India’s western region comprises the high-ARPU telecom circles of Mumbai, Gujarat and Maharashtra (including Goa), and is an important revenue source for telecom service providers. Unlike the northern, eastern and southern regions, the western region comprises only metro and Category A circles. It is economically advanced as compared to other regions of the country and, therefore, offers major opportunities for telecom operators.

The western region has witnessed significant growth in mobile telephony. In fact, in circles like Gujarat, the segment’s growth has been higher as compared to that of the per capita income. While the state’s per capita income has witnessed a compound annual growth rate (CAGR) of 16.54 per cent in the past three years, its teledensity (wireline and wireless) has registered a CAGR of 24.55 per cent.

Teledensity and subscriber base

Gujarat’s teledensity recorded a CAGR of 24.55 per cent to reach 92.47 per cent in June 2012 from 47.86 per cent in June 2009. During the same period, Maharashtra’s teledensity grew from 53.72 per cent to 96.97 per cent, representing a CAGR of 21.5 per cent. However, the wireline subscriber base has witnessed a steady decline in Maharashtra and Gujarat, like other circles.

The growing subscriber base in the region has been on account of low tariffs and the high penetration of telecom services in these states. As of September 2012, the region accounted for about 17.1 per cent of the country’s wireless subscriber base. The Gujarat, Maharashtra and Mumbai circles had a wireless subscriber base of 52.94 million, 68.02 million and 34.07 million respectively.

Over the past year, there has been a decline in monthly subscriber additions. The country’s wireless subscriber base dropped to 913.49 million in July 2012 from 934.09 million in June 2012. The Maharashtra, Mumbai and Gujarat circles witnessed a wireless subscriber loss of 5.15 million, 0.72 million and 0.93 million in July, August and September 2012 respectively. Therefore, the decline in teledensity in the region in the second quarter of 2012-13 was largely on account of the loss in wireless subscribers, which has been attributed to the discontinuation of services for inactive subscribers.

About 91.2 per cent of the decline in the western region’s user base in July 2012 was attributed to the subscriber churn witnessed by Reliance Communications (RCOM). On the other hand, Vodafone India, which is the largest operator in the region, registered an increase in its subscriber base in the Mumbai and Gujarat circles during July-September 2012.

The scenario changed in October 2012 with all major operators witnessing an increase in their subscriber base. Bharti Airtel added about 36,341 users in October 2012, as compared to a subscriber loss of 279,121 in the three western circles in September 2012. Similarly, Idea Cellular gained 93,206 subscribers in October 2012 after losing 138,998 users in the previous month. Subscriber consolidation in these circles would help operators to assess the demand of active subscribers and offer services that cater to their needs.

Revenue realisation

Maharashtra is the highest-revenue circle in the western region. Interestingly, the Mumbai circle, which offers the second highest ARPU in the country at about

Rs 120, contributes 6.64 per cent of the total operator revenues, while Maharashtra (which offers an ARPU of Rs 105) contributes about 7.92 per cent. Gujarat contributes about 5.66 per cent to operators’ total revenues, making it the seventh largest circle in terms of revenue contribution.

Vodafone India, Idea Cellular and Bharti Airtel are the dominant players in these circles. These operators contribute about 81.3 per cent, 77 per cent and 69.98 per cent to service revenues in the Gujarat, Maharashtra and Mumbai circles respectively. Tata Teleservices Limited (TTSL) is the third largest operator in the Mumbai circle and the fourth largest in Maharashtra and Gujarat in terms of revenues.

Operators in the region

Currently, 10 players operate in Maharashtra and Gujarat. These are Vodafone India, Bharti Airtel, Idea Cellular, RCOM, TTSL, Bharat Sanchar Nigam Limited (BSNL), Aircel, Unitech Wireless, Sistema Shyam TeleServices (SSTL) and Videocon. In addition to these private players, Loop Mobile and Mahanagar Telephone Nigam Limited (MTNL) provide mobile services in the Mumbai circle.  Consolidation is expected in these circles as operators such as Videocon, Unitech Wireless and SSTL, whose licences were cancelled by the Supreme Court in February 2012, will have to exit service areas for which they did not bid in the recent 2G spectrum auction. Videocon will have to close operations in the Maharashtra and Mumbai circles, Unitech Wireless in the Mumbai circle and SSTL in Gujarat, Maharashtra and Mumbai.

As of September 2012, Vodafone India was the largest GSM operator in the three circles in terms of subscriber base and revenue, followed by Bharti Airtel, Idea Cellular, Aircel and RCOM. Unitech Wireless, which operates under the Uninor brand, also has a strong foothold in the region, with the Maharashtra and Gujarat circles being its second and third largest markets respectively. TTSL leads the CDMA segment,  followed by RCOM, BSNL and SSTL.

Demand for 2G spectrum

Though the overall response to the recent 2G spectrum auction was subdued, the Maharashtra and Gujarat circles fared better than other high teledensity circles such as Tamil Nadu, Karnataka, Andhra Pradesh and Haryana in the 1800 MHz band. Norway-based Telenor, which bid through its Indian subsidiary Telewings Communications, continues to remain bullish on its operations in the western region and won 5 MHz of spectrum in Maharashtra and Gujarat. The Videocon Group also won 5 MHz of spectrum in the Gujarat circle. Vodafone India, which won 1.25 MHz of spectrum, was the only incumbent operator to bag airwaves in the region.

No bids were submitted for the Mumbai circle due to the high reserve base price of Rs 6.78 billion per MHz of spectrum. The new entrants say that high teledensity, and Bharti Airtel’s and Vodafone India’s dominance in the Mumbai circle prevented them from bidding. Another reason could be the fact that the operators may be interested in bidding for spectrum in the 900 MHz band rather than in the 1800 MHz band as the former is more efficient for providing telecom services. The Department of Telecommunications will auction 16 MHz of spectrum in the 900 MHz band in 2014, when the licences of incumbent operators will be due for renewal. Currently, Vodafone India and Loop Mobile hold about 8 MHz of spectrum in the 900 MHz band in the Mumbai circle, which was allocated to them in 1994. Moreover, the licences of Vodafone and Idea Cellular for the Maharashtra and Gujarat circles will be due for renewal in 2015, and consequently, 14 MHz of spectrum will be auctioned.

Adoption of internet and broadband services

Given the western region’s teledensity is above 90 per cent, operators are focusing on data services to increase ARPUs and drive business growth. Further, the operators’ high investment in 3G spectrum shows the growth potential in the data service segment in the western region. 3G spectrum in the Mumbai circle was sold to Bharti Airtel, Vodafone India and RCOM at Rs 32.47 billion for 5 MHz. Maharashtra and Gujarat also witnessed aggressive bidding and garnered about Rs 12.57 billion and Rs 10.76 billion respectively from Vodafone India, Idea Cellular and TTSL.

While BSNL and MTNL launched 3G services in Maharashtra and Gujarat, and Mumbai respectively, TTSL was the first private operator to provide services in the Maharashtra and Gujarat circles. Subsequently, all operators that hold licences in these circles launched 3G applications, though the service uptake has been low. To increase the adoption of these services, Bharti Airtel reduced tariffs by as much as 70 per cent. Other operators followed suit, which resulted in a growing demand for data services. This will provide the platform for future operator growth in the region.

In the 4G segment, Reliance Industries Limited-owned Infotel Broadband is the only company with pan-Indian broadband wireless access (BWA) spectrum. In Gujarat, Maharashtra and Mumbai, it holds 20 MHz of BWA spectrum. Bharti Airtel holds 20 MHz of spectrum in Maharashtra and Mumbai (following the acquisition of Qualcomm’s Indian subsidiary, which won BWA spectrum in the Mumbai circle). The Mumbai circle is expected to witness fierce competition in the BWA segment with both Infotel and Bharti Airtel looking to grab a significant market share. Besides, Tikona Digital holds 20 MHz of spectrum in the Gujarat circle.

At present, only Bharti Airtel provides 4G services in Pune in the western region. Infotel Broadband is conducting trials in the Maharashtra and Mumbai circles, and is expected to launch services by end-2013.

MTNL and BSNL launched fibre-to-the-home broadband services in Mumbai and Pune in 2011. High speed broadband will enable operators to provide services such as IPTV and VoIP at speeds of up to 100 Mbps.

State initiatives

Gujarat has taken rapid strides in providing rural broadband connectivity. A special purpose vehicle, the eGram Vishwa Gram Society, was set up for providing internet services to about 13,693 villages in the state. The project was completed in two years and involved an investment of about Rs 1.5 billion in installing computers, procuring internet connections from internet service providers and training local officials on internet services.

Moreover, Gujarat initiated the state wide area network (SWAN) project in 2001 to launch e-governance applications and increase the operational efficiency of government departments. The project connects all 26 districts and 225 talukas and over 5,070 state government offices for providing communication services. As of July 2012, the network had 32,746 users and processed about 45,000 mails on a daily basis. The intranet facility provides secure access to the public distribution system (PDS), Garvi (registration of documents), the land record information system (e-Dhara), the electoral roll management system and e-Mamta. The SWAN project also launched a grievance redressal programme, SWAGAT, which is being overseen by the state’s chief minister. The programme has addressed about 262,000 grievances so far. Also, about 424,000 ration cards have been issued through the PDS application. Besides, the SWAN project provides webcasting and videoconferencing facilities for government-to-government and government-to-consumer communication.

Maharashtra also has an active SWAN project. In 2009, the state government signed a five-year contract with ITI-Spanco for developing the project on a build-own-operate-transfer basis. The Centre for Development of Advanced Computing, PricewaterhouseCoopers and Infrastructure Leasing and Financial Services were selected as consultants, while Cisco was the technology provider. About 366 government offices have been connected under the project, allowing them direct communication with the district offices and talukas through secured networks. The networks enable services such as videoconferencing and VoIP, which facilitate governance processes and streamline information flow among the state offices.

The state government has also established a state data centre for supporting e-governance initiatives under the National e-Governance Plan.

The way forward

To increase the western region’s rural teledensity, operators are looking to provide customised value-added services. It is expected that the low penetration of telecom services in rural areas will drive the growth of voice services in the coming years. The telecom growth potential offered by the western region’s rural areas is evident from the fact that these circles witnessed aggressive bidding by operators in the recently concluded 2G auction.

Going forward, the region’s high per capita income, especially in Mumbai, is expected to provide an impetus to the uptake of BWA services. Meanwhile, 3G services will continue to gain traction with new tariff plans as well as the mass adoption of smartphones.