Indian Telecommunication Policy and Reform: Impact on Cellular Mobile Industry

By Batra, G. S.; Marwaha, Amandeep Singh | Political Economy Journal of India, January-June 2008 | Go to article overview

Indian Telecommunication Policy and Reform: Impact on Cellular Mobile Industry


Batra, G. S., Marwaha, Amandeep Singh, Political Economy Journal of India


Introduction

India has emerged as one of the world's best performing economies during the last five years. The growth rate of the Indian economy is at a historic peak. It has averaged close to 9 percent year after year and we are targeting a growth of 10 percent in the coming five year plan. The size of the middle class has trebled, people below poverty line have decreased by ten percent, population growth has slowed down and the per capita income in terms of purchasing power has increased to nearly three times. Economic theory suggests that there is a positive correlation between infrastructure and economic development. Telecommunications is one of the most important types of infrastructure. In most of the developing countries, mobile penetration is strongly correlated with economic growth and social benefits. India, a developing country in South Asia with a population of over one billion people, has low telephone penetration, but has now become one of the high volume, high growth telecommunication services market in the world. There has been tremendous contribution of the telecom sector to the rapid growth of the Indian economy. The growth of cellular mobile services is leading the telecom revolution in India and the other services are following. From waiting for years to get a fixed-wire connection provided by the state-owned monopoly, most Indians today have telephone on demand. However, Indian telecom still has to go a long way.

Mobility scene in India

In 1991, less than one per cent of the world population had a mobile phone. The proportion has grown to the vicinity of one phone per every six people by the end of 2001. It is interesting to observe that China has surpassed USA to become the largest mobile market of the world. India is now the 3rd largest market for mobile phones and by the year 2009 end, it is expected to overcome US to become the second largest market only after China. India has achieved significant distinction in having the world's lowest call rates, the fastest sale of million mobile phones (in a week), the world's cheapest mobile handset (US$ 17.2) and the world's most affordable colour phone (US$ 27.42) and largest sale of mobile handsets (in the third quarter).

The mobile sector subscribers have grown from around 10 million subscribers in the year 2002 to 250.93 million by the end of February 2008. According to Telecom Regulatory Authority of India (TRAI), a total of 8.49 million telephone connections were added during February 2008. The annual growth of mobile cellular services recorded in India during the last few years has been nearly 100 percent, but still, after over a decade of start of mobile services in the country, only 30 percent of the 600 million addressable markets of mobile users in the country of over one billion people have been reached. Today, around eight million new telephone subscribers are being added in India every month. This is mostly in the mobile telephone segment. Indian government has set a new target of 500 million mobile phones by 2010 and provision of mobile coverage of 90 percent geographical area by 2010.

Trend in Tele-density

Tele-density in the country increased from 5.11 percent in 2003 to 22.56 percent in October 2007 i.e. an incremental growth of 34.15 percent during last five years (about 7 percent per annum). In the rural area, tele-density increased from 1.49 percent in March 2003 to 7.03 percent in October 2007 and in the urban areas, it is increased from 14.32 percent in March 2003 to 56.93 percent in October 2007. Although, the growth in the last few years has been impressive and our tariffs are among the lowest in the world, vast stretches of our rural areas have little or no telecom penetration. Rural tele-density is still in single digits.

The total number of telephone connections reached 290.11 million at the end of February 2008, taking the overall tele-density to 25.31 per cent at the end of February 2008. …

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