Telecom Sector in India

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Telephone density or teledensity is the number of telephone connections for every hundred individuals living within an area. It varies widely across the nations and also between urban and rural areas within a country. Telephone density has significant correlation with the per capita GDP of the area. It is also used as an indicator of the purchasing power of the middle class of the country or specific region. Teledensity can be divided into Wireline and Wireless.

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Figure - 1

Figure 1 shows the growth of teledensity in India in the period 2004-2013, relative to the growth in China, United States, Brazil and the world on a whole. However, we see that despite of having the second largest mobile subscriber base, India lags behind in terms of teledensity (As indicated by the World Bank data). The mobile market in India is predominantly supply driven. However, certain demand side factors such as income also play an important role in the adoption of mobile phones in India.

India is one of the world's largest telecom market with enormous growth potential particularly in the field of mobile internet due to its high population and development potential. Airtel, Vodafone, Idea, Telenor India, Reliance, Tata DoCoMo, BSNL, Aircel, Tata Indicom and MTNL are the major operators in India. However, rural India still lacks strong infrastructure. India's public sector telecom company BSNL is the 7th largest telecom company in world.

Indian telecom operators added a staggering 227.27 million wireless subscribers in FY 2010-11 averaging at 18.94 million subscribers every month. To put this into perspective, China added 119.2 million wireless subscribers during the same period- averaging 9.93 million subscribers every month. So, while India might currently be second to China in the total number of mobile subscribers, India has been adding nearly twice as many subscribers every month until March 2011. Mobile teledensity increased by almost 18.4 percent in FY 2010-11 (49.60% to 67.98%) while wireline subscriber numbers fell by a modest 2.2 million. This means that the Indian mobile subscriber base has shown a year on year growth of 43.23%. Subscriber number hit a peak in June 2012 but has since declined. The decline in telecom user base after June 2012 has been primarily due to the removal of inactive mobile telephone connections by service providers.

Table -1

Indian Telecom statistics

- Telephone subscribers (wireless and landline): 1058.01 million (May 2016)

- Land lines: 24.81 million (May 2016)

- Cell phones: 1033.20 million (May 2016)

- Monthly cell phone addition: -1.1 million (May 2016)

- Teledensity: 82.82% (May 2016)

- Telephone system: The telecommunications system in India is the 2nd largest in the world.

- Landlines: In India landline service is firstly run by BSNL/MTNL and after there are several other private players too, such as Airtel, Reliance Communications, Tata Teleservices.

- Mobile cellular: The mobile telephone network has aggrandized greatly since 2000. The number of mobile phone connections crossed fixed-line connections in 2004. The dominant players are Airtel, Vodafone, Idea Cellular, Reliance Communications, Tata DoCoMo, Reliance and state run BSNL/MTNL. There are many smaller players like Aircel, Videocon, MTS, Telenor India etc. with operations in only a few states. International roaming agreements exist between most operators and many foreign carriers. The data reported by service providers indicates that rural India is emerging as the growth driver.

- Visitor Location Register(VLR): Out of the total 1009.32 million wireless subscribers, 907.07 million were found active in November, 2015. The proportion of VLR subscribers is 89.86% of the total wireless subscriber base as reported by the service providers.

- Internet users: Number of Internet users in India is the 3rd largest in the world next only to China and the United States of America. Though the number of internet users is high, internet penetration is still much lower than most countries across the globe.

- Broadband subscribers: Broadband in India is defined as 512kbit/s and above by the government regulator. Total subscribers (wireline + wireless combined) were 131.49 million (November 2015).

- Between FY 07-16* India’s telephone subscriber base expanded at a Compound Annual Growth Rate (CAGR) of 19.5 per cent to 1,022.61 million and teledensity to 80.98

- In September 2015, total telephone subscription stood at 1,022.61 million, while teledensity was at 80.98 percent (Figure -2)

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Figure - 2

The government policies of liberalization, deregulation and competition have played a pivotal role in the growth of telecommunications industry in India. Increased competition has led to a dramatic fall in the tariff rates which has further accentuated the growth of mobile phone subscribers. However, as shown below in Figure 3, we notice that the share of rural subscribers has continually been increasing while the share of urban subscribers shows a decline.

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Figure 3

The factors that seem to have a considerable impact on the growth of teledensity are GDP, disposable income of the state and presence of wirelines. Other factors such as the growing popularity of the prepaid service, advent of Chinese mobile phones and mobile number portability are also important.

GDP per Capita is an indicator of the financial capacity of consumers to purchase mobile phones and associated services and accessories.

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Figure 4

Figure 4 shows the scatterplot of GDP per capita varies with teledensity. We can see a positive slope emerging in the scatterplot. An increase in GDP reflects the development of a country and thus, it indicates that, with increasing buying capacity, people of India have adopted mobile technology at a high pace.

Disposable Income across Indian States

The amount of money that is available with the households for spending and saving after they have accounted for their income taxes is referred as the disposable income.