CEO OUTLOOK: Cellular Tiger’s Big Leap

For the last several years, China has been the focus of cellular industry
analysts’ attention for the stupendous growth that it has been recording on
the mobile front–currently it has a mammoth subscriber base of more than 150
million.

India, in comparison, seems to be trudging along with 6.4 million customers.
But this obvious contrast also tends to mask the developments that have been
taking place in the Indian cellular market. Let’s look at some of the
pointers:

• The cellular market grew to 6.4
  million by March ’03, nearly doubling from 3.5 million a year ago. And the
  growth seems to be picking up at an even faster rate in the last few months.

• In 2002-03, the
  number of players will go up from 2 to 4, bringing in a much higher level of
  competition which will further bolster growth to more than 100 percent.

• Long-distance
  calling has just been thrown open to competition, thus bringing down the
  long distance calling charges. So far the higher margins on long distance
  calling had subsidized the local calling charges but these are now likely to
  increase. This will bring down the disparity in prices of mobile and
  landline calling and increase the value proposition of cellular services.

• Roaming calling
  charges have been reduced by 70 percent from Rs 10 to Rs 3 per minute, a
  change which together with the drop in long distance charges will result in
  a huge increase in penetration of roaming and a big jump in the value
  perception of cellular, which can now be used anywhere in the country at
  much more affordable rates.

The impact of these changes is going to be tremendous, and
with the expected GDP growth of 6 percent, it is likely that the cellular base
in India will top the 40 million customer mark by 2005 and be more than 100
million by 2010.

And this is happening in spite of the uncertainty that
prevails in the regulatory environment on several critical aspects. One of the
major issues facing the cellular operators today is the level-playing field for
mobile services, including limited mobility.

Cellular industry has been a flag bearer of India’s reforms
process and has already attracted investments in excess of Rs 20,000 crore,
which is the largest FDI in any sector, resulting in India’s first and only
world-class state-of-the-art nation-wide infrastructure.

If the government clears up the regulatory uncertainties that
have been clouding the telecom sector, it will open the floodgates of rapid
growth and accelerate foreign investment in the sector. India may then very well
replace China as the toast of the cellular growth story in the long term.