 109 per cent over the next five years.

•           Revenue from 3G-related data services for other VAS value chain players is likely to reach Rs 36 billion in 2015.

•           Approximately 135 million 3G handsets are expected to be sold in 2015. Revenues from 3G handset sales are expected to reach Rs 670 billion in 2015, growing at a CAGR of 33 per cent between 2011 and 2015.

•           Equipment manufacturer revenues from 3G rollout are expected to be worth Rs 165 billion in 2015, growing at a CAGR of 72 per cent over the next five years.

•           The cumulative 3G-related investment between 2010 and 2015 is expected to be  Rs 500 billion.

•           Between 60,000 and 70,000 employment opportunities would be created by the telecom industry (service providers, handset vendors, equipment vendors and VAS value chain players) by 2015.

Issues and challenges

3G is expected to enhance broadband penetration; however, issues related to spectrum, access device and content must be addressed for sustainable growth.

Adequate bandwidth for rich media MBS

Globally, mobile operators have between 2x10 MHz and 2x15 MHz of spectrum to enable service providers to promote data services aggressively. In India, despite the positive steps taken by the government towards promoting 3G, 5 MHz of spectrum may not be able to support data-intensive services like video, especially given the spectrum crunch in the 2G bands. According to some analyst reports, the optimum data capacity of each 3G cell site for 5 MHz bandwidth (based on 3GPP simulation) is only 7.2 Mbps, capable of serving 250 data users per site with a speed of 256 kbps (assuming a contention ratio of 1:10).

Availability of utility and diverse vernacular content

Proper internet content and applications are still not widely available in India. For increasing the adoption of MBS, content and applications that are of great value to the user must be made available at affordable prices.

Corporate users seem to be the immediate beneficiaries of mobile broadband. However, the stakes for rural India are even higher, given the benefits that broadband-enabled applications such as telemedicine, m-commerce, m-education and m-governance can bring to the masses. For this to happen, the availability of content that caters to the needs of the rural population is critical. Local language content will be a key enabler for the uptake of mobile broadband amongst the rural masses.

Affordable 3G-enabled handsets

The availability of affordable 3G-enabled handsets would be a key driver for the adoption of MBS in India. Although a few handset manufacturers have announced the launch of sub-Rs 5,000 devices, 3G handset prices are not expected to come down to the the level of 2G handsets in the absence of substantial volumes.


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