India's mobile market surges 80%

By CNN's Kristie Lu Stout

NEW DELHI, India (CNN) -- India's mobile market grew 80.2 percent year-on-year in October, according to the Cellular Operators' Association of India (COAI).

The country added 201,096 new mobile subscribers in October to reach a nationwide total of 5.011 million users.

But the COAI also warned that the ongoing debate over limited mobility services could break the momentum of the sector's growth.

'Doubling every year'

"We have been growing at a fairly good rate, doubling every year partly due to a drop in the tariffs," COAI's Anjali Hans told CNN.

The COAI said telecom markets with the least subscriber growth potential, otherwise known as "C" circles, grew the fastest.

India divides its telecom markets into areas based on subscriber potential including the "metro," "A," "B," and "C" telecom circles.

The "C" mobile user base surged 130.9 percent over the last year, whereas the lucrative "metro" market experienced 77.8 percent growth, the COAI reported.

"A" circles soared 103.3 percent, and the "B" areas grew 52 percent.

COAI said India's metro areas have seen a record surge in mobile users in recent months due to the introduction of more competition.

"Competition has already come to Delhi and Bombay, but as for the other places, full competition has yet to be introduced," said Hans.

Cellular rates in India have fallen by about 75 percent over the last three years.

In May 1999, the peak rate allowed by Indian regulatory authorities was 16.8 rupees a minute. Now, it is 4.5 rupees.

In New Delhi and Bombay, the current standard package rate -- the rate actually being charged by mobile operators -- has fallen to 2 rupees per minute compared to last year's 4.5 rupees.

India's mobile market has been adding at least 200,000 subscribers a month since June.

New Delhi currently leads India's mobile push forward with a total of about 760,000 users as of end-September. Bombay is the No.2 mobile market with about 710,000 users.

Limited mobility limbo

COAI said that there are regulatory issues remaining that are breaking the momentum of the sector's growth -- in particular the issue of limited mobility.

This is a service where a fixed-line phone connection can be used like a cellular service within a set geographical area, using a mobile handset.

Cellular operators have been challenging the government's decision to allow fixed-line providers to offer mobile services, saying that the move gives them a back door entry into the wireless business.

Currently, fixed-line operators in India enjoy a substantial government subsidy -- 60 percent of long distance revenues can be kept by long distance operators.

The limited mobility issue could damage players in the cellular sector because they do not have access to the subsidy.

"It's still an issue," said Hans. "Hearings are going on about the matter and we are hopeful of getting a judgment by January."

India's Telecom Dispute Settlement Appellate Tribunal, a separate tribunal set up by regulatory authorities to look at telecom disputes, is overseeing the hearing, which began in June.

A final decision is slated for January.

"Once that is done, then there will be a lot of clarity about what the market will look like and cellular operators can make plans more firmly," said Hans.

"Right now, things are in limbo and people are not really talking about future plans."