India Telecom

Indian cellular mobile tariffs lowest in the world

NEW DELHI -- A review of tariff statistics available from the International Telecom Union (ITU), EMC, renowned telecom consultants - all clearly show that the mobile telephony tariffs in India are the lowest in the world.

A comparison of Indian cellular tariffs, vis-à-vis, those prevailing in comparative emerging economies in South America and the Asia-Pacific region, clearly brings out the affordability of Indian mobile telephone services.

Cellular mobile tariff statistics from EMC show that India at $16 per month has the lowest monthly cost of a 300-minute basket for cellular services. In contrast, a 300-minute basket costs $21 in China, $29 in Thailand, $40 in Malaysia and $42 in Indonesia. The tariffs in South American economies are far higher at $60 for Chile, $77 for Brazil, $96 for Mexico and $115 for Argentina.

Airtime tariffs have plunged by over 75 percent over the last three years alone. According to the TRAI, the average monthly rental and airtime being realized for cellular services stand at Rs 202 and Rs. 1.99 per minute, respectively. Prepaid services have been introduced by all operators at an extremely affordable tariff of Rs 300 per month. Roaming charges have been cut by 70 percent down from Rs 10 to Rs 3 in early 2002, and now to as low as Rs 1.50 by several service providers.

It may be noted that the Indian operators are offering these low tariffs, despite prohibitive regulatory costs that are amongst the highest in the world. Indian cellular operators are passing 35-42 percent of their revenues to the government by way of various levies - license fees (8-12 percent), spectrum usage charges (2.5-4.5 percent), service tax (5 percent) and interconnect access charges (approximately 20 percent of revenues). In contrast, it may be noted that cellular operators in China pay nil license fee, a negligible fixed usage charge for spectrum, no service tax and have very reasonable terms of interconnection with the fixed service operators.

As per industry data, the Indian cellular sector has registered a compound annual growth rate (CAGR) of 109 percent in cellular subscribers during the period 1995-2001. In fact, the growth rate for FY 2001-02 stood at 79 percent. The current all-India cellular subscriber base has crossed 80 lakhs (8 million) and it is expected that with these highly affordable and extremely attractive tariffs, the industry will cross the 1 crore (10 million) cellular subscribers mark by December 2002. Further, it is also estimated that around 25 percent of these subscribers will be from smaller towns and rural areas.

Low tariffs, rapid expansion of infrastructure and robust competition have driven this explosive growth. This growth will be further fuelled with the rapid expansion of the infrastructure and services consequent to launch of services by the fourth cellular operators.

Currently, there are 51 cellular mobile networks or air serving 80 lakh consumers in almost 1,500 cities and towns, covering 60,000+ villages and most of the major rail routes and highways to provide seamless mobile connectivity to subscribers while they are travelling. This infrastructure has been set up at an estimated cost of Rs 21,000 crores.

Like most emerging economies, it is expected that the total number of cellular subscribers will exceed the number of fixed line subscribers within the next five years. In fact, this trend is already evident in India, since in the last quarter (April-June 2002), the number of additions in cellular subscribers was three times greater than the increase in the number of fixed line subscribers. The fixed-mobile crossover for India has been projected to take place in 2008, when the total number of cellular subscribers will exceed the total number of fixed line subscribers.

By March 2003, it is estimated that the total number of networks will go up to 70, as all the fourth cellular licensees should have commenced rollout of services. Services are expected to be available in around 2,000 cities all over the country and the subscriber base is expected to cross 1.25 crores. Investments in the sector too, are expected to increase to around Rs 25,000 crores.

The cellular industry in India has clearly shown that the benefits of the NTP-99 and migration package have been transparently passed on to consumers. The industry has welcomed the increased competition from the third and fourth cellular operators, has responded with increased consumer choice, multiple tariff offerings, increasingly affordable tariffs, value-added services, world class customer care (24x7) and quality of service (QoS).

The cellular industry has already met and exceeded its license obligations and is now poised to grow from the year-end one crore mark to over 5 crores by 2006 and 12 crores by 2008. The Indian cellular consumer can look forward to even greater benefits by way of tariff packages, service quality and other value-added features, which have been the hallmark of this sector.

Leaders of the cellular industry, who recently met in Delhi, again reiterated their commitment to cellular consumers. They stated that it is now extremely important that the government supports and helps sustain the growth of the sector by making significant improvements in the investment climate. Huge inflow of foreign and domestic funds is essential and to make that happen, the following actions need to be undertaken by the government:

• Adequate spectrum for superior service at lower costs;
• Equitable, non-discriminatory and cost-based access and interconnect regime;
• Revenue share license Fee to cover the costs of administration & regulation;
• Non-discriminatory treatment, vis-à-vis, fixed line and WLL (M) phones for income tax 1/6 criteria.
• We need to match international best practices in policy and regulation norms to ensure that existing tariffs and growth rates are not merely sustained, but also surpassed.