New Delhi: India’s smaller towns are emerging as the decisive battleground for cellphone companies in the world’s fastest growing wireless market, as the number of new users increases at a slower pace in big cities such as New Delhi and Mumbai.
So-called category B and C locations are outpacing India’s political and financial capitals in terms of subscriber additions, according to cellphone-user statistics provided by the Cellular Operators Association of India, or COAI, and reviewed by Mint.
COAI, which groups cellphone companies that use the popular global system for mobile, or GSM, technology platform, says the growth opportunity is huge in smaller towns, even as the so-called metros head towards saturation levels.
EMERGING MARKETS (Graphic)
“The growth percentage is high in smaller towns as these places have inadequate telephone penetration,” said T.V. Ramachandran, director-general of COAI.
Cellular companies signed up an average of 165,713 subscribers monthly in January-June in New Delhi.
The number was down from an average of 225,411 last year, which was an increase from 195,567.41 subscribers per month recorded in 2006.
The monthly average of new cellphone users in 2005 was some 93,676.25.
Five telecom firms—Bharti Airtel Ltd, Vodafone Essar Ltd, state-run Mahanagar Telephone Nigam Ltd (MTNL) and Idea Cellular Ltd offer cellphone services in the national capital.
Mumbai, too, is experiencing a slowdown in new subscriptions.
Cellular phone firms signed up a monthly average of 91,039 users during January to June, compared with a net addition of 155,872.25 users every month during 2007.
The number of new connections had increased at a monthly average of 117,359 and 121,018.4 in 2006 and 2005, respectively.
BPL Mobile Communications Ltd, Vodafone Essar, MTNL and Bharti Airtel serve Mumbai, along with Idea Cellular, which launched its services in the city last month.
A top executive at a cellphone firm said he accepted the fact that growth in the subscriber numbers in the metros would slow.
“This is relatively due to the limited population in the cities,” said Asim Ghosh, chief executive of Vodafone Essar.
In category ‘B’ and category ‘C’ telecom circles, new cellphone users have been increasing month-over-month in the last three years for which data was analysed by Mint.
In the category ‘B’ circles that comprises Kerala, Punjab, Haryana, Uttar Pradesh, Rajasthan, Madhya Pradesh, West Bengal and the Andaman and Nicobar Islands, cellular companies added some 2.58 million new cellphone users during January to June 2008.
That compares with a monthly average of about 2.12 million in 2007. This number rose from 1.46 million and 639,328 in 2006 and 2005, respectively.
The trend is similar in category ‘C’ telecom circles of Himachal Pradesh, Bihar, Orissa, Jammu and Kashmir, Assam, and the north-eastern states of Arunachal Pradesh, Meghalaya, Tripura, Nagaland, Mizoram, Manipur and Sikkim.
These locations added an average 992,732 new phone users every month from January until June, a gain of 44% from last year’s average of 687,018. In these states, average monthly additions had risen significantly in 2006 to 497,227, more than doubling from 223,358 in 2005.
The penetration is higher in the metros, in some cases close to 75%, says a telecom company executive.
A March 2008 report by the country’s telecom regulator, the Telecom Regulatory Authority of India, or Trai, indicated that Delhi had a teledensity as high as 73.83%.
“In rural India, the cellphone penetration is still in single digit. A good 50% of our new customers come from rural areas. The potential for future customers is going to come from these smaller towns,” said Sanjay Kapoor, president (mobile services) at Bharti Airtel.
The launch of so-called 3G, or third-generation, cellphone services, offering users faster data transfer and multimedia ability, could boost usage in the metros, said Kapoor,
Potential new entrants planning to offer 3G services would find it tough to dislodge strongly entrenched incumbents in the big cities, said COAI’s Ramachandran. “The only way is to give value-add by offering low tariffs, and in that case too the new operators will not be able to challenge the incumbents,” he said.
New operators, however, will be able to share already established telecom infrastructure and spend less on marketing.
Trai has recommended the introduction of cellphone number portability, which would enable users to switch operators and still retain their cellular number, unrestricted Internet telephony, and long-distance calling cards to increase usage in smaller towns and cities.
“All these will converge to give a new push to the telecom sector,” says Nripendra Misra, chairman of Trai.