Date
16 January 2017
India has a dozen wireless carriers, more than in any other country, and spectrum is hard to come by. Photo: Midlifers
India has a dozen wireless carriers, more than in any other country, and spectrum is hard to come by. Photo: Midlifers

A billion users may not be enough for India’s phone industry

India has just signed up its billionth mobile-phone customer, the only country aside from China to cross that milestone.

Yet, the wide subscriber base may not be enough for the telecommunications industry to keep its head above waters.

That’s because Asia’s third largest economy has a dozen wireless carriers — more than in any other country — spectrum is hard to come by and regulatory risks are high, according to Bloomberg.

“There are too many of them all fighting for limited spectrum,” said Chris Lane, a telecommunications analyst at Sanford C. Bernstein & Co. in Hong Kong.

Lane said this is why phone operators in India have lower profits than their peers in other parts of Asia.

“In China by comparison, 1.3 billion subscribers are serviced by just three operators,” he said.

“The government in China allocates spectrum on the basis of need, and at no cost to the operators. As a result, the Chinese operators get scale benefits that Indian operators are unable to achieve.”

Meanwhile, India’s richest tycoon, Mukesh Ambani, has decided to join the competition. His Reliance Jio Infocomm Ltd. will launch a US$15 billion 4G service in early 2016.

Sunil Mittal, who heads market leader Bharti Airtel Ltd., has warned that Ambani’s entry into the market will force smaller players to exit or merge with larger ones.

With competition reducing call rates to the lowest levels in the world, average profit margins have ranged from 35 percent to negative 50 percent in the past five years, Bernstein said.

By comparison, telcos in Asia’s emerging markets record an average margin of 42 percent.

While stiffer competition is good news for consumers, India’s shift to 4G wireless services will mean increased data usage and higher phone bills.

– Contact us at [email protected]

RA/CG

EJI Weekly Newsletter