Mobile Subscriber Growth: Making Sense of Waning Numbers

With 20 million new phone users in 2003, the teledensity figure of seven was
achieved 15 months ahead of the NTP target. Mobile telephony, in particular, was
on a new high with 17.5 million more users. Though the year-on-year figures
showed an impressive performance, the monthly user additions reflected a
different picture. There was a slump both in GSM and CDMA in the number of
additions in December compared to November, when unified licensing was notified.

The figures show that in the first month of its implementation the unified
licensing has not helped in adding more users. The regime has been targeted
towards streamlining telecom services in India and increase the performance of
the service providers, but it seems even after the notification operators are
taking time to fully adopt the new regime. The industry figures for mobile
operations, including both GSM and CDMA subscribers, show a 12 percent drop in
new user additions. Only 1.69 million new mobile users were added in December as
against 1.90 million in November.

Among the GSM operators while Hutch, Bharti, BPL and Idea maintained their
positive growth, the number of additions reduced for Spice, Aircel and BSNL.
Circlewise, the metro cities recorded a jump in GSM users while all other
circles had lower addition rate. In December, Delhi, Mumbai, Kolkata and Chennai
combined had 334,355 new GSM subscribers against 310,886 in November. In the
CDMA segment, Reliance added 357,608 users in December against 458,486 in
November. The number of subscription slowed down for other major CDMA service
provider Tata Indicom too. Of the 16 CDMA circles, 15 registered a negative
growth from 524,550 new users in November to 420,084 in December. Only in Andhra
Pradesh CDMA additions jumped from 52,735 to 65,575 and the GSM additions were
less.

In states like Punjab and Bihar the number of new mobile users, GSM and CDMA
combined, fell by more than 50 percent. Being agriculture intensive states,
farmers in these states could be waiting for the end of the harvest season
before going in for a new connection. But in Uttar Pradesh, this logic does not
seem to be working. Overall, the state has added more new subscribers but the
number of new GSM users is more than that of CDMA here. Maharastra, Gujarat,
Karnataka and Rajasthan have also shown the same trend.

Moreover, the festive season also failed to attract mobile users in December.
Special schemes like the Monsoon Hungama Rs 501 are also not attracting much
attention now. Initially, many people subscribed to the ‘cheaper’ CDMA
phones, but when the bills started coming, subscribers realized that the actual
cost was higher than expected. With the initial euphoria settling down and users
starting to read the fine print, addition rates have come down. Surrendering of
connections might also have added to fewer additions overall.

One major deterrent for the new users has been the call tariffs and the
confusion surrounding rates being charged for calls between networks. The GSM
call rates have fallen almost 88 percent since 1995, when cellular services were
introduced and are among the lowest in the world. However, the bills are still
on the higher side and the wirelines are proving to be cheaper, free from
network and billing tangles, for the common user.

Industry analysts say that the mobile phones are no more a status symbol and
are considered more of a necessity now. But the growth rate will slow down as
inflection point has reached for the top layer. This class would switch his
operator or get a new connection only, if he is not satisfied with the services
being offered or there are lots of value adds including the pricing to lure him
away. The new additions would now come from the second layer of people who are
on the move like the plumber, electrician or the mason. These people like to own
a mobile phone, but low tariffs and monthly bills are more important for them
than the technology in use.

In the price-sensitive Indian market, customers first see the cost of going
mobile. GSM and CDMA comes later. In the past also, when mobile call rates have
been cut, there has been an immediate rise in subscription levels. However, the
companies are sending out signals that the tariffs have bottomed out.

One way to attract new users has been to bundle handsets with a new
connections. This serves the numbers of the equipment maker as well as the
service provider. And, with the Government slashing the duties on handsets,
operators need to come out with fresh schemes. Otherwise, the December slump
could well become a trend.