New technology to fuel boom in cellular phone market

New technology to fuel boom in cellular phone market
ENS ECONOMIC BUREAU

MUMBAI, DEC 18: Cellular phone companies in India are poised to turn around and become one of the fastest growing segments of the industry as a new wave of mobile technology now sweeping the west fuels demand in India, investment bankers said.

Indian cellular firms are now bleeding - they are paying the price for overestimating the size of the local market and committing huge licence fee payments to the government - but sheer demand growth, newer applications and friendly government policies would lead to a sea-charge in the industry's fortunes over the next few years, they said.

Mobile phones have already overtaken personal computers (PCs) in developed countries. Mobile phone subscribers now number almost 400 million, up from 11 million in 1990. This is more than twice the number of PC owners at 180 million. In its recent telecommunication survey, the Economist magazine predicted that the number of mobile users would hit the one billion mark by 2004, exceeding the number of wired phones.

New mobileconnections are far outstripping fixed line connections in the developed countries. According to International Telecommunication Union data, mobile subscriber base worldwide was over twice that of fixed lines in 1998.

The revenues of mobile firms have been skyrocketing even as revenues of fixed telephone providers have been declining. The market capitalisation of mobile phone companies have registered a corresponding rise. Fixed line companies worldwide, including India's Mahanagar Telephone Nigam Ltd (MTNL) have realised the threat to their survival posed by mobile phones and are entering the mobile bandwagon.

Realising the immense potential of the mobile phone industry, the Indian government has decided to support its growth by submitting the fixed licence fee model with a revenue sharing model. India now has 1.2 million mobile phone subscribers. Cellular Operators Association of India (COAI) and the government estimate an additional one million subscription every year to take the subscriber base to 10million by 2007. This projection assumes connections growing at 42 per cent a year.

According to investment bankers, these projections do not take stock of the new technologies in mobile communications which are expected to revolutionalise communications in the new millennium. Third generation digital technology, due to be introduced in many countries over the next few month, will enable mobile subscribers to access the internet.

Cellular phone subscribers in Japan have already started tasting fruits of the new technologies. Japan's biggest mobile company has released phones that allow customers to surf the internet. Mobile users in Japan are using their phones to check news headlines, stock market quotes and even download music from the internet. According to a report, children in Finland chat with each other as much through short messages on their mobiles as in face-to-face conversation.

The new revolution that makes the mobile a multi-purpose tool, one of the uses being talking to one another, isexpected to witness an explosive growth in India despite the current state of Indian cell phone industry. ``They (mobile firms) are going to be the new wealth creators in the coming decade,'' said a leading investment banker. ``Mobile firms will ride the new wave. Their growth could even eclipse the software industry.''