Guest Column: The Booming Indian Mobile Industry

VoicenData Bureau
New Update

The Indian mobile industry is going through a phase of

rapid expansion and growth. During the financial year ending March 2006, the GSM

subscribers grew by 28 mn. This is the highest growth recorded since the

inception of GSM services in India. The total number of GSM subscribers reached

69.2 mn in March 2006 as compared to over 40.8 mn in March 2005. GSM continued

to dominate the mobile market as it accounted for 78% of the total cellular

mobile subscribers in the country.


The GSM service is now available in more than 5,000 towns

and cities and in over one lakh villages across the country. The industry

continued to invest strongly in the sector, which has resulted in the creation

of a robust infrastructure of more than 169 MSCs, 681 BSCs, 35,165 BTSs and a

backbone network of more than 160,964 km spread across the country.

TV Ramachandran,

director general, Cellular Operators Association of India (COAI)

Positive Policy Initiatives

The year witnessed many landmark policy initiatives taken by the government to

spur the growth of the sector, and to maximize its potential.


The first step taken in this direction corrected a

long-standing anomaly of long-distance calling in four states. In May 2005, it

was decided that henceforth, calls within UP (East) and UP (West), Maharashtra

and Mumbai, Tamil Nadu and Chennai, and, West Bengal and Kolkata would be

treated as local calls. This would benefit the consumers and help in addressing

the regional interests of the communities.

To make long-distance calling more affordable, entry fee

was reduced by 97.5% for NLD licenses and by 90% for ILD licenses. This would

also encourage operators to become national players and achieve economies of

scale that would ultimately benefit the consumers through lower tariffs.

Another important step forward has been the relaxation of

FDI limit from 49% to 74%. This has brought in much clarity in the regulatory

environment and has yielded immediate benefits with the entry of reputed global

giants, like Vodafone and Maxis in the country.


In February, a long and much sought-after issue of the

introduction of a revenue-share regime for ADC was resolved. A 1.5% revenue

share on AGR has been announced, which would lead to a reduction in telecom

tariffs across the board. This regime is transparent and easy to implement and

enforce. It exempts the fixed operators of ADC levy in rural revenues. This

extension of exemption to CMSPs would further drive rural penetration

and more affordable services in the rural areas.

These initiatives have aided growth and we are well on

course to achieve the government target of 250 mn subscribers by 2007. However,

the mobile sector faces significant challenges, as even today about 70% of the

population-mostly in the rural areas-is not covered by the mobile service.

The urban-rural digital divide needs to be bridged. Several joint initiatives

which harness the forces of co-opetition while nurturing the spirit of

competition, would be the key to spread affordable mobile services in the


Create Infrastructure

The need of the hour is to boost reach through infrastructure creation. However,

the capital costs for this are formidable and cannot be met from the revenues

currently generated by service providers. The concept of infrastructure sharing

between cellular operators assumes crucial importance, as it allows operators to

leverage and ride on existing infrastructure. This enables them to provide

affordable services, especially to the rural consumers.


Infrastructure sharing is equally relevant in the urban

areas. Here, the presence of 6-8 operators and a fast exploding mobile

subscriber base is resulting in more cell-sites being put up by each operator to

cater to the growing traffic requirements. This not only results in high costs

for each operator but also mars the landscape with congestion because of the

large number of towers.

Sharing of

infrastructure between operators in the urban areas would result in lesser

investment and its better utilization

The minister of communications and information technology,

Dayanidhi Maran, has stated his vision of ushering in the infrastructure sharing

revolution by starting the project MOST (Mobile Operators' Shared Tower

Initiative). This project will aim at promoting infrastructure sharing among all

the service providers with a view to bring down costs and enhance efficiency in



A high-level committee to kick start this project in Delhi

has already identified sites for sharing, and actions are being initiated to

facilitate availability of various sites from the concerned authorities.

Techno-commercial proposals have been made by Independent Infrastructure

Providers (IP-I). The preliminary report for Delhi has already been issued. This

project will be gradually scaled upwards to cover cell-sites on an all-India


Enhancing Interconnection

The explosive pace at which the subscriber base is growing in India is putting

immense pressure on the scarce resource such as spectrum and interconnection. As

of today, lack of the point of interface is a critical bottleneck hampering the

expansion of service. It is also adversely impacting the quality of service

parameters of all the service providers, leading to:

  • Higher cost of service
  • Inefficient handling of calls
  • Sub-optimal utilization of network resulting in an increase in Capex and Opex

In order to overcome this problem, the service providers

are actively engaging in dialog to enhance interconnection. They are also

exchanging projected requirements of interconnection on a quarterly basis so as

to ensure better planning and availability of interconnection.

As a medium-term approach towards enhancement of

interconnection, the industry is also working towards setting up of an

interconnect exchange. This will be a managed node for automatic switching or

cross connect, rather than the mesh-like structure currently being followed. In

fact, this node could be a full-fledged switch with many more functions besides


This node, being an interconnect exchange associated with

an inter-carrier billing and settlement platform, will be able to ensure not

only timely provision for interconnection, but also inter-carrier billing and

settlement. Since the interconnect exchange will handle all inter-operator

calls, it will be in a unique position to offer the following facilities:

  • Inter operator bill settlement (clearing house function)
  • Reconciliation and MIS generation
  • Tariff-based/time-based route selection
  • Route related announcements
  • Carrier selection

A high-level committee of both public and private sector

service providers has been formed to go into the details and modalities of

setting up the interconnect exchange.


In order to comply with DoT requirements and to address the concerns of national

security agencies, the service providers have set up the Apex Advisory Council

for Telecom in India (ACT). This council will ensure proper subscriber

verification before any new mobile connection is activated.

The industry also needs to address the issue of bad debts

which amounts to Rs 800 crore @ 3% every year. It should share fraud management

data which will help reduce avoidable churn and bad debts. It is also the

corporate social responsibility of the industry to control increasing spam in

the mobile industry.


of 3G will also be crucial for enhancing India's competitiveness in the

ITeS/BPO segment

Introduction of 3G

The next big push for Indian telecom is the expeditious introduction of

third-generation (3G) services which will represent the true convergence of

fixed and mobile telephony. Its high speeds and data throughputs will facilitate

delivery of a wide range of multimedia services including video telephony,

television, etc. 

It may be noted that world over, 3G services are taking off

exponentially. As of date, in 3GSM alone, over 160 licenses have been issued in

57 countries and 102 networks have been launched commercially in 44 countries.

The 3GSM subscriber base has crossed 50mn subscribers. It overtook the worldwide

CDMA 2000 1x EVDO back in 2004.

India cannot afford to be left behind in the 3G race. Korea

and Japan have already launched 3G services. China too has conducted field

trials and will launch the 3G initiative soon. It is opportune for India to look

at the earliest possible introduction of 3G services. This will bring the much

needed foreign investments into the country, help reach the addressable

population in the rural areas, encourage and facilitate vital social initiatives

such as tele-medicine, etc, cater to the demand for hi-speed data services in

the urban markets and enhance India's competitiveness in the BPO segment.

Introduction of 3G will also be crucial for enhancing India's competitiveness

in the ITeS/BPO segment.

To ensure maximum benefit, 3G services should be cost

effective. This will play a key role in its rapid spread.

This mobile broadband route could be a rewarding journey

for India if the service can be made available at affordable prices. By sticking

to the revenue-share license fee model for 3G, the government can ensure that

this initiative maximizes affordable and early benefits to the people of India.

To conclude, last year has been a year of further

consolidation and growth for the mobile telecom sector. The sector is now on a

high growth trajectory and is well set to achieve the target of 500 million

subscribers by 2010.