Four Months to a Crore

The Indian cellular sector, which has enjoyed unprecedented growth over
1995-2002 with a CAGR of 109%, is expected to touch a base of one crore by the
end of this year. With a current subscriber base of over 80 lakh, the sector has
already achieved the distinction of having overtaken the growth rate of fixed
line telephony in the country during the last April-June quarter.

While there were 3 lakh new DELs established in the last quarter, cellular
notched up 9.6 lakh new subscribers. It is estimated that around 25% of the new
subscribers would be from small towns and cities. The sector has witnessed
increased coverage beginning with just 249 towns and cities in 1998 to over
2,000 towns and cities by March 2003. A very laudable achievement of the
cellular sector has been the 80% plunge in the tariff structure since 1986. The
current Indian cellular tariff structure is amongst the lowest in the world when
compared to statistics from International Telecom Union, EMC and PwC.

crore by 2008
number of mobile phone subscribers in India is likely to rise to 120
million by 2008 because it has the cheapest call rates in the world,
according to the Cellular Operators Association of India. "The number
of cellphone users in India is expected to climb to 12 crore by
2008," COAI director-general TV Ramachandran says. "We have
absolutely the lowest tariffs in the world and they can fall further by up
to 20-30%."

The country’s
$25,000-crore mobile phone sector, billed as one of the fastest-growing
markets globally, has eight million users spread across 1,500 cities and
over 60,000 villages. The main driver for the over-100% growth each year
in the past six years has been falling tariffs in a sector where a dozen
money-losing firms have launched a fierce price war to grab marketshare.
Cellular firms plan to invest Rs 25,000 crore over the next five years to
broaden coverage and add new customers.–DQ

Cellular tariffs from EMC show that India at $16 per month has the lowest
monthly cost of a 300-minute basket for cellular services. In contrast, a
300-minute basket costs $21 in China, $29 in Thailand, $40 in Malaysia and $42
in Indonesia. The tariffs in South American economies are far higher at $60 for
Chile at the lowest end and $115 for Argentina at the highest end. In the last
three years alone, airtime tariffs have plunged over 75%. According to TRAI, the
average monthly rental and airtime being realized for cellular services stand at
Rs 202 and Rs 1.99 per minute, respectively.

Pre-paid services have been introduced by all operators, with roaming charges
cut down by 70%, from Rs 10 to Rs 3 in early 2002 and now to Rs 1.50 by several
operators. However, Indian cellular operators are paying one of the highest
regulatory costs in the world. Operators are passing around 35-42% of their
revenue to the government by way of various levies: license fees (8-12%);
spectrum usage charge (2.5-4.5%), service tax (5%) and interconnect access
charges (approximately 20% of revenues). In contrast China pays nil license fee,
a negligible fixed usage charge for spectrum, no service tax and has very
reasonable terms for interconnection with the fixed service operators.

Although industry tariffs have reached rock bottom, it is possible to pass
more benefits to consumers if the government and regulatory agencies do away
with some of this burden. According to Bharti Group chairman Sunil B Mittal,
"We can still pass on a large chunk of benefits to the consumer, provided
that the government and regulator act fast to ensure that end users

COAI chairman Manoj Kohli and Escotel CEO says, "It is only cellular
operators who have to pay an access charge of Rs 1.20 to fixed line operators
whenever a call is made from a mobile to a fixed line. This is completely
illogical and should be removed at once." Spectrum allocation is also one
of the lowest in the world–at 8 MHz in metros and 6.2 MHz in other circles,
against a world average of 17 MHz. This puts a huge strain on operators since
spectrum is the basic component on which the entire business planning rests.

Cyber News Service in New Delhi

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