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Telecom: India’s Knight in Shining Armor 5 Mar, 2009

“When the United States sneezes, the world catches a cold.” However, the telecom sector in India seems to have clearly defied this saying by witnessing robust growth in the past quarter.

Picture this, the total telecom subscriber base for India grew from 70.83 million in the first quarter of 2008 to 90.98 million in the second quarter. If you thought this was outstanding, there is more to come. Telecom companies added a record 15 million customers last month. The numbers can make anyone dizzy, especially at this time when nearly all industries across the world are witnessing a massive slowdown.

There is also clear evidence that revenue from telecom services is unlikely to be hurt by a recession. It is one of the fastest growing industries in the world and India is projected to become the second largest global telecom market by 2010. When closely looking at the other sectors in the country, telecom has clearly survived the present slowdown. Contrast this to sectors like real estate, automobiles and construction which have been hit hard. The commodity sector has also been hit despite the rising demand, and job buoyancy in the IT sector has decreased as well.

What’s more, 20 important deals worth $9.15 billion took place in India’s telecom sector this fiscal. The largest deal during the period was the buyout of a 26 percent stake in Tata Teleservices by Japanese company NTT DoCoMo Inc. for $2.7 billion. Other major deals included Italian multinational Telecom Italia’s acquisition of a 49 percent stake in Unitech Telecom for $2 billion and Dubai-based Emirates Telecommunications Corp’s (Etisalat) buyout of a 45 percent stake in Swan Telecom Pvt Ltd. for $900 million.

India: massive mobile industry growth

Telecom is clearly shining amidst the gloom. The Indian wireless industry, with a 32% penetration is the second largest after China in terms of subscribers at 325 million. Reliance Communications launched its GSM service in January and by the end of the month it had made a record by acquiring over half a million subscribers. The GSM subscriber base had touched 27.25 crore in January 2009. More recently, State owned MTNL’s launch of 3G services – ‘Jaadu’ – is all set to create further magic.

Predictably, this growth is now coming from the hugely untapped rural market consisting of villages and small towns. According to figures from Q2 2008, rural India has so far contributed a 71% growth in the telecom sector, while the remaining 29% growth came from urban India. The rural segment is witnessing a growth of 8-10% every month – giving a substantial boost to the telecom sector.

In the village of Karanehalli, about 40 miles from India’s high-tech capital of Bangalore, mobile phones have changed the way farmers do business. Here, a farmer commonly does not have a toilet for his home or a tractor for his field. But when a cellular tower was erected in his village, he splurged on a cell phone.

Here in Karanehalli, the old family tradition of crushing rice with a massive stone roller has not changed, but a mobile phone has certainly changed farming. Farmers use it to decide when to plant and harvest by calling other farmers, to get the best prices for rice, coconuts and jasmine by calling wholesalers, and to save hours of time waiting on the road for deliveries and pickups that rarely come on time. Farmers believe that their life is much better with the mobile phone, as they can be reached by anyone while they are working in the fields. In fact, a majority of the rural population thinks that they are in a better shape after the global crisis.

People who have observed this sector closely would mirror our views that the Indian telecom has stood strong against these tough times. In the next couple of months, India will rise into a towering position in terms of telecom subscriber base. VNL’s revolutionary WorldGSM™ system, which was recently showcased at MWC 2009 in Barcelona, is another momentous step in helping bridge the last mile and drive the mobile telecom success story.

Clearly, telecom is proving to be India’s knight in shining armor.

Further reading:

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Surviving Competition – Regional Mobile Operators Strategize 4 Sep, 2008

The evident demand for mobile phones in India has created a very interesting business and entrepreneurial opportunity for the nation’s retailers – setting up mobile stores.

With the call rates and handset prices declining day by day, the mobile retail sector is creating a ripple in the Indian market. There are two segments fighting for space in this sector – retail stores backed by known corporates, and the traditional shops that rule regional India. Who will win this tussle?

“Business opportunities are like buses, there’s always another one coming”

–Richard Branson

Clearly, the advantage that regional players have is that of location; set up in the interiors of the country, these mobile retailers are able to reach the untapped target audience. More importantly, they are able to understand the psyche of their consumers, who usually come from the same geographical location. Price is also an advantage for retailers such as UniverCell, Sangeetha and Global Access, because their relatively small size allows them to change prices within two hours of the market price change; bigger stores, however, take 2-3 days to solve the issue.

In this scenario, the competition being generated by corporate-backed mobile retailers has come as a surprise to the regional players. Retail outlets such as The MobileStore (Essar and Virgin), HotSpot, Subhiksha and Mobile NXT are setting up shops countrywide. While some like HotSpot have tied up with neighbourhood stores as their franchisees, others like The MobileStore have stuck to investing in their exclusive outlets.

In a country like India, where more than 70% of the mobile retail sector is unorganized, the franchisee model seems to spell the way ahead.

As mobile penetration continues to grow in the Indian subcontinent, mobile retailers – organized & unorganized – are fighting for their share of the pie in the urban, semi-urban and rural parts of the country.

What remains to be seen is whether the struggle between the regional mobile retailers and the national mobile retailers will continue, or if they’ll come together to fulfill the demand of the next billion mobile users.

Further reading:

Indian Mobile Market Breaks New Record 26 Aug, 2008

9.22 million. 9,220,000. That’s how many new Indian GSM and CDMA subscribers were added in July. It breaks the earlier record of 8.94 million that was set a month earlier.

Out of all the mobile operators, Bharti Airtel expanded the most with 2.69 million. Vodafone Essar welcomed 1.7 million new subscribers, and Reliance 1.5.

Close to 300 million people now have a mobile phone in India. This makes India the world’s second largest mobile phone market after China.

The split between GSM and CDMA is currently roughly 74% vs 26%.

As new GSM operators, such as Videocon, Unitech, Reliance and Tata Telservices, start launching mobile services by the end of this year, growth is expected to grow upwards of 10 million new subscribers per month.

A market with amazing contrasts

Rafat Ali recently wrote a blog entry about Cyriac Roeding’s (former EVP of mobile at CBS) travels in India.

He visited the spiritual city of Varanasi, and found himself standing at an intersection, observing his surroundings:

“The backdrop of this ancient scenery is dominated by a giant billboard from the mobile carrier Vodafone. And on the sidewalk, where men in wet orange T-shirts pass by after their spiritual bath in the Ganges River, a young entrepreneur has set up a booth on two wheels, which carries only two stationary telephones on a counter. This is a mobile phone recharging station, where consumers can add credit to their prepaid cell phones.”

There are many reasons for India’s mobile revolution. One of the most important is accessibility. Only a couple of million Indians – around 5% of the population – have Internet access. And getting a traditional wired phone installed is often a cumbersome process.

As it’s possible to get a new mobile phone for as low as $25, and as mobile services (voice, text messaging, data) are priced very competitively (the average country-wide ARPU lingers around $7), getting a mobile phone is the way to go.

But an enormous challenge still remains – making sure that mobile services are accessible to everyone. Which in the case of India translates to close to 400 million people – a majority located in rural areas – that still can’t use a mobile phone because there’s no coverage.

That’s where VNL’s WorldGSM™ system comes into the picture – helping operators reach rural markets profitably.

Further reading

To learn more about India’s mobile market, here are some resources worth visiting:

Going rural, going green 27 Jun, 2008

There has been some recent buzz around the rural opportunity. And about the need for sustainable energy sources.

Everyone wants to get connected. Mobile operators want to reach new growth markets. And oil is, after all, going extinct.

On the 24th of June, The Economic Times wrote that:

“The government is considering a proposal by which companies using solar or biogas power for running the rural telecom infrastructure would be subsidised.”

India’s Department of Telecom (DoT) has, according to Economic Times, around Rs 15,000 crore of unutilised money under the USOF (Universal Services Obligation Fund) scheme and is finding ways to spend it.

Unstrung Insider recently released the report “Mobile Networks Go Green: The Lean Base Station” which examines the opportunities for using sustainable energy sources to power radio sites in remote areas.

John Blau, research analyst at Unstrung, recently underlined the importance of new energy sources:

The growth in mobile networks over the next few years will come from emerging markets. Of the more than 1.5 billion new subscribers from emerging markets by 2015, nearly two thirds live in remote parts of the world, where access to electric grids isn’t guaranteed.”

The most common way to reach areas where there’s no power grid is to deploy conventional base stations with diesel generators. And even in emerging market cities, the power grid is often so unreliable that diesel generators have to run several hours every day to keep the mobile network running.

Unstrung estimates that around 1 million new base stations will be needed to extend connectivity to rural areas in emerging markets.

The good news is spelled WorldGSM™ – VNL’s complete GSM system that helps mobile operators reach rural markets profitably.

We also have a new white paper in the works about the mobile energy crisis. It’s coming soon, and will explain mobile operator’s power woes further.

It will also provide ideas for how the mobile industry can move forward sustainably. Which is, actually, the only way forward.

The transformative power of the cellphone 17 Apr, 2008

Nokia’s own “human-behavior researcher” Jan Chipcase has found undisputable evidence that supports the mobile phone’s potential ability to transform lives and enable positive change.

For the last seven years, he has been working in the field from São Paulo to Mumbai – documenting the lives of mobile phone users.

New York times recently summarized the conclusions of Jan’s work in the article “Can the Cellphone Help End Global Poverty?“:

Over several years, his research team has spoken to rickshaw drivers, shopkeepers, day laborers and farmers, and all of them say more or less the same thing: their income gets a big boost when they have access to a cellphone.

Over 2 billion people in the world are still unconnected.

Imagine how their lives can, and will, change once they’re connected.

The human chimney 14 Apr, 2008

China emits 1000 tonnes of CO2 every 9.2 seconds. Russia takes 22 seconds to emit the same amount. And the US is leading with 1000 tonnes every 5.4 seconds.

Every minute, these three countries combined emit approximately 20,360 tonnes of carbon dioxide. 20,360,000 kilograms. Which is the same weight as 290 fully loaded Boeing 737 jetplanes, 34,000 Tata Nano’s, or 254,300 average Finnish men. Every 60 seconds.

All this is calculated from a the carbon dioxide emissions simulation at breathingearth.net.

It’s not until we see visualisations of emission and consumption that we truly understand the scale of human impact on our planet. We’ve written about this before in posts like “Shocking images of unsustainability ” and “The world in numbers “.

Seems like the time is right for increased adoption of clean technology, don’t you think?

A big dip in ARPU 11 Apr, 2008

According to the latest figure from TRAI, average airtime and SMSs sent per subscriber in India have noticeably decreased.

Indian service providers say that the lowered ARPU (Average Revenue per User) is caused by two main factors: extending networks into rural India, and the downward tariff spiral.

ARPU in rural areas is lower, as rural users tend to call and send SMSs less often.

Both pre-paid and post-paid plans are getting cheaper as India’s mobile market matures, and as competition gets fiercer.

So the big question is: how long can the exponential growth of India’s mobile market offset the lower ARPU trend?

Learn more: “Minutes of cellular usage & SMS per user hit new low