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Telcos may be rushing in to flat terrain
Published on 10 Oct. 2009 11:53 PM IST
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If India is the fastest growing telecom market in the world, it is also the one that has the most number of players. It is not unusual to find 10 players in a circle vying for a share of the increased subscriber base. A host of telecom circles in India have high-penetration levels with entry barriers being hard to miss. With at least four new operators (Unitech, S Tel, Swan and Datacom) waiting to launch services in this market that has over 450 million subscribers, the story is likely to be about where the new lot of subscribers will come from. Take a circle like Mumbai, for instance, which has a total wireless subscriber base of over 22 million for a population of around 21 million. With a penetration level well in excess of 100%, the subscribers bringing in the revenues have been accounted for. The instances of other circles such as Delhi and Chennai are not very different, with the early entrants having the advantage of a headstart. Rock-bottom tariffs and new pulse rates have merely made the market even more competitive. The new entrants are not, however, convinced about the lack of opportunity in a market like India. “With less than 500 million subscribers, there is still a lot of potential left. There is a good chance of subscribers churning and with number portability expected, the opportunity is huge,” thinks Videocon Group chairman Venugopal Dhoot. His group is a majority shareholder in Datacom Solutions, which is expected to launch its GSM services in December this year. What these players are banking on is the fact that there is a part of India that is still not on the mobile phone. Of course, these users could well bring in low amounts of revenue since they will be the low-end users. “The fact is that the metros are fully penetrated. Growth will have to come from the B and C circles,” said Jigar Shah, senior vice-president and head of research, Kim Eng Securities. He anticipates that 3G will fuel a part of this growth. Like Datacom, another new entrant, Unitech Wireless is banking on the churn factor. The company, which will launch services under the Uninor brand name by year end, thinks churn levels of 40% are more typical of markets that are highly penetrated and evolved on products, services and technology. “In India, this clearly means we have a large number of potential subscribers who are changing their operator rather frequently,” states the company’s executive vice-president, Rajiv Bawa. Importantly, new operators can use the infrastructure that has been put in place by the incumbents. “Besides, for a player like us, there will be no big-ticket investment on branding or distribution,” Mr Dhoot said. In that context, it will perhaps cost some operators a lot less than what might have been planned. “Since they do not have to build large levels of infrastructure, these new operators may be in a position to sustain low levels of average revenue per user (ARPU),” added Mr Shah. On the face of it, the key will be in getting in the high-end users and ensuring investments are recovered quickly. That will be the base for a sustainable business model. For now, high penetration levels in key geographies could complicate that.

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