Indians See Mobile Phones as a Necessity in Economic Crisis

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India's mobile services market continues to be buoyant, despite the global economic slowdown that has hit the Indian economy.

Indian users see mobile communications as a necessity, and that is the reason why sales of connections to new subscribers are not slowing down despite the economic crisis, said Anshul Gupta, principal research analyst at Gartner, on Wednesday.

The country added 10.42 million new mobile subscribers in October, up from 10.07 million a month earlier, according to data released this week by the Telecom Regulatory Authority of India (TRAI). The total number of mobile subscribers at the end of October was 325.73 million.

The country added 9.22 million mobile connections in July, and another 9.16 million connections in August, according to TRAI.

To attract new mobile phone subscribers, operators have been offering attractive schemes to subscribers, Gupta said. These operators are trying to win as many subscribers as they can before a new set of mobile services licensees introduce services by early next year, he said.

Operators are also addressing new markets such as small towns and rural markets which are seeing strong growth in new connections, Gupta said.

However, average revenue per user (ARPU) is dropping both on account of the new schemes offered by operators, and because new mobile phone users tend to have less purchasing power, he added.

Although Indian users appear to consider a mobile connection a necessity, they are willing to compromise on their handsets. Previously, close to 45 percent of the handset market was for replacement mobile phones, and an earlier forecast had expected the replacement market to cross 50 percent by the fourth quarter, Gupta said.

After the economic crisis hit, the replacement market has dropped to about 40 percent of the total handset market.

Average selling prices of mobile phones are coming down as users economize, said a mobile phone reseller in Bangalore.

If users typically replaced their handset with a newer and more expensive version, now they are more likely to buy a handset at about the same price they paid for their earlier phone, Gupta added. New users are also very price-sensitive.

Even as customers continue to add mobile connections, the situation is quite different in the fixed telephone segment of the market, according to TRAI. In the fixed line segment, the subscriber base decreased to 38.22 million in October, compared to 38.35 million subscribers in September, TRAI said.

The number of fixed line telephone subscribers declined over the last one year or so, and the worst hit has been government owned Bharat Sanchar Nigam Ltd. (BSNL), which until the 1990s had a monopoly in fixed telephone services. BSNL's fixed line subscribers declined marginally in October with the company having a total of about 30 million fixed line subscribers.

In the wireless segment, India's largest operator, Bharti Airtel added 2.7 million subscribers in October to take its subscriber base to 80.2 million, according to TRAI.

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