The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010.

India added 113.26 million new customers in 2008, the largest globally. In fact, in April 2008, India had already overtaken the US as the second largest wireless market. To put this growth into perspective, the country’s cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month. According to the Telecom Regulatory Authority of India (TRAI), the total number of telephone connections (mobile as well as fixed) had touched 385 million as of December 2008, taking the telecom penetration to over 33 per cent. This means that one out of every three Indians has a telephone connection, and telecom companies expect this pace of growth to continue in 2009 as well. "We are extremely bullish that the growth will continue in 2009. This year, the number of additions will be in excess of 130 million," according to T.V. Ramachandran , Director General, Cellular Operators Association of India (COAI), an industry body that represents all Global System for Mobile communications (GSM) players in India.

According to CRISIL Research estimates, eight infrastructure sectors, which include the telecom sector, are expected to draw more than US$ 345.28 billion investment in India by 2012.

With the rural India growth story unfolding, the telecom sector is likely to see tremendous growth in India's rural and semi-urban areas in the years to come. By 2012, India is likely to have 200 million rural telecom connections at a penetration rate of 25 per cent. And according to a report jointly released by Confederation of Indian Industry (CII) and Ernst& Young, by 2012, rural users will account for over 60 per cent of the total telecom subscriber base.

According to Business Monitor International, India is currently adding 8-10 million mobile subscribers every month. It is estimated that by mid 2012, around half the country's population will own a mobile phone. This would translate into 612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012.

It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10.

Growth in Segments

According to a Frost& Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India. Fixed line capex is projected to be US$ 3.2 billion, and mobile capex is likely to touch US$ 9.4 billion.

Further, according to a report by Gartner Inc., India is likely to remain the world's second largest wireless market after China in terms of mobile connections. According to recent data released by the COAI, Indian telecom operators added a total of 10.66 million wireless subscribers in December 2008. Further, the total wireless subscriber base stood at 346.89 million at the end of December 2008.

The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent from 19.8 per cent in 2007.

The Indian telecommunications industry is on a growth trajectory with the GSM operators adding a record 9.3 million new subscribers in January 2009, taking the total user base to 267.5 million, according to the data released by COAI. However, this figure does not include the number of subscribers added by Reliance Telecom.

In WiMax, India is slated to become the largest WiMAX market in the Asia-Pacific by 2013. A recent study sees India's WiMAX subscriber base hitting 14 million by 2013 and growing annually at nearly 130 per cent. And investments in WiMAX ventures are slated to top US$ 500 million in India, according to a report by US-based research and consulting firm, Strategy Analytics.

Value-Added Services Market

A report by market research firm IMRB stated that the mobile value-added services (MVAS) industry was valued at US$ 1.15 billion in June 2008, and is expected to grow rapidly at 70 per cent to touch US$ 1.96 billion by June 2009.

Currently, MVAS in India accounts for 10 per cent of the operator's revenue, which is expected to reach 18 per cent by 2010. According to a study by Stanford University and consulting firm BDA, the Indian MVAS is poised to touch US$ 2.74 billion by 2010.

Mobile advertising, which is an important VAS segment, offers great potential to become an important revenue source. Marketers are increasingly using MVAS as a step ahead of SMS-based marketing to sell soaps and shampoos, banking, insurance products and also entertainment services, and rural markets are proving to be very receptive for such marketing.

Further, Venture Capitalists like Canaan Partners, Draper Fisher Juvertson, Helion, and Nexus India are also innovating with services like mobile payment options, advertising, voice-based SMS and satellite video streaming.

According to Venture Intelligence, there were nine deals worth US$ 41 million in 2007 in the mobile VAS space, and till August 2008, seven deals worth US$ 91 million had already been finalised. Presently, mobile VAS has a US$ 700 million market with a 20 per cent y-o-y growth, which is likely to touch US$ 3 billion by 2012.