Urban India faces mobile glut

In Delhi, every person has two mobile connections on an average. In the hill state of Himachal Pradesh, everyone in an urban area has four mobile numbers on an average.

If you think mobile operators have a large potential market in urban India, you may be wrong, as everyone in urban India has, on an average, a mobile connection.

The Telecom Regulatory Authority of India (Trai) says the wireless teledensity in urban India's 21 circles is 150 per cent. In Himachal Pradesh (where most of the population lives in rural areas), it is 430.5 per cent. The figure for Delhi is 209 per cent.

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The story is different in rural India, where mobile teledensity is 32.75 per cent, pulling down the overall figure to 67.98 per cent (by the end of March).

Even here, in many circles, the penetration is reaching or has gone over the halfway mark.

In Himachal, it has hit 66 per cent; in Maharashtra, including Mumbai, it is 44.76 per cent; in Haryana and Punjab, it is above 50 per cent; and in Kerala, Tamil Nadu and Gujarat, it is above 40 per cent.

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According to industry estimates, there will be 1.2 billion mobile users in India by 2014. This means everyone will have a mobile connection by then.

The implication is that India is no longer a developing or growth market for mobile services.

It is, instead, becoming a matured market, say industry experts.

This means companies have to go beyond customer acquisition to earn more per customer, just like in the developed markets.

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Telecom analyst Mahesh Uppal warns these numbers do not reflect the total usage, as many subscribers have multiple SIMs.

"No doubt, the growth opportunities in urban markets are falling. The revenues are not increasing. The operators will have to increase revenues from data services such as 3G," he said.

The saturation in the urban markets, combined with a fall in subscriber addition in the GSM space, may impact the industry.

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The additions fell about 40 per cent between February and June from 14.7 million to 8.6 million.

"The average revenue per user is falling. Even the minutes of usage are coming down. The margins are under pressure. We are banking on 3G services to drive usage and revenues," said a senior executive of a leading telecom company.

"The mobile penetration is very high. The number of mobile additions has started to fall. There is no incentive for operators to add subscribers, as it is unlikely that spectrum allotment will be linked with the subscriber base in the future," said Uppal.

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Due to intense competition, falling margins and large payments for acquiring 3G and broadband wireless access spectrum last year, some leading companies, such as Bharti Airtel, recently increased rates by as much as 20 per cent in select circles.