NEW DELHI -(Dow Jones)- India is likely to have more mobile telephones than fixed-line phones in use by the end of October, underscoring the rapid growth in wireless phones in the world's second most populous country.
There were 44 million fixed-line phones at the end of September, just ahead of 43 million mobile phones, according to the Association of Unified Telecom Service Providers of India. During October, the number of mobile phones could jump by up to 2 million, pushing the total above that for fixed-line phones.
"Mobile phones are no longer products for the elite," said Anil Nayar, vice chairman of the Cellular Operators' Association of India.
Analysts say mobile-phone sales will be the key driver in raising India's overall phone penetration rate, which is currently just eight phones for every 100 people.
Many countries in the Asian-Pacific region including Malaysia, the Philippines and Singapore have more mobile phones than fixed-line phones. In China, mobiles overtook fixed-line phones last year.
Sales of mobile phones are expected to be brisk during India's festive season, when Indians often buy consumer items. Dussera, a Hindu festival, is being celebrated this week and the Diwali festival is in November.
"There could be an addition of around 2 million mobile phones this month," said T. R. Dua, co-chairman of the communications convergence committee at the Associated Chambers of Commerce and Industry of India.
Falling prices, spurred by competition between the top five telecommunications companies, has helped to lift sales of mobile phones. A price war in August led by Reliance Infocomm Ltd. caused prices of both mobile and fixed-line phone calls to fall by up to 60%. Some call prices are as low as the equivalent of 2 cents a minute.
A mobile phone was "like a piece of jewelry" when the phones were introduced into India in 1994, said Pradip Baijal, chairman of the Telecom Regulatory Authority of India. He said sales really took off last year, when the price of mobile-phone calls fell to match the price of fixed-line calls.
India's mobile-phone industry is adding about 1.5 million new users a month, and the Telecom Regulatory Authority predicts there will be 150 million mobile subscribers by 2007.
Declining prices for mobile-phone handsets will likely keep sales rising into the future. Nayar at the Cellular Operators' Association said handset costs could drop to around INR1,500 ($32.75) from INR2,500 ($54.58), especially if local companies start to manufacture the handsets.
Expansion of mobile-phone networks requires less infrastructure than fixed-line phone networks.
"Because of India's huge geography, wireless will be the fastest and cheapest way to expand telecom networks," said Kobita Desai, principal analyst at Gartner India Research & Advisory Services Pvt. Ltd. "A large cellular subscriber base will give telecom carriers the economies of scale to run sustainable businesses."
Gartner last year predicted 30% compound annual growth for mobile phones through 2008, and a much lower 4.7% growth rate for fixed-line phones in this period.
"This is the highest growth rate for mobiles in the Asia- Pacific region," Desai said.
Both Nayar and Desai agree that the next big milestone in the Indian telecommunications industry is likely to be broadband usage, which has the potential to replicate the success of the mobile phone sector.
"Broadband, like cellular (phones), gains traction when it becomes a mass-market phenomenon," Desai said. "We need to watch how quickly broadband penetration permeates into the residential segment."
According to data from the Telecom Regulatory Authority, India's broadband penetration rate is a negligible 0.02%. The government aims to have 3 million broadband users by 2005.
-By Ruchira Singh; Dow Jones Newswires; +91-11-2307 4020; ruchira.singh@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 20th October 2004
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