Tata Teleservices Leads August Mobile Subscriber Additions in India; MNP to Be Launched by End-2009

According to the latest market statistics released by the Telecom Regulatory Authority of India, the wireless subscriber base in India increased by 15.08 million last month to 456.74 million at the end of August. This represents a wireless penetration rate of 39.08%. CDMA operator Tata Teleservices, which recently launched its new GSM services in partnership with Japan's NTT DoCoMo, outperformed its larger rivals in August by adding 3.42 million mobile subscribers in the month. This took the country's sixth-largest mobile operator's total subscriber base to 42.79 million, a market share of 9.4%. Meanwhile, industry leader Bharti Airtel signed up a net 2.82 million new subscribers to a total of 108 million and a market share of 23.6%. Reliance, another CDMA major expanding its GSM services, had 84.11 million customers and an 18.4% market share after adding 2.11 million subscribers in August. Vodafone Essar added 2.19 million subscribers to a total of 80.87 million users and 17.7% of the market. The state-owned operator BSNL had 57.3 million mobile subscribers and a market share of 12.5% after adding 1.34 million subscribers in August, an improved performance compared to its sluggish customer growth in the previous periods due to capacity shortage.

Meanwhile, the TRAI has this week issued its policies regulating on implementing MNP, a system which allows mobile users to switch operators without changing their numbers. The regulator said the introduction of MNP will help in increasing competition between the service providers and act as a catalyst for the service providers to improve their quality of service. Some key elements of the regulations are as below:

• MNP shall be implemented by end-December 2009 in metros and category "A" service areas and by 20 March 2010 in rest of the country.
• All the service providers are given 60 days from 23 September to set up in their mobile networks a mechanism for the purpose of (a) receiving SMS messages from its subscribers requesting for a unique porting code; (b) allocating a unique porting code for each such request and communicating it to the subscriber forthwith through SMS message through an automated process; and (c) retaining such unique porting number on its records for the purpose of verification of the porting request of such subscriber to be received eventually by it from the MNP Service provider.
• MNP facility shall be available only within a given licensed service area.
• A subscriber holding a mobile number is eligible to make a porting request only after 90 days of the date of activation of his mobile connection. If a number is already ported once, the number can again be ported only after 90 days from the date of the previous porting.
• The subscriber who wishes to port his mobile number should approach the recipient operator. Subscribers may be required to pay porting charges, if any, to the recipient operator.
• The operators are required to complete porting process with a maximum of 4 days in all licensed service areas except in the case of J&K, Assam and North East licensed service areas where the maximum time allowed is 12 days.

Outlook and Implications

The introduction of MNP and the recent expansion of CDMA players into the GSM segment as well as the planned service launch of several new players will further intensify competition in the already cut-throat Indian mobile market. The impressive initial performance of Tata Teleservices' new GSM service, under the Tata DoCoMo brand, should alert the established players of the prospect of some serious threat the newcomers could bring. The likes of Unitech Wireless, Swan Telecom, and S Tel, which are preparing for their service launch, are also aiming to make an aggressive push into the Indian mobile market, with the back of Telenor, Etisalat, and Batelco respectively. To speed up their service roll-out and control costs, several new players have made arrangements for network sharing, while rolling out their own mobile network infrastructure (see India: 16 September 2009: Aircel, Datacom in US$400-mil. Tower-Sharing Deal; India; 28 August 2009: Reliance, S Tel in Tower Sharing Deal; India: 23 July 2009: Etisalat and Reliance Sign US$2.2-bil. Tower-Sharing Deal in India and India: 12 February 2009: Unitech Wireless in Tower-Sharing Deal with Tata, Quippo). Some have also outsourced their IT operations, which will enable them to concentrate on service developments and provisions (see India: 7 September 2009: Etisalat Awards Tech Mahindra US$400-mil. IT Outsourcing Deal for India Operation and India: 6 May 2009: Wipro Infotech Wins IT Outsourcing Deal from Unitech Wireless).

Nevertheless, with its mobile penetration rate approaching 40%, growth of the Indian mobile market will increasingly be contributed by the additions of low-income customers in the massive rural areas. With the increasing competition, the industry could see further price reductions even though the country already has one of the lowest mobile tariff levels. To ensure long-term success in the market, however, the operators should not rely on price cuts alone, but must increasingly move towards improving service quality and developing attractive, differentiated mobile data services to attract and retain customers and achieve profitable growth. Although the August figure alone cannot predict a long-term growth trend for Tata DoCoMo, its plan to primarily target the mid and high end of the market by leveraging the expertise of NTT DoCoMo to offer new, rich value-added services does raise a fair amount of confidence in the new venture.