Travel report part one (of five):
Characteristics of the Indian telecom market
Bengt G Mölleryd at PTS and Jan Markendahl at Wireless@KTH visited India for almost two weeks during the second half of February 2012. Besides presenting papers on spectrum valuation, spectrum management, mobile broadband and network deployment at the Regional India International Telecommunications Society Conference (http://www.its2012india.com/) a number of meetings and interviews were organized in order to get a better understanding of the Indian telecom market.
We met representatives for three of the major mobile network operators, the largest independent tower company, some telecom manufacturers, telecom analysts and two government authorities (the Ministry of Communications & IT and the Telecom Regulatory Authority of India, (TRAI)).
We will during the forthcoming week present and summarize our findings and insights in a number of postings at the Unwired People. Today’s contribution below on the market characteristics, “The Indian Telecom market in short”, will be followed by summaries on other topics of the Indian telecom market
– Spectrum availability & management and technologies
– Spectrum politics and the allocation procedure
– The role of ICT and broadband for development of India
– What should India do in order to enable large scale mobile broadband deployment?
The last topic is a summary of the contribution by Dr. Mölleryd at the ITS India 2012 conference panel discussion on “Conceptual Issues in Spectrum Pricing and Market Competition”.
THE INDIAN TELECOM MARKET IN SHORT
A mass market with very low prices
The Indian telecom market is dominated by mobile communication services. More than 900 million SIM cards make it to the second largest telecom market in the world. At the same time the fixed line penetration is around 3% (35 million) and the total number of broadband connections is 14 million 2011, where 3 million are mobile broadband connections using the 3G services.
The operators and regulators etestimate that the number of active SIM cards is in the range 60 – 95 %, with large variations between the operators. Multi-sim-phones are common enabling the users to shift between 2-3 different SIM cards i, hence the users themselves can implement “national roaming”.
Voice services and pre-paid dominates. The average revenue per user (ARPU) is around €2 per month. At the same time the price per voice minute is very low (half a Eurocent) and the number of voice minutes per user and month is high (400 min) compared to Europe.
A fragmented market with many operators
The Mobile communication market in India differs a lot compared to the situation in Europe. Operator and spectrum licenses are awarded in 22 regions (called circles) and the number of operators in each circle is 10 – 12. There are state owned mobile operators but none of them are among the largest (and most profitable) operators.
The high number of operators has led to a intense competition and very low prices. After 2008 when new operators entered the market the (already low) voice prices decreased by 60 %.
Another issue for operators is the limited amount of spectrum that is awarded. GSM operators typically have 4,4, 6,2 or 8 MHz in the 900 MHz band. For 3G services some operators have been awarded 2* 5 MHz, this is more or less 10 times less the amount of spectrum available for mobile broadband for European operators.
Moreover, the spectrum allocation process is complex and has caused a lot of uncertainty. Recently 122 spectrum licensees awarded at first-come-first-served basis in 2008 was cancelled. India’s supreme court has ordered the government to cancel these 122 cellphone licenses granted to companies during an arbritary allocation process. This has thrown the Indian telecom market into a “wait and see” situation where no operator upgrades or invests in mobile networks.
Issues for the Indian telecom market and the mobile operators
A summary of issues and challenges at the Indian telecom market would be as follows:
The number of operators
The spectrum availability in general
Spectrum allocation procedure
Mobile broadband in Rural areas (with 70% of the population)
The price of Smartphones has to come down in price