Mobile phones to exceed fixed lines in India this year

The number of mobile phones in India is expected to outstrip fixed-line phones by the end of this year, according to India’s Ministry of Communications and Information Technology in Delhi. But government-owned operators still dominate the country’s telephone services market.

The total number of telephone connections, both mobile and fixed, grew by 39 per cent to 79.4 million between June 1, 2003 and May 31, 2004, according to data released Friday by the ministry. The share of the private sector in the total number of phone connections as of May 31, 2004 is, however, 41 per cent. Mobile phones accounted for 36.3 million connections.

The surge in demand for mobile phones continues. In the second quarter of this year, 2.8 million phone connections were added in the country. About 70 per cent of them were mobile connections, according to the ministry.

India’s mobile phone operators include a mix of providers using Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA) technology. The government had earlier licensed mobile telephony services only to operators using GSM, in a bid to make GSM a de facto mobile telephony standard. But providers using CDMA got into the market, taking advantage of a government rule that allowed operators licensed to offer fixed telephony services to use their wireless local loop networks to offer limited mobile services as well.

Cut-throat competition among GSM and CDMA players helped push down mobile telephony costs, making it more attractive for consumers. However, the falling prices led to significant operator losses in the fragmented mobile communications industry, particularly among GMS providers. This in turn gave way to a wave of consolidation in the mobile services market. “Consolidation is gathering momentum and key players are creating nationwide networks,” said Kobita Desai, principal telecoms analyst at the Indian operations division of research firm Gartner Inc. in Stamford, Conn.

For example, Hutchison Essar Telecom Ltd in Delhi, an Indian joint venture of Hutchison Whampoa Limited in Hong Kong with Delhi’s Essar Group, announced last month it had bought smaller GSM mobile operators Aircel Ltd. and Aircel Cellular Ltd. with operations in Tamil Nadu in southern India.

However mobile calls still cost more than fixed line calls, which will ensure that fixed line telephony will continue to have a significant market share, analysts said.

As a result of the growth in new telephone connections, particularly mobile connections, India’s telephone density also increased to 7.29 per cent in the second quarter of this year, up from 5.35 per cent at the end of last year’s second quarter.