India's Mobile Phone Sector Shows Huge Growth

By Anjana Pasricha
New Delhi
28 July 2007

India's largest mobile phone company, Bharti Airtel, announced recently that it doubled its earnings in the April through June quarter to $368 million dollars, compared with a year ago. Subscribers rose by 82 percent.

The staggering numbers did not surprise anyone in a country that is witnessing massive growth in the mobile phone market.

Mobile users in the country have exploded from a mere five million in 2001 to 185 million at present.

A new study by the Gartner technology consulting group says the number will more than double in the next five years, growing to 462 million by 2011.

But as urban centers are already saturated, much of the new growth will come from rural areas, home to two-thirds of the population.

That presents a lucrative opportunity in a country with more than 1 billion people.

A senior research analyst at Gartner, Madhusudan Gupta, says service providers have started to focus on the rural market by offering low tariffs and affordable handsets.

"The cost of the handset has gone has down as low as less than $25 U.S," he noted. "They are actually selling it on their own manufacturing cost. Therefore, what has happened is that a lot of rural people whose disposable income was not to an extent that they can afford it, are now in a state to buy it. They will obviously be giving lots of subsidies even on their voice tariffs."

Rates for domestic mobile services have dropped steadily in India, and are now among the lowest in the world at two cents a minute.

All major telecom companies have begun investing heavily in new towers and base stations in the countryside to tap the rural market. Bharti Airtel, for example, is investing $2 billion over the next two years to expand its network in rural areas.

State-owned Bharat Nigam Sanchar Limited plans to spend $4 billion on rural coverage as well as broadband network expansion.

Increased mobile service could be a boon for rural areas, where the fixed-line infrastructure is poor, and most people do not have access to a phone.

India is now the world's third largest mobile phone market after the United States and China.