Rural areas fuel telecom growth in India

April 24th, 2009 - 1:10 pm ICT by IANS  

KPMG By Pupul Dutta
New Delhi, April 24 (IANS) When most sectors are bearing the brunt of global economic slowdown, India’s telecom industry is continuing with its high growth saga, thanks to the expanding subscriber base in the rural areas.

India last month saw the highest number of subscriber addition, 15.87 million, about three times the population of countries like Finland, Denmark and Singapore.

A majority of the numbers were from the rural market with the urban market becoming more or less saturated. The mobile handset replacement market and the switch from landline telephony to mobile telecom have also been the driving force for such robust growth.

“The overwhelming number of connections that are added every month is due to the reach of the network to those sections of society it had never touched before,” T.V. Ramachandran, director general of GSM operators’ lobby Cellular Operators Association of India (COAI), told IANS.

The country, which already boasts of the second-largest telecom user base in the world after China and ahead of the US, now has 429.72 million telecom subscribers, in both the wireless and mobile segments, with a record growth of 59.48 percent last fiscal.

According to the industry watchdog, Telecom Regulatory Authority of India (TRAI), the overall tele-density in the country reached 36.98 at the end of March.

“The current numbers have exceeded our forecast also. And with this pace, we should be able to achieve about 800 million subscribers by 2012,” Ramachandran said. The key factors driving the voluminous growth in rural areas are affordability and government policies.

Sunil Dutt, country head of Samsung’s telecom division, is also upbeat about the industry’s growth rate.

“We expect the mobile handset market to grow by 10-15 percent this year, largely driven by first time users in the tier II, III, IV cities as well as the replacement segment in the metros and larger cities,” Dutt said.

With almost 13 million new connections being added every month, the industry’s prospects are bright, he said.

“Also, with both the handset makers and the service providers working towards expanding their penetration and customising their products and services for the semi-urban markets, I see the mobile sector in India sustaining its growth,” Dutt added.

However, some telecom experts believe that this is just a temporary phenomenon and the high growth rate would continue for a maximum of 8-10 more quarters.

“These numbers would continue for 8-10 quarters, owing to low sim card prices, but then for how long will these sim cards produce money for telecom operators? This is a major issue,” Jaideep Ghosh, communications director of global consultancy firm KPMG, told IANS.

“The growth is good, but the penetration of telecom services in the rural areas has not been impressive,” he added.

COAI’s Ramachandran also said, “No matter how many millions of subscribers we add, the penetration would still remain at 60-70 percent even after two-three years.”

Talking about the challenges ahead, he said a very limited spectrum was available for many players in the market. Moreover, the government needs to reduce duties and levies to spur greater growth.

“This sector delivers the most to the country; yet we don’t get any benefit from the government,” Ramachandran said, adding: “We deserve the best support owing to the unprecedented growth.”

(Pupul Dutta can be contacted at

Related Stories

Tags: , , , , , , , , , , , , , , , , , , ,

Posted in Business |