Telecoms Subscriptions Plateau

CEIC India Data Talk: With one of the largest telecommunications networks globally (second only to China), India boasts a remarkable 29.5% compound annualised growth rate in overall number of telephone subscribers from December 2006-2012 on the back of high growth in wireless subscriptions. The latter account for over 95% of total telephone subscribers, as wired subscriptions – those requiring a physical connection line - have continued to wane (declining by 6.1% year-on-year as of February 2013. However, telephone subscription has plateaued and gradually declined from its recent peak of 965.52 million users during June 2012 to 892.02 million users during February 2013. This represents a 5.5% year-on-year decline in overall telecommunication subscription as of February 2013. It also corresponds to a decline in India’s tele-density – i.e. the number of telephone phone lines per 100 inhabitants – to 72.9% during February 2013 from 77.8% during July 2012. The wireless telecommunications sector in India has been relatively decentralised with a large variety of service providers. The largest operator, Bharti Airtel, holds a 21.7% market share as of February 2013; other major operators include Vodafone Essar (17.4%), Reliance (13.9%), and Idea (13.8%). The fairly competitive market structure is largely attributable to the liberalisation of the telecoms market, which has enabled telecoms firms to tap into the sector’s inherent potential. Due to India’s geography and large population, a well-functioning telecommunications infrastructure is crucial in supporting growth in India. Intense competition, especially in the mobile telecommunications market, has arguably helped encourage competitive pricings, prompting a long-term decline in average revenue per user (ARPU). ARPU for both Code Division Multiple Access (CDMA) and Global Systems for Mobile Communication (GSM) declined by a compound annualised growth rate of 12.4% and 16.2% respectively from September 2007 – September 2012, though the ARPU rose marginally on a year-on-year basis from the fourth quarter of 2011 to the present. As of September 2012, ARPU for CDMA stands at approximately INR78 per month, while ARPU for GSM stands at INR95 per month. The long term decline in ARPU is attributable to both intense competition and oversaturation in the mobile telecommunication market. The latter, especially, meant that mobile telecommunication providers are obliged to expand their market segment to accommodate the low-income groups (who may be more price sensitive than the other consumer groups). This has been further exacerbated by the long-term decline in average minute of use in favour of auxiliary cellular services, including short messaging services (SMS) and other modes of communication. Improvements in newer telecommunications technology – including voice-over-internet protocols (VOIP) and chat applications, among others – serves both as an opportunity and a threat to existing telecommunications industry players. On the one hand, these technologies help industry players further differentiate themselves to capture a larger slice of market share. On the other hand, however, the increasingly dynamic playing field poses a long-term challenge for industry players to adapt and innovate in a bid to remain relevant to the market. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Chan Yee Lui - CEIC Analyst Back to Blog
9th May 2013 Telecoms Subscriptions Plateau

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