Indian mobile: onwards to one billion

(Tony Worthington is the Global Head for Telecoms, Media & Technology at Standard Chartered Bank. The opinions expressed are his own)
By Tony Worthington
After five years of explosive growth, the number of mobile subscribers in India will shortly cross the 500 million mark.
Based on current trends, India is likely to witness its 500 millionth subscriber signing up sometime in December this year or January 2010. With this milestone reached, the next question will be when will India reach the magic one billion number?
Every September, we at Standard Chartered update our annual forecast for mobile subscriber growth in India. Although we have been one of the most bullish banks on subscriber growth in recent years, the market has outperformed even our rose-tinted view.
In September 2008, we predicted India would have around 366 million subscribers by end FY2009. The market actually recorded 392 million subscribers.
Our updated September 2009 forecast reveals some interesting findings around how we see subscriber evolution.
Firstly, we are now forecasting 532 million mobile subscribers by end FY2010 and 655 million subscribers by end FY2011. At first glance this would suggest that the strong subscriber growth looks set to continue.
However a closer look at the numbers reveals that we think the rate of gross subscriber additions is beginning to top out. India added 131 million subscribers between end FY2008 and end FY2009. We are forecasting 140 million subscribers to be added between end FY2009 and FY2010 but then 123 million to be added between end FY2010 and end FY2011.
Clearly annual growth of 123 million subscribers is still very impressive, although slightly lower than the previous year.
But wait, I hear you say, what about the new entrants? Won’t these operators accelerate growth further by incentivising and attracting new subscribers?
My view is that the new entrants will undoubtedly stimulate competition further, but we will see a large increase in churn amongst existing operators. In other words, existing mobile subscribers will be jumping from one operator to another in response to attractive offers. This could see market churn increase from 40 percent to over 50 percent.
Secondly Standard Chartered’s forecast is now for the first time asking the realistic question of when India will have one billion mobile subscribers.
My view is that this level is likely to be exceeded in FY2015, some five years from now.
So it will have taken India twelve years to grow from zero to 500 million subscribers but only five years to add the next 500 million.
By then India will be a mobile “powerhouse”, competing with China to have the highest number of mobile subscribers in the world.
In Bharti Airtel, India will potentially have one of the top five mobile operators globally in terms of subscribers. It will also have benefitted from substantial investment from elite international telecoms companies including Vodafone, Etisalat and Telenor.
There is one important point to clarify though before we think about mobile telephony for all. When we talk about one billion subscribers we are talking about one billion active SIM card subscribers.
In reality many users will have more than one SIM card. At the top end of the market there are the Blackberry users who typically have a second SIM and handset for voice calls. Standard Chartered estimates 26 million potential Blackberry subscribers in India.
Furthermore in the mass market as a whole many users will have a second SIM and handset for private use.
Another consequence will be a drop in average revenue per user (ARPU) for Indian mobile operators. Users with multi-SIMs are causing a continued decline in ARPU levels for all operators in India. This has prompted operators to analyse other performance variables such as minutes of use (MoU).
Nonetheless these are exciting times in the Indian mobile sector. As we race through the 500 million level we will have the realistic prospect of one billion mobile subscribers within five years. Who would have thought that back when it all started in 1997?