The ?India shining? story is perhaps best epitomised by the continued development of Gujarat, the western-most state in the country.
Over the last decade, political stability and efficiency has paved the way for significant development. A combination of socio-economic factors such as increasing disposable incomes, improved infrastructure, high literacy rates, an increasingly favorable urban-rural divide and high foreign direct investment (FDI) inflows have facilitated the growth of diverse industries within the state, and telecommunications leads the way.
With a gross domestic product (GDP) of almost Rs 5,000 billion, Gujarat is the fifth largest economy in India. This number is better understood when placed within the context of the rest of India, as Gujarat?s GDP per capita is Rs 78,653, which is significantly higher than the average of the entire country (Rs 59,646).
Historically, the state?s economy has been driven by the manufacturing sector, which comprises of more than forty percent of the total economy, but the fact that significant contributions are also made by the agriculture (20 per cent) and services (38 per cent) sectors makes Gujarat?s growth stand out.
The robust performance of Gujarat?s economy has paved the way for rapid industrialisation with 30 special economic zones (SEZ?s) in the state, and this has subsequently facilitated the growth of industries like telecommunications, infrastructure and technology.
As on June 2011, the state of Gujarat had a population of sixty million, thus accounting for 5 per cent of the country?s total population, and a wireless subscriber base of 49 million, thereby representing 6 per cent of India?s total wireless subscriber base. With a wireless penetration of 82 per cent, Gujarat is India?s fifth largest telecom market, and this number (wireless penetration) is significantly higher than that of India (71 per cent) and the average of the A circles (76 per cent).
The entry of new telecom operators into the market in 2008 intensified competition and gave way to a tariff war, with call rates falling dramatically. This price-war negatively impacted operator financials, and this is epitomised by the low average revenue per user (ARPU) in Gujarat. While the average for India?s A circles is Rs 98, the ARPU for Gujarat is even lower at Rs 96. This number is lower than the average ARPU of the rest of the country, and for a circle that has a high revenue potential, is below expectations. A possible explanation for this number could be high price sensitivity in the market, which is caused by the presence of a number of telecom operators in the circle.
Another explanation for the state?s low ARPU could be the total wireless minutes of usage (MOU) per subscriber. As on June 2011, the MOU in Gujarat was 311 minutes, a number that is much lower than the total average of the A circles, which is 340 minutes.
Despite the low cellular MOUs in the state, internet and broadband usage in Gujarat has been impressive. As on June 2011, Gujarat was ranked seventh in the country with more than one million Internet subscribers. This number is a forty percent increase from the previous year, and accounts for six percent of India?s total wireless subscriber base. Out of the total Internet user population in Gujarat, approximately 80 per cent of the subscriptions (800,000) can be attributed to broadband users, and this number is much higher than the total percentage of broadband users in India, which is currently at 80 per cent.
The rapid growth of Internet and broadband in India can be attributed in large part to the country?s willingness to adopt new technologies and the recent success of 3G and BWA auctions with more than Rs 600,000 million of funds raised by government is testimony to this. While the metro circles of Mumbai and Delhi were ultimately auctioned at the highest prices, the first few days of the auctions saw an unexpectedly high interest in the Gujarat circle. This high interest in Gujarat was maintained throughout the duration of both auctions. However, despite this high interest, the final amount bid for spectrum per population in Gujarat (Rs 845) was considerably lower than the average amount spent on A circles in the country (Rs 996). Thus, while the high interest shown in the circle reflects an operator belief that Gujarat has high potential, the below-average bid amount per population suggests that there is still some way to go before 3G and BWA will gain popularity in Gujarat.
The significant growth of the Indian telecom sector has been ably supported by the growth of passive infrastructure investments in India. The rapid growth of the Indian telecom sector, with greater focus being placed on rural India, has given rise to an increased demand for telecom towers. With more than 330,000 towers and 500,000 base stations (BTS) already present, it is expected that future growth will take place in circles with greater passive infrastructure. A favorable regulatory environment in Gujarat has encouraged operators to invest in passive infrastructure in the state, and this is reflected in the fact that Gujarat has one of highest number of BTSs in the country at about 32,000 (about 6.5 per cent of total BTS base as compared to 5 per cent of the total population base).
Telecom operators are now beginning to offer a diverse range of Internet based applications that cater to all sections of society and this is expected to boost the consumption of data within the country. The uptick in this growth will be aided by the availability of data enabled smart phones at cheaper prices. With an above average per-capita GDP and cities like Ahmedabad, Vadodara and Surat ranking as some of the highest in terms of disposable income, Gujarat is well positioned to supersede and come to par with other metro states in the country. Higher income will drive consumption and subsequently lead to a growth in number of smart phone sales, thereby resulting in greater Internet connectivity within Gujarat.
A combination of economic and political stability has made Gujarat an attractive destination for domestic and international investment, with $6.6 billion flowing into the country as FDI. This capital inflow has aided the rapid industrialisation that has taken place in Gujarat, and has provided impetus for the growth of enterprise data connectivity in the state.
Over the next decade, the trend of rapid industrialisation in Gujarat is set to continue, with some of the world?s largest conglomerates expected to set up factories and offices in the state. With the emergence of cloud computing and IP-based communication, these corporations will require advanced enterprise connectivity. Thus, this increased industrialisation within Gujarat is likely to translate into a high revenue generating opportunity for enterprise connectivity players, thereby stimulating a market that has been steadily comprising of a greater percentage of the circle?s total telecom industry.
With the recently formulated draft national telecom policy placing greater emphasis on the growth of wireless and Internet connectivity in rural areas, India?s telecommunications sector appears to be on the brink of change. A combination of favorable industry drivers, central government impetus, rising focus by foreign Investors, optimistic socio- economic conditions and increasing technology adoption will ensure the growth of telecommunications in the country. Gujarat is well poised to lead the way, and should emerge as one of the country?s most favorable investment destination for telecommunications.
