India – Travelogue India trip – September 2008.
India, like China, keeps pulling me back. I want to be part of the dynamic telecoms developments that are taking place there and which are having a wonderfully positive influence on the social and economic structures in that country. I am also beginning to accept that the changes that are needed to alleviate the level of poverty for some 700 million Indians will take time – probably around 50 to 100 years.
Back to the smells and the colours
It was good to be back, albeit rather briefly this time. My destination was Mumbai and I still found it an unbelievably exciting place. The amount of people and the pace of life there is mindboggling. Unlike China, India remains very unique – the colours, the smells, the smiles on people faces.
But the poverty, the incredible slums and the gross inequality between rich and poor remain hard to accept, especially by somebody whose world is one where, despite its excesses, wealth is spread more equally. While at least one major slum next to the airport has since disappeared, I noticed many more new slums on my way to Novi Mumbai.
One third of the world’s poorest population lives in India. I still find it very difficult not to rescue from the cold hard pavement a sleeping baby who had rolled away from her sleeping mother and siblings, while the traffic, dogs, cats and people move past them, and the early morning street cleaners sweep the rubbish from one end of that pavement to the other. As human beings we are all the same, yet our circumstances are so different.
However, many countries are seeing progress in India, and therefore hope – for many people perhaps not in their lifetime, but at least for their children and grandchildren.
You might recall that I enjoy my morning jogs through foreign cities. Because my accommodation was close to the original Portuguese fortress (now a heavily protected naval base with its guns pointed directly at passersby), I jogged around the old colonial part of town and Mumbai Central Station (which is World Heritage listed and attracts one million visitors each day). At that time of the morning the station is buzzing with office workers and it is clear that these are some of the 300 million people out of 1.1 billion Indians, who are gaining the most from the economic boom.
The lack of infrastructure remains
As I have reported previously, the lack of infrastructure in India still remains the same. While there has been some progress in the last two years at Mumbai Airport, it is still a mess – to get from the parking lot to the main terminal you still have to drive through slums, and stumble through mud and over building debris. There are a few reasonable roads in Mumbai but the road system is not coping with the increase in traffic.
One way around the government’s ineptness in upgrading and extending the infrastructure has been to ban private cars during peak hour traffic, but because around 80% of the cars are taxies, tootoes and lorries (not to be referred to as trucks), this does not make much difference. Drivers need to slow down to 5km per hour every couple of hundred metres to avoid serious damage to their cars, when they suddenly arrive at stretches of road where there is no tarmac. This is the condition of the main thoroughfares, not suburban streets, in a city of 13 million people.
The government is still struggling with its infrastructure policies. It wants to attract foreign investors, but denies those companies active involvement. There has been a little progress since my last visit, but the whole process remains a bureaucratic bungle with conflicting policies from different levels of government and infighting between various Departments about who can make decisions – a process that often ends up bogged down in endless detail.
Most buildings in Mumbai, including the World Heritage listed Central Station and most apartment housing, are all in desperate need of maintenance and restoration. I was told that the main reason why this has not been done is because of the high level of corruption involved in securing maintenance contracts. This occurs not only in the main cities, but even more so in rural areas.
India still has a very long way to go, and the differences between India and China are more obvious year by year. Life for most Indians is harsh, but they have a rich culture and tradition and a unique way of life – a soul – and I find that this is missing in China, particularly in the main cities.
While developments in China are delivering far greater social and economic benefits to its people than the developments in India, I wonder how they will compare in 50 to 100 years time – one country as chaotic as ever, struggling forwards while preserving its culture, and its neighbour with a far superior standard of living, but without a soul.
Only time will tell what has been the best approach to move these two giants forward.
Different mobile cultures
Another major difference between India and China, and also many western countries, is the use of the mobile phone. In a timeframe of 10 minutes during one of my morning walks I observed around 1,000 people (mainly men), but only five were using their mobile phone. These were the office workers, most of them in their 20s and 30s, and in the prime mobile phone user group of the relatively well-to-do middle class.
Although there are almost 300 million mobile phones in India, the mobile phone culture is different to most other countries, in looks like that not very many people actually use their phones for social chatting. While using a mobile phone is relatively cheap for us, it may be that they are more prudent because of the costs, and use it only for a direct purpose.
Three hundred million mobile phones
As mentioned above, there are now just under 300 million mobile phones (yes, 300 hundred million of them!) in India. Annual mobile growth is around 50%; GDP growth is around 9%. The effect that mobile usage has had on the very industrious Indians is profound – it is changing society and the economy.
More and more men are moving away from the poverty-stricken rural villages to more urbanised areas, in both regional cities and national metropoles. Because family is very important to Indians, the mobile phone now allows those internal migrants to stay in contact. In the villages communications services often revolve around a few people who operate a mobile pay phone service. Increasingly however, people have their own SIM card – almost always provided and paid for by those who have migrated out of the villages – and can rent a mobile phone for 1 Rupee (half a cent).
Economic benefits
As I have reported in my previous Travelogues on India, a mobile phone which is used for commercial purposes can raise the living standard of a village by 20%.
During this visit I was also told about another major social and economic change that has occurred in India. Over the last few years in the cities there has been an increase in the number of small business people such as shop owners and trades people who use mobile phones. Because this means a greater level of communication for their businesses, their customers can now call them and place orders. This has resulted in an explosion of innovative home delivery services – you name it, you can get it.
Without the mobile phone this market could never have been developed. This was mentioned by several reasonably well-off Indians as one of the better advantages of mobile phones. I am sure that these small business people are also equally pleased with their new level of income.
Mobile data boom not far off
The first generation of mobile business users is now moving to mobile data. Email and Internet access is still a luxury, but with 3G competition around the corner it is easy to see where this will lead to.
Social networking services are taking off in a big way among the young and wealthy upper class Indians. Because most of them don’t have a fixed line alternative, and fixed broadband has not progressed because of a lack of infrastructure, wireless broadband will no doubt boom in India.
Open markets
There has been very little change in telecoms policies since my previous Travelogue on India, and two years later the government is still talking about more openness. However, despite its ineptness with infrastructure developments, this time they seem to have made some real progress.
While I was there this time, in good old Indian bureaucratic tradition, the Ministry for Finance and the Department of Telecommunications were trying to come to an agreement about the fact that there has not been enough consultation between the two departments. The detailed discussion was about foreign ownership and the fact that US companies would perhaps have a lesser chance to invest in India by comparison to other foreign companies.
While it is difficult to anticipate decisions being made in such a politically charged environment, I understand that there is enough commitment to launch five 3G services in 2009. In addition, MVNOs will start to arrive perhaps as early as October 2008, based on a new licensing system that will be introduced. While India remains reluctant towards foreign investments, there now seems to be an opening for foreign companies to participate in this level of market liberalisation.
This reminded me of a previous market liberalisation scheme around ten years ago when some foreign companies, mainly American and European players and also including Telstra in Australia, also received licences. However, that scheme was flawed by the western business models which those companies introduced, making development of the networks a totally uneconomic proposition. The Indian bureaucrats developed a complex system of regional ‘circles’ to manage these foreign operations. The whole project was disastrous and ultimately a local company Bharti consolidated the foreign assets and subsequently opened the Indian market five years ago with super cheap price plans.
Interestingly this time around companies from Africa, the Middle East and Russia are vying for the new licences. Virgin and Vodafone are among the possible European contenders, and AT&T has been mentioned as a potential American interested party.
However, the current financial crisis in the US could have a serious impact on the new 3G roll outs in India, as investments bank have traditionally played a key role in these infrastructure projects.
Lies and statistics
Despite the many pitfalls, who would not want to be involved in a market with such enormous growth rates?
It is interesting to see western telcos scrambling for entry into a market with overall ARPUs between $3 and $5 a month, while at home they argue that they can’t survive without high roaming charges.
In any event the US$3 to US$5 ARPU rate does not take account of the fact that there are very many people who spend less than a dollar a month. With the Indian mobile market approaching 600 million by 2013, we will begin to see services being used by people who would be living close to the poverty line, and this will almost certainly bring the overall ARPUs further down.
Some analysts even predict penetration rates as high as 60%, but because the majority of Indians will still remain financially disadvantaged, this prediction doesn’t make sense from BuddeComm’s perspective. It is the city people who are able to take most advantage of India’s newly created wealth, while some 700 million people remain living in poverty in rural India.
Other Reports
- India – Key Statistics and Telecommunications Market Overview
- India – Mobile Communications – Market Overview
- India – Mobile Communications – Major Operators
- India – Mobile Communications – Technologies including 3G
- India – Mobile Communications – Voice & Data Services
- India – Broadband Market
- India – Internet Market
- India – Telecommunications Regulatory Overview
- India – Telecommunications Infrastructure – National
- India – Telecommunications Infrastructure – International
- India – Fixed Network Operators
- India – Broadcasting
- India – Telecoms Market Trends and Forecasts
