India's telecom growth is fulfilling its promises
Isabelle Paradis
October 2006

The Indian telecom industry has changed significantly over the last decade as all its segments have now been opened up to competition. The country's telecom market is growing rapidly and by 2010, telecom is expected to be a US$38 billion sector, contributing 5.4% to India 's GDP. Teledensity has increased four-fold in the last five years and service tariffs have gone down substantially. The last five years have witnessed the number of phones more than triple, taking the total number to 140.3 million at the end of March 2006. Total telecom penetration has increased from 2.9% in 2002 to 12.8% at the end of 1Q 2006, a growth mainly generated by the mobile and private sectors.

Mobile phones now account for 64.2% of the total telephones, after surpassing the number of fixed lines for the first time in 2004. The sector grew by an average rate of 92.6% in the last 5 years to reach 75.9 million subscribers at the end of 2005, of which 77.7% were GSM subscribers and the remainder CDMA customers. This growth trend is continuing in full force, with the number of mobile customers increasing by 18.7% in the first three months of 2006 to reach 90.1 million.

Fixed line connections however have grown at a slower pace of 13.1% on average in the last 5 years. Fixed line growth slowed down considerably in 2003 and 2004, but climbed slightly to 8.9% in 2005 to reach 48.8 million subscribers. This level of growth should remain at a similar level in the next 5 years with a forecasted average growth rate of 6.5% up to 2011 bringing the number of fixed lines in service to 67.0 million.

Internet has also been growing considerably but has a long way to go before it reaches penetration rates found in surrounding Asian countries. With one of the world's lowest penetration rates (0.6%) and a mere 6.9 million Internet subscribers at the end of March 2006, India 's Internet sector represents a significantly untapped market. The number of Internet users is however estimated to have reach 61.1 million.

Broadband development is in its infancy in India, but is growing very rapidly. At the end of 2004, the country only had 135,000 broadband customers; however this number had grown by 568.9% in 2005 to reach 903,000. In the first quarter of 2006 alone, the number of broadband customers increased by 49.3% to reach 1.3 million. Broadband connections now represent 19.4% of all Internet customers in India.

With over 1 billion inhabitants and a telecom market on the verge of full competition, India is and will remain one of the world's most dynamic and promising telecom markets for the next five years, even surpassing China in terms of market vitality. However, the growth trend will not be sustained at such high levels as were seen in the last 3-4 years.