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Indian Telecoms Seek to Expand Their Mobile Phone Market


The mobile phone industry in India is trying to expand its reach to low-income earners and the country's vast rural areas. India is already one of the world's biggest mobile phone markets.

The state-owned telecommunications company Bharat Sanchar Nigam Limited recently announced what it called its "One-India Rate." The company's chairman, A.K. Sinha, says the scheme will allow people to call anywhere in the country for less than two cents a minute on both land lines and mobile phones.

"This will be one of the most affordable, customer-friendly and innovative schemes for long distance calls," he said. "It marks the death of distance [rates]."

The company says the move targets the common man, and will make telephone services affordable for the country's low-income earners. Analysts say it is also a bid to increase market share in an industry that is growing at a breakneck pace, and becoming fiercely competitive.

Much of the explosive growth in the telecom industry has come in the mobile phone sector, where calling prices have been steadily reduced, bringing millions of new customers on board. There are now more than 75 million mobile phone users in the country, up from just 10 million three years ago.

But in a country of a billion-plus people, there is still a huge market waiting to be tapped, and much of that lies in the country's vast rural areas, where two-thirds of the people live. So far, wireless services only cover about one-third of India's 600,000 villages. By the end of the year, they are expected to cover the entire country.

As a result, mobile phone companies have begun aggressively pursuing rural India, by offering cheap handsets and innovative subscription schemes. Recently, they have offered customers a phone number for life, for a one-time fee of about $20.

Prashant Singhal, head of telecom analysis at Ernst and Young in Bangalore, says mobile phone ownership has surged in the wake of such schemes.

"In terms of subscribers, this month of January was the highest addition, which has been in the industry, at about four-and-a-half to five million subscribers," said Singhal. "I think that is the rate, which should continue for a month, close to four-odd million."

However, Prashant Singhal says revenue from these new users is likely to be low, and operators will increasingly depend on peripheral services to increase revenue, such as the sale of ring tones and wireless games.

But optimism pervades the market, and several foreign companies have increased their stake in India, after the government raised the foreign direct investment limit in telecommunications from 49 percent to 74 percent last year. Britain's Vodafone bought a 10 percent stake in India's largest wireless company, Bharti Tele-ventures, for $1.5 billion, and Malaysia's Maxis Communications has acquired a stake in Aircel for more than $1 billion.

Analysts say, by the end of this year, India could be the world's third largest mobile phone market, behind China and the United States.