Network shutdowns to reshape Indian mobile market

The shock decision last week by India’s Supreme Court to order the cancellation of 122 regional mobile licences could impact almost 10 percent of the country’s mobile users, according to Wireless Intelligence.

The licence cancellations will serve to put the brakes on growth in the world’s second-largest mobile market, which is already slowing following regulatory uncertainty in the wake of the so-called ‘2G licensing scam.’

Since Q1 2008, 120 networks have launched across India’s 22 circles, including most of the start-up networks using the 2G licences issued under controversial circumstances by the office of disgraced former telecoms minister, A Raja.

Among incumbent operators, six launched networks in additional circles during this period: Aircel (14 circles), Idea Cellular (11), MTS (21), Tata Docomo (three), Vodafone (seven) and Loop Mobile (12), while four new operators have launched: Etisalat’s Cheers Mobile (15), Telenor’s Uninor (15), S Tel (five) and Videocon Mobile (17). Several of these new operators now face having to shut down within the next four months following the Supreme Court’s ruling – unless they are able to buy-back licences in the court-ordered reauction of the cancelled licences.

These network launches have helped the market triple in size since 2008 with annual connections growth peaking in 2009 (51 percent year-on-year), before slowing dramatically last year.

According to the latest Wireless Intelligence data, total Indian mobile connections grew by 19 percent year-on-year in 2011, less than half the 48 percent average growth recorded over the previous three years. Total yearly net additions in 2011 declined to 141 million from 227 million a year earlier. The slowdown was even more pronounced in Q4 2011, where quarterly net additions were recorded at 20 million, compared to 60 million a year earlier.

A number of factors have triggered this slowdown, including regulatory uncertainty ahead of the finalisation of the ‘New Telecom Policy’ announced in the wake of the licensing scandal; the DoT’s intention to delink future spectrum allocations from operator subscriber bases; delays in the allocation of additional numbering resources; and rule changes introduced by operators regarding the activity period allowed for prepaid users.

Previously, users would see their services terminated if they had not recharged their prepaid cards or placed/received a call within a period of 180 days. Late last year, both Bharti Airtel and Vodafone reduced this period to 60 days while state-owned BSNL reduced it to 90 days last month. Airtel stated that this change was necessary in order to free up unused numbering allocations for new customers given the overall country-wide shortage. These changes are expected to have a negative effect on connections growth over the coming quarters.

The slowdown has seen many operators begin to report negative net additions. In Q4 2011, Tata Docomo recorded a 5.3 million decline in connections compared to previous quarter, while new entrants Videocon Mobile at (-826,398) and Ping Mobile (-32,461) also saw declines.

Meanwhile, the Telecoms Regulatory Authority of India (TRAI) has identified that almost 30 percent of the estimated current total of 900 million mobile connections in country are inactive, putting the total number of ‘active’ connections at about 650 million.