India’s massive mobile market
entered a period of uncertainty in 2012 and this had continued into 2013.
Whilst maintaining its ranking as one of the two largest telecom markets in the
world (not surprisingly the other being China), India has looked anything but
the strong market it was two years earlier. A number of factors have
contributed to this situation. The Supreme Court decision in February 2012 that
saw the large scale cancellation of operator licences and the subsequent
response of the regulators to the court orders set the scene for the market
uncertainty that followed. In the wake of the court decision and specifically
the directive to re-auction the cancelled licences, a number of operators
exited the market, whilst others were looking to rationalise their
businesses.
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After a number of delays, the
all-important re-auctioning of the cancelled 2G mobile licences took place in
late 2012. This saw a disappointing outcome for the government with much of the
spectrum on offer not even attracting bids, the high reserve prices clearly
frightening off potential buyers. A further auction was held in March 2013 to
sell off the remaining spectrum. Again the lack of bidder interest forced
further postponements.
In the meantime a different kind of
‘shake-out’ was impacting on the mobile market. Operators had begun culling
inactive prepaid subscribers from their customer databases; by mid-2012 this
process had caused a major dislocation in the subscriber statistics and it was
evident that the market would need time to adjust.
The mobile sector had passed the 900
million subscriber mark by early 2012; by end-2012, however, the total
subscriber numbers had fallen to around 860 million as the combined net effect
of growth and culling was felt. Despite this dislocation, overall growth in the
national subscriber base in the medium to long term was expected to continue at
a strong rate; by mid-2013 the net subscriber numbers were increasing once
more.
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One of the reasons for the operators
culling their databases was to lift Average Revenue Per User (ARPU). Mobile
ARPU in India had been steadily declining over the years as competing operators
offered cheaper tariffs; at the same time usage levels have remained reasonably
high thus slowing the decline in revenues. At the same time, there had been a
major push in recent years to take mobile services into the poorer and rural
areas of the country; this inevitably weighed heavily on ARPU.
Countering this trend, the
long-awaited 3G licensing has seen networks across the country finally
delivering mobile data services to customers. Although still struggling with
coverage issues, 3G has started to see operators boosting revenue. By 2012 and
into 2013 there were positive signs that the decline in ARPU was ‘bottoming
out’ as operators began reporting increased ARPUs.
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