Wireless base may double by 2010

The wireless phone subscriber base in India has already crossed 100 million mark and is expected to more than double to 265.2 million by 2010. Providers will continue to rake in profits, however, average revenue per user (ARPU) levels have declined significantly, and the downward trend is expected to continue.

According to a report by In-Stat, the primary growth drivers for the subscriber base include the fact that India is an under-penetrated market, has a low tariff structure, as well as increasing ability of the population to afford mobile services and rapid network expansion by operators.

The ARPU in India is one of the lowest in the world and is expected to decline further to $5.60 by 2010.

"The fundamental reason for the decline in ARPU is the downward trend in tariff structure for subscribers due to intense competition," said the report.

The leading operators, Bharti Airtel, BSNL, Reliance, Hutchison, and Idea Cellular, combined accounted for about 84 per cent of the subscriber base in 2005.

Due to the growing utility of cellular mobile services, low penetration, increased coverage, higher competition, and declining prices, cellular subscriptions are expected to increase to around 160 million by March-end 2007.

Subscription growth is expected at around 75 per cent during the financial year 2007.

India's current wireless subscriber base is approximately 146.54 million, as compared with the 3.6 million on 31 March, 2001, according to COAI and AUSPI.

According to a recent report by Icra, for the first half of financial year 2007, the combined wireless service revenues of Bharti Airtel Ltd (BAL) and Reliance Communications (RCL) increased 60 per cent year on year to Rs 108.39 billion.

The increase in revenues is mainly because of significant increase in cellular and fixed wireless telephone subscriptions and increased revenues from long distance services. Lower increase in operating costs resulted in a significant improvement in margins.

For RCL, operating margins (EBITDA/revenues) improved from 26.2 per cent in the first half of financial year 2006 to 36 per cent in the first half of financial year 2007.

As the telecommunications needs of subscribers are expected to become sophisticated, the wireless industry is expected to see increased demand for value-added services (VAS) like music messaging and voice recognition products. This trend will be enhanced by the development and supply of new data-enabled handsets at lower prices.

Revenues from VAS is expected to bridge the gap created by the fall in ARPUs triggered by a reduction in tariffs.