Mobile telephony is the fastest growing market in the world with over 170 million subscribers and adding almost 65 million new subscribers every month, yet the current tele density or penetration is only 18% of the population. The projections are that by 2010 we gonna have close to 500 million subscribers and that’s what makes it interesting for a large number of global players to come and take a close look at the things happening in the mobile industry.
There are a number of interesting aspects of this industry like almost 86% of the revenue is actually accrued to the operator in prepaid format, so they get the money in before actually the services are used. In addition to that it’s also a fiercely competitive market. The country is divided into 23 different circles, each circle has approx. 6 operators and the result is some of the lowest mobile tariffs in the world. I believe that there are a series of complementary innovations that have taken place in the Indian mobile industry and these innovations coming together have really sort of created the perfect storm and which in turn had a direct impact on all levels of the society.
If we look at the lower level of the society that comprise of the daily workers, the taxi drivers, the maids, servants etc. this technology has really changed their lives. It has increased their livelihood. Taxi drivers can now make more trips per day as a result of better co-ordination. Maids in large cities can actually service more houses. Likewise at the middle of the economic layer, it’s more on an efficiency gain. So let’s take service sector, if you are a plumber or an artisan providing services, you would go out and put your mobile no. permanently on your business display, thus this becomes a way to drive the business.
If you move up at the high end of the society, mobile phones really are a fashion statement among the vibrant youth. People are known to change their phones roughly every 12 months (and I am talking about the higher end phones).
If you look at women and children, they see the mobile phones as a safety device. The younger generation which is almost the 75% of the market, they use mobile phones to create a virtual space to people they would like to talk to.
Now looking at India as an emerging telephony market, Nokia and Airtel are a good case study to get a better understanding the concept.
Nokia has invested in all aspects of the value chain. So they do R&D in India (Joint R&D with Texas Instruments in Bangalore) and because of this the low cost chip is an innovation that really powers the sub $20 handset. Nokia does manufacturing; they have large manufacturing facility in Chennai. And to really innovate you have to be close to the customer and I think one big lesson which we can take from Nokia. They have strategic partnership with many companies like HCL technologies for e.g. and because of this Nokia brand is visible across the country.
Similarly at the operator level, Airtel is the largest operator in the country right now in terms of the market share and they have really pioneered in a new way of operating this particular business in which what they do is really focus on customer acquisition and it’s relentless pursuit of getting new customers and enhancing the value of existing customers and they have outsourced all their non core activities not just IT and Technology part but even their network and that’s the first in the world.
So Airtel network is actually run by Nokia, Siemens and Erricson. It’s owned by them and they have partnership which is based on revenue sharing. So as Airtel grows so does its partners.
I think there is still a big chunk of the market which is still untapped and needs considerable thought among the various emerging entrepreneurs.
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