'Time for mergers, tariff cuts in Indian mobile phone market'

Wednesday, 26 September 2007, 07:00 Hrs
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New Delhi: The Indian telecom industry, which is projected to have 525 million mobile subscribers by 2010, will soon witness major consolidations that will make the services more affordable, a leading industry body has said.

"Consolidation is expected in the telecom sector. And it would be good for the growth of the industry as a whole," said T.V. Ramachandran, director general of the Cellular Operators Association of India (COAI).

"It will lead to larger economies of scale and it would also have the ability to support the affordability factor," Ramachandran, who heads the leading lobby for the mobile telephone industry in India, told IANS.

Ramachandran also referred to a recent proposal of the industry watchdog Telecom Regulatory Authority of India (TRAI) on mergers and acquisitions that said post- merger a combined entity can have a maximum market share of 40 percent.

At present, the maximum market share of a merged entity is 67 percent.

"If these recommendations are accepted by the government, which would modify the M&A (mergers and acquisitions) norms, then also a consolidation is expected," Ramachandran said.

Last month, the telecom watchdog came out with a set of new M&A norms that reduced the share of a merged entity to 40 percent in the particular market against the earlier ceiling of 67 percent based on the number of subscribers and revenue.

Referring to the projected market for mobile phones in India, the industry lobby also said the 525 million mobile subscribers by 2010 would be easily met, driven this time by the rural market.

"The Indian mobile industry is growing at an exponential rate. We are confident that at this rate, our projection of 525 million mobile subscribers by 2010 will easily be exceeded," Ramachandran emphasised.

"The next big thrust in growth is definitely expected in the rural areas. There is still 60 percent of India's geographical area uncovered by mobile services and it mainly covers the rural and remote areas," he said.

"Thus, operators are making their best efforts to provide the benefits of mobile telephony to those in semi-rural and rural areas," he said, adding this did not mean that the market in urban areas was saturated.

"Even in urban areas there is a tremendous potential for growth."

As on Aug 31, 2007, the total number of telephone subscribers in the country had reached 241.02 million and the overall tele-density has jumped to 21.20 percent, against 20.52 percent in the previous month, according to the industry watchdog.

The total wireless subscribers' base stood at 201.29 million, with the addition of 8.31 million new subscribers in August, while landline, or traditional phone base, declined marginally.

"The main reason for this incredible growth in India is the intense competition which has led to low mobile tariffs. Each area is characterised by the presence of six-eight mobile players, against the global norm of three-four players."

Ramachandran, however, had one worry. He said this growth might not be sustained for long if radio frequency spectrum is not made available to service providers. He called for a comprehensive policy on this at the earliest.

"To sustain healthy growth of the sector, the most fundamental resource - that is the spectrum - is not readily available in India. This is also affecting the quality of service," he said.

Earlier this month, the umbrella organisation for mobile phone operators had served a legal notice on the Department of Telecommunications (DoT), demanding immediate allocation of radio waves to their members.

The DoT says as much as 60 MHz of spectrum under control of the defence ministry is not being utilised and has asked for 42.5 MHz for use by mobile phone service operators.

But the defence ministry says it needs it for future use by its forces.
Source: IANS
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