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Mobile & Wireless
India’s mobile market: an attractive foreign telco investment target
Study shows need for more uniform penetration to benefit all
by Ek Heng, Asia-Pacific correspondent
Shrugging off the global gloom, India’s telecommunications sector increased its mobile user base by 13.4 million in February 2009 bringing the total to 375 million. What’s driving the majority of growth in India’s telecom market is the dominance of GSM-based platforms which account for nearly 74 percent or 277 million mobile subscribers.
Wider access to rural areas, lower charges and cheaper handsets are also factors contributing to the growth making India an attractive investment target for foreign telcos.
After its announcement last year, Norwegian telco Telenor has completed renegotiations to increase its stake in new Indian telco, Unitech, from 60 percent to 67.25 percent. The increase in stakes for the same investment of INR 61.2 billion (US$1.2 billion) by Telenor reflects the macro economic developments, it said in a statement. Unitech’s license is for the popular GSM service.
Telcos eye GSM services
Telenor has made the first payment of INR12.5 billion (US$245 million). The remaining INR48.7 billion (US$965 million) will be completed in three tranches in 2009. It marks the formal entry of Telenor into the world’s fastest growing mobile market where the company is now embarking on an operational phase and preparing for the launch of services, according to Telenor Group President Jon Fredrik Baksaas.
Virgin Mobil India, formed by UK-based Virgin Group and Tata Teleservices (TTSL), is also eyeing the GSM service. The joint venture company provides design, marketing and support to operate a CDMA service under an arrangement with TTSL. Virgin Mobile India’s CEO M A Madhusudan said its agreement with TTSL is technology-neutral which can be extended into the GSM platform.
TTSL reportedly announced it was investing US$2 billion to implement GSM service before the end of 2009. It identified Nokia Siemens Networks as one of the main vendors for managed services for its pan-India GSM service over a five-year period.
Criticism for 3G delay
Meanwhile, the delays for 3G bidding has been criticized by the media which highlighted the investments being made by China for 3G licenses and USA setting its sights on expanding the availability of broadband services to counter the economic downturn.
Differences over the reserved price for the license, among others, have delayed the on-off bidding process. Two local state-owned Indian-based telcos exempt from bidding have ran into problems in their 3G services implementation plans.
Having launched 3G services in Chennai and Delhi, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) were asked to stop their services by the Department of Telecommunications and India’s Intelligence Bureau. The reason reportedly is over the need to sort out monitoring issues for 3G calls by the authorities.
Higher teledensity equals higher growth
Meanwhile, a research report by the Indian Council for Research on International Economic Relations (ICRIER) has pointed out the correlation between penetration rate and growth. It drew the conclusion that the benefits for Indian states translate into 1.2 percent growth for every 10 percent increase in the India’s penetration rate.
It also suggested there is evidence that policy makers should take note an important threshold is to achieve a critical mass of 25 percent penetration rate. While India has more than 30 percent teledensity with monthly growth around 10 million mobile subscribers, it highlighted the point that there is great variation in penetration rates within the country. Many less developed states like Orissa, Assam and Madhya Pradesh have average penetration rates below 20 percent, the Vodafone-sponsored report, said.
The report added that access for Internet is even lower at 5 percent nationwide and is negligible at 0.1 percent in Bihar and 0.2 in Assam, which are representative of the situation in the less-developed states.
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