Indian cellular market – Future scenario

Written by Amit Agarwal on Jul 18, 2007

Cellular IndustryAccording to a Gartner report, after China, India would be fastest growing mobile telephony market in Asia Pacific with revenues slated to increase at a CAGR of 18.4% to reach $25 billion in 2011 from current $9 billion.

Cellular penetration would increase to 38.6% in 2011 with 58% of rural population and 95% of urban population possessing mobile phone. The market will be driven by prepaid connections, which will account for more than 93% connections. The voluntary churn rate is expected to reach 41% from current 30.6%.

Gartner reports expects that the penetration will be driven by an increased focus on rural market, cheap handsets, aggressive promotions and handset bundle offers. The low rural mobile pentration of 2% represents an immense opportunity for cellular players. The call rates will further drop to become closer to fixed-line rates, further lowering the entry barrier.

The revenues from data services will contribute to the revenue growth, however the bulk of the revenues will continue to come from voice services. Customers with low disposable incomes will increase as such the Average Revenue Per User will decline.

Large players will have an advantage as they expand their presence and take advantage of economies of scale. But they will face tremendous challenges owing to intensifying competition. With the entry of Vodafone, the market will become more dynamic.

However, scarcity of spectrum could impact expansion plans and the quality of service. Gartner report mentions that release of 3G spectrum will be essential to sustain growth in the industry and bridge the gap generated because of lower voice tariffs and handset subsidies.

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