The Indian Economy Blog

May 19, 2007

What Gives in the Mobile Space?

Filed under: Business,Infrastructure — Reuben Abraham @ 2:24 am

This news story has got buried, for some reason, with few people I know being aware of it. According to Business Standard, the net addition to the GSM subscriber base has dropped from 6.13 million subscribers in March to 4.13 million subs in April. What gives?

1. As the story suggests, there has been an inexplicable drop of subscribers at MTNL and BSNL alone, among the carriers.
2. The user-verification drive for pre-paid subscribers has led to a sudden drop in subscribers, a one-time phenomenon in all likelihood.
3. The Indian mobile phone industry has hit saturation point.

My own gut tells me that the user-verification drive is the most likely reason for the precipitous fall in numbers (CDMA numbers are not out yet). Hopefully, it’s a one-time correction and the growth will stay on track, especially if the ministry can actually fulfill its promise of making India a unified calling zone (without domestic roaming, i.e.). Nonetheless, if anyone has other ideas on what could be going on, please do comment.

In the meanwhile, it is being reported that Virgin Mobile is finally entering India in a 50-50 tie-up with Tata Teleservices. I think it’s safe to assume that Virgin is going in for this model because MVNO’s are not yet allowed in India.

2 Comments »

  1. [...] Read more at Reuben Abraham [...]

    Pingback by » What Gives in the Mobile Space? - Street talk and opinions — May 19, 2007 @ 8:40 am

  2. I would think you may be right about the verification process contributing to the decline.

    There are 2 models in the UK – ‘pay as you go’ where there are no ID checks and you just pick a box containing a phone and top-up the balance at a range of retail outlets including supermarkets and even some bank ATMs; account-based customers who have to go through ID checks because they are effectively asking for credit and the provider of credit has a right to check whether the customer can afford it. The former is popular with light users or with students etc who may have irregular or low incomes so they cannot afford line rental that the latter pay. Portability of numbers across networks is easier, I think, for the latter.

    India however is in a different phase of social and economic growth/ sophistication at present, with most of the personal mobile phone users not being account customers. Systemically, linking the ownership of cars, houses and mobile phones with the income tax paying records of individuals is one of the steps being taken to curb the parallel economy and to expand the income tax payer base in India. Rightly so, but the key here would be proportionality of measures; a house is not in the same league as a mobile phone, of course, but the principle of proving that one has an income to pay for either applies in both cases.

    I think therefore the decline would be arrested as more and more people enter the tax payer base, or faced with declining customer numbers, mobile operators come up with new business models such as allowing a customer more than one connection which he/ she could then subsequently give somebody else (the issue of liability for payment arises here which would legally be the contracted party’s sole responsibility), without asking for details of the user. Other legal issues could arise here too..

    Comment by Shefaly — May 21, 2007 @ 1:04 pm

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