India growing mobile story

The recent publication on Bloomberg caught my eye ""India Telecoms Cut to ‘Cautious’ at Morgan Stanley". Those who I have spoken to, knows that I have been advocating the view that the next two years will be tough for Telco players in India. Although she is still without doubt the highest growing mobile market in the world, the ARPU in India is extremely low as a result of fierce pricing war between competitors and low utilization rate (in rural area) which will continue to take their toll on the players. In spite of this, India remains a pretty attractive venue for foreign players eager to find an alternative to their maturing domestic market. The most prominent of this is of course Vodafone. After acquiring the Hutch’s controlling stake from Hutch Essar, Vodafone Essar has been by far the most aggressive foreign player in India trailing only behind Bharti and Reliance in term of customers. The payoff to Vodafone has been a take rate of around 2 millions new subscribers in the exploding market every month. Mind boggling it seems, but it will be a number the giant has to keep up with in order to make presence relevant in a market with such low margin. But with its deep pocket however, Vodafone will surely remains as one of the top contenders in the imminent consolidation.

India regulator, TRAI for its part has been more willing to let the market “invisible hand” works its magic as compared to China. Like most emerging markets however, TRAI influence I feel has been lacking in area where control matters and policies so far has been drawn with consumer as the primary interest. This will need to be change for the long term benefit of India telecommunication ecosystem. Ultimately, collapsing carriers will serve to benefit no one, unless you are shopping for one.