KEY POINTS:
Sunil Mittal is the posterboy for India's telecom revolution but success hasn't come overnight. His company, Bharti Airtel, struggled during its early years and took 11 years to painstakingly pick up its first 20 million customers.
But in the past 16 months, as India's telecom boom has gone from strength to strength, Bharti has grown explosively and has added an astounding 26 million customers to its ever-expanding directory. It also doubled its profits in the first quarter of 2007 to $375 million.
And Bharti isn't the only Indian telecom company that's adding numbers faster than you can punch them in on a mobile phone. All of this adds up to great news for companies like Britain's Vodafone, which earlier this year forked out $11.1 billion to buy a controlling stake in India's third-largest service provider, Hutchison-Essar.
When the deal was closed six months ago Hutchison-Essar, which was just re-christened Vodafone last week in one of the world's biggest re-branding exercises, was adding 1.1 million new customers every month. That has shot up to 1.7 million per month and there's no sign of it slowing.
In fact it's expected to speed up.
About one year ago it looked as if India's telecom revolution was already pelting along at full speed. Indians were buying about 5 million new mobile connections every month and everyone was astonished by the sizzling growth.
But the calls are coming even faster now and 8.31 million new wireless connections were added in August. India has seized the crown from the Chinese and is now the world's fastest-growing mobile phone market.
The Indian tele-talkathon is moving so quickly that the Government's ambitious growth targets have been outstripped. There are now about 241 million phone connections in India and 35 million have been added in the past six months. The telecom industry crossed another landmark in August when the number of wireless connections hit 201 million.
And this in a country famous for its telephones that didn't work and where, back in the 80s, the waiting lists for phone connections stretched for years. Today teledensity (the number of phones per 100 people) has moved up to over 21 per cent. That's up from about 3 per cent at the turn of the century.
But even as the numbers shoot upwards, the telecom scenario is evolving and altering at an astonishing speed. Some of India's top metropolises like Delhi and techno-paradise Bangalore may already be nearing saturation.
Teledensity in both cities has hit 70 per cent. That's nothing compared to markets like Singapore, where there's more than one phone per person and teledensity is about 130 per cent, but it's pretty high for a developing country like India. Metro growth for everyone will slow, says one senior telecom company official.
Growth in the metropolises could be about to ease off but don't imagine for a moment that India's telecom story is running out of steam. India's top telecom companies like Bharti Airtel, Vodafone-Essar, Reliance Communications and the Government-owned BSNL, are working very hard to make sure that the calls keep coming.
They are moving out of the big metropolises and pushing into rural India. All the companies are rolling out new cell sites that will carry their mobile phone signals to every corner of the country.
"Going into the interiors is not a matter of choice, it's a necessity," says Arpita Pal Agrawal, associate director, telecom group, PricewaterhouseCoopers.
Take Bharti Airtel, which currently has about 50,000 cell sites and which will add a further 10,000 by March 2008. Rapid network rollout will give us the customer numbers, says a Bharti Airtel spokesperson.
It's the same story at Vodafone-Essar, which has doubled the number of cell sites it is putting up each month. About five months ago the company used to put up about 900 cell sites a month and that has now climbed to 1800.
"Growth is coming on the back of the faster rollout of networks," says Harit Nagpal, marketing director, Vodafone-Essar.
But any company that's attempting to sell in rural India must, of course, confront a new set of realities. The new customers in rural India may need their phones to stay in touch with the outside world but they are unlikely to be big spenders.
Revenues from each customer (known by the unlovely name of ARPUs or average revenue per user in the telecom industry) are bound to be low and therefore the telecom companies have to be even more careful than they are now about keeping a tight grip on costs.
Luckily, Indian telecom companies are models for the world when it comes to keeping a rein on spending. Now they are looking at other innovative ways of forging ahead. They are, for instance, sharing infrastructure like cell sites in a bid to ensure that costs don't spiral out of control.
Also, companies like Vodafone are reported to be looking at tie-ups with Chinese companies to sell cheap handsets for as little as $17 to new customers. Rival Reliance Communications has already announced a phone costing $19 and Bharti is deepening its alliance with Nokia.
India last month became Nokia's second largest market, way ahead of schedule, overtaking the United States. Nokia sells both its cheaper handsets and its costlier ones like the Nseries in India.
"People tend to think India's just a low-end market but it's not," says a Nokia spokesperson.
What are the lessons from India's telecom story? One is that effective Government policies can lay the ground for exponential growth. The fact is that the Government, after many stops and starts, did finally get the mobile telephony policy right.
By contrast, landlines and even broadband still have a long way to go because the Government hasn't got the policies right.
The number of landlines in India has stalled at about 40 million, unlike in China which has several hundred million landlines. Similarly, the broadband numbers are very small, though in percentage terms they are rising swiftly.
Are there any larger lessons to be drawn from India's mobile phone industry? Many multinationals are watching the sector closely and wondering whether the same tearaway growth could be repeated in other industries if the price points and marketing are right. Now, that would be a truly breathtaking scenario.
