Teledensity falls sharply on drop in mobile connections

Updated on: May 12, 2013
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Shutting down of operations by some players, hike in tariffs cited as reasons

India’s telecommunications revolution seems to have run into a stumbling block, with teledensity falling sharply from record levels charted in June 2012.

Teledensity — the number of telephone connections for every hundred individuals living within an area — stood at 72.9 per cent in February 2013, according to the latest Telecom Regulatory Authority of India data.

This was a 6.7 percentage point decline from a record high of 79.6 per cent just nine months ago in June 2012. The number has been falling steadily month on month.

A sharp reduction in the number of mobile connections was primarily responsible for the falling teledensity. Wireless teledensity declined from 77 per cent in June 2012 to 70.8 per cent in December 2012, the latest data show. Fixed line teledensity, on the other hand, fell marginally to 2.5 per cent from 2.6 per cent during the period.

Licence cancellation

Analysts explain that the large-scale cancellation of telecom licences, following the Supreme Court’s orders after the 2G scam, has resulted in some operators downing shutters in certain areas and others exiting the business altogether.

It may be some time before customers, who were left in the lurch after service providers ceased operations, can sign up for a connection again. Poor participation and selective bidding by operators in the recent 2G auctions indicate that the companies are beginning to feel the pinch of rising licence fees and are focusing on areas with high revenue potential.

Besides, operators, keen to improve their profitability, have also terminated pre-paid connections that were lying idle for long. As of December 2012, the average revenue per user (ARPU), a measure of the revenue generated per user, amounted to just Rs 98 for GSM players and Rs 80 for CDMA service providers. This is a far cry from the peak of Rs 366 per GSM user and Rs 256 from CDMA user in March 2006. This indicates that the strategy of achieving higher volumes through lower tariffs may have gone a step too far.

Most operators have increased their mobile tariffs too in the last four months. Cheaper calls and services were the primary drivers of the telecom revolution in the country during the boom years, which saw subscriptions rise five-fold between 2006 and 2011.

Monthly usage

Monthly mobile phone usage by subscribers indicates that the number of minutes spent by the average user talking on GSM networks has fallen from 505 minutes in June 2008 to 359 minutes in December 2012.

In the case of CDMA networks, average monthly usage has fallen to 230 minutes from a peak of 550 minutes in June 2006.

According to Espirito Santo Securities — an investment bank — teledensity can improve only if telecom players are able to increase subscribers in regions not fully covered by their networks. States such as Rajasthan, West Bengal, Odisha and Bihar fall in this category and their average teledensity is just 61 per cent.

If the entire population in these States is covered, it would add up to 350 million subscribers over time, though ARPU in these regions are 30 per cent lower than States where telephone usage is prolific.

Published on March 12, 2018

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