Cellular services clocked a revenue of Rs 98,260 crore in FY 2009-10

Unlike the past years of growing volumes and revenues, the cellular revenue
saw 3.6% growth in FY 2009-10. The cellular services clocked a total revenue of
Rs 96,860 crore against Rs 93,522 crore in FY 2008-09. The cellular market in
India went through a turbulent phase of aggressive pricing. The competition
stiffened with new players rolling out services and eating into the market share
of the incumbent players. High volumes could not be translated into revenue. The
cellular subscriber base grew by almost 49%, and the revenue charted a single
digit growth.

Even for the market leaders, holding on to their comfortable places was not
very easy. Already strained under slim margins, players were forced to be a part
of the tariff war fueled by per second billing. In FY 2009-10, the market leader
Bharti Airtel recorded a 7% growth in its revenue in the cellular services
space, which is too low compared with 36.8% growth that it saw in FY 2008-09.
The operator's balance sheets for Q2, Q3 clearly reflected the pressure. For
Vodafone as well, the growth in FY 2008-09 was 35.6%, while in FY 2009-10, it
clocked a modest 10.8% growth in the mobile services revenue.

Both Bharti Airtel and Reliance Communications crossed the 100 mn subscribers
mark during the last fiscal. Bharti Airtel realized its dream of becoming
India's first telecom MNC and extended its footprint to Bangladesh and Africa.

The market did have a negative impact on the businesses of players like
Reliance Communications, BSNL, MTNL and Loop Mobile. MTNL had been making losses
out of its cellular services, FY 2009-10 was no better. The operator saw 6.3%
fall in its cellular revenues. The third largest player in the market, Reliance
Communications that grew 18.9% took a nosedive and saw 6% negative growth in
this segment.

State-run BSNL that had managed to be on the positive side of growth in FY
2008-09 with 0.02% growth, had a great fall of 8.3% in FY 2009-10. Aircel that
fought a daring battle with its mix of VAS, pricing plans, managed to keep hold
of the market. A growth of 25.4% is definitely not a bad performance against the
previous year's 30.5% growth revenue from mobile services segment. The other
players, including MTS, S Tel together grew by 119.8%.

Subscriber addition trends were also quite interesting. MTS recorded an
impressive growth of 526.7% growth in subscriber numbers. The subscriber base
grew from 0.6 mn in FY 2008-09 to 3.76 mn in FY 2009-10. Tata Teleservices,
which took the market by storm with its pay per second billing scheme, saw a
90.6% increase in its subscriber base in FY 2009-10. For TTML, the subscriber
growth rate was 76.5%.

For Aircel, the subscriber growth rate was almost 100%. Interestingly,
Aircel's unlimited Internet plans were a hit with the youth. The market did see
a trend amongst young people using multiple SIMs to access unlimited Internet.
Events that changed the growth pattern of the Indian cellular services market
are interesting. The crowded mobile services got overcrowded, intensifying the
competition. Players at their early stage of operations-set out on expansion and
customer acquisition spree with compelling offers.

Rollout and Expand

MTS, the CDMA service brand of Sistema Shyam Teleservices that recently opened
its hundredth retail showroom in the country was in the process of expanding its
operations to new circles, including Andhra Pradesh, Delhi, Goa , Jharkhand,
Konkan part of Maharashtra. The Karnataka launch was made with a promotional
offer of half a paisa per second. The operator had opened its innings with a
really huge offer of 1 mn minutes of free talk time to its customers. The brand
that completed a year of operation in the country in March, is present in about
twelve circles till date, and expects to have a pan-India presence and break
even by 2012. The company has no GSM plans as yet. It launched the 'One MTS, One
India' tariff plan.

In FY 2009-10, Loop Mobile launched services in Karnataka, Kerala, Tamil Nadu
and Orissa. Loop Mobile has invested over Rs 300 crore in the last three years
in strengthening its network and enhancing services in Mumbai, and is now
embarking on a major network upgradation program, involving investment of Rs 200
crore as part of its phase I capex plans.

S Tel launched services in three circles, Himachal Pradesh, Bihar and Orissa
in December last year. The operator has UASL license and spectrum to operate in
six growth circles, of which three are already operational and the remaining
circles of Assam, Jammu and Kashmir and Northeast will be launched in this
calendar year. The operator boasts of having clocked 1 mn subscribers in ninety
days of launch. The cellular service provider won 3G spectrum for three circles,
is hopeful of rolling out the next generation services in twelve months time.

Uninor, the joint venture between Norwegian group Telenor and India's real
estate firm Unitech, launched its GSM mobile telecom service across seven
circles. It launched in Tamil Nadu, Kerala, Uttar Pradesh East and West,
Karnataka, Andhra Pradesh and Bihar in the last year. The total number of
circles covered till date are thirteen and will be launching in several other
circles this year. It has already launched GPRS in about nine of its operation
circles.

Uninor added 1.2 mn subscribers in December 2009, its first month of
operations. And that too with operations in just eight circles, one of which was
launched towards the end of December. The consumer today asks for seamless
connectivity and complete bouquet of services. Many mobile users travel
extensively, and prefer mobile services that are highly reliable in terms of
coverage. One of the reasons why Airtel and BSNL have been dominating is not
because of their tariff plans but due to their strong coverage. In order to make
a place in the market, Uninor will need to quickly have a very strong
infrastructure. The service provider has already made tower sharing agreements
with several companies and has ambitions of gobbling up 8% of market share.

Uninor started with a belief that it did not want to imitate the rest of the
players on the per second billing scheme. It argued that its focus will be on
value for money and it launched 29 paise per minute (less than half a paisa per
second) plan, which took the price war a step ahead.

Videocon launched GSM mobile services beginning with Chennai, Tamil Nadu.
This year it rolled out services in Gujarat, Kerala, Mumbai and plans to launch
in Punjab and Haryana. TTML rolled out CDMA wireless services in 116 new towns
in Maharashtra and Goa.

Idea cellular and Aircel too continued to expand their areas of operation.
Uninor and Tata DOCOMO are still to complete their nationwide rollouts and
Etisalat is still to launch services. Since uncertainty revolved round the
auction of 3G/BWA spectrum, most key players in the market were conservative
about their expansion investments. Now with the auctions over, the players will
be able to better plan their strategies. Market leaders like Bharti Airtel have
set aside separate investment layouts for 2G expansion and 3G rollouts.

Offers Unlimited

The Indian cellular services market is known for its innovative pricing and
packaging of the offer. Last fiscal was also marked by such offers. Besides, the
per second offers, the Indian operators threw away other alluring offers too.

Loop Mobile has launched 'epaid'-India's first ever premium mobile service on
a prepaid platform. 'epaid' entitles subscribers all benefits of a postpaid and
a prepaid connection bundled together. It also came up with a plan for Mumbai
which provided all local calls to Loop subscribers at just 10 paise/minute. In a
bid to provide its subscribers the flexibility to access services at their
doorstep, the service provider launched the Mobile Service Gallery, offering
services similar to that of any Loop Mobile outlet. 'Karaoke messaging' that
allows subscribers to sing a song along with the right music accompaniment and
the exact lyrics, listen to their recording and then dedicate it to their
contacts, was another interesting service.

TTSL, one of the pioneers of per second billing in India, extended its
service to other platforms like BlackBerry and Samsung Android, with a 'pay per
use' concept and unlimited talk plans for Tata Indicom subscribers. TTSL
introduced Push 4 All Mail, earlier this year, enabling Tata Indicom and DOCOMO
customers to access their Gmail, Hotmail or Yahoo! emails on any type of
handsets via SMS Push 4 All Mail.

Vodafone continued to attract users with exciting offers. In April, Vodafone
launched unlimited GPRS browsing for its customers in Karnataka at Rs 95 a
month. The company also recently tied up with BlackBerry and RIM to launch the
E-UNO R10 healthcare solution on a Vodafone services delivery platform for the
prevention of heart attacks.

Reliance Communications announced various initiatives to increase mobile
telecom and Internet penetration in rural India, with the launch of three new
initiatives known as 'BharatNet' plan, 'Grameen VAS' and 'M2M' (Machine to
Machine) solutions for rural customers.

Post a paisa per second, Reliance unveiled new text messaging tariffs-one
paisa per message and unlimited messages at Re 1 per day for its GSM and CDMA
services. Aircel kept its focus mostly on data and offered unlimited Internet
data plans-was an active participant in the per second tariff war.

Idea Cellular built on its VAS profile, be it mobile TV, which was launched
for the first time in India on the Idea network; exhaustive music library in
multiple languages; DTs/ RBTs; and other content downloads.

App Mania

Bharti Airtel's App store launched during FY 2009-10 recorded 2.5 mn downloads
in the first thirty days. Vodafone Essar also launched its mobile applications
store in March this year, which saw over 10,000 downloads in the first few days
itself. Other operators including Idea Cellular, Reliance, Aircel are all
rolling their sleeves up to enter this space.

New War Fronts

The real test for the Indian cellular service providers is yet to come. The
ground is now open for the private players to roll out 3G services. No operator
has got the 3G spectrum on a pan-India basis. The industry believes
consolidation is bound to happen. Wireless Internet will definitely be a key
deciding factor in the success of the service providers. Most importantly,
mobile number portability, which has been missing its deadline, might be
implemented by the year-end. The co-existence of 3G and MNP will redefine the
rules of the Indian mobile services market.

Heena Jhingan

heenaj@cybermedia.co.in