Mobile market expanding rapidly in India

By Nandini Lakshman

updated 9:23 p.m. ET July 25, 2006

In rural India, carrying around a $44 mobile phone can be something of a status symbol. Or at least it has been for Pandurang Narayan Shelke, a 55-year-old farmer in Latur, a village in the west Indian state of Maharashtra. Last January his son, who works as a porter at Bombay's Victoria Terminus railway station, bought him a low-end Nokia 1100 handset. Shelke had coveted one for years. And, now, "my stock has gone up considerably with my poor relatives, as I can talk to my son whenever I want," he says.

Shelke's small step into the world of wireless communications is part of a much larger drama unfolding in the Indian telecom market, once a backwater but now the world's fastest-growing after China. The number of fixed and wireless telephone connections has doubled in the past two years, to about 150 million, and Indians are signing up for mobile-phone service at an extraordinary five million new wireless connections a month. The Ministry of Telecom has set a target for India to have 250 million connections and mobile coverage for 85 percent of the country—from about 30 percent today— some time in 2007.

Massive growth
This is explosive growth, no question. And there could be much more to come if New Delhi is serious about improving the lot of rural India, home to two-thirds of the country's one billion-plus population but with precious few workable phone lines. Most analysts believe that wireless mobile networks and affordable handsets could quickly change all that. Indian Prime Minister Manmohan Singh's government has rolled out the welcome mat to global wireless operators and handset manufacturers to invest in the country's massive telecom build-out, and domestic companies are expanding rapidly, too. "India has reached a take-off point in telecom," says Ashim Ghosh, managing director of Hutchison Essar, a joint venture between India's Essar Group and Hutchison Telecom, based in Hong Kong.

While India has a very long way to go in establishing a nationwide network of landline telecom networks, let alone high-speed broadband service, paradoxically, the country could overtake China in the next several years in terms of mobile-phone subscription growth. Rolling out towers and base stations to support wireless networks certainly isn't cheap. But it likely will be wireless networks—not copper-wire fixed lines—that do most to pull India out of the telecommunication dark ages.

Talk is cheap
While India often gets a deserved rap for its rigid labor laws and heavy regulation in some sectors, that's really not true when it comes to telecom, which New Delhi started liberalizing back in the mid '90s. Telecom tariffs imposed on domestic voice services have dropped steadily, and today India enjoys the lowest call rates in the world at 2 cents per minute, compared to 33 cents in Japan, 11 cents in Brazil, and 24 cents in Australia. The arrival of a sizable market of wireless phone subscribers—India's mobile phone user base has exploded to 105 million today from 5 million in 2001—is also driving down the price of handsets.

That's encouraging relatively well-off urban consumers to trade up to more feature-laden phones and creating a heat blast of desire among the big chunk of the population who haven't yet tried one. "There's an insatiable hunger for mobile phones permeating all layers of society," says Pankaj Mohindroo, president of the Indian Cellular Assn., a trade group. And India's relatively "lower ownership of handsets, low call rates, and spreading out of networks is having a cascading effect on affordability," adds Sanjeev Aga, director Idea Cellular, which is owned by the Aditya Birla group, one of India's leading business conglomerates.

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