The government is now targeting 250 million mobile telephone subscribers by 2007, Maran told reporters in Bangalore. India’s mobile services sector experienced unprecedented growth for the fiscal year ended March 31 this year, according to the Telecom Regulatory Authority of India (TRAI) in Delhi. The mobile subscriber base grew by 55 percent during this period from 33.6 million to over 52.1 million, TRAI said. Spurred by the high growth in the mobile services market, the government is now hoping to boost telecom equipment manufacturing in the country.

“We feel that if we are going to add another 150 million subscribers by 2007, we cannot depend entirely on imports of equipment,” Maran said. “We need the equipment to be manufactured in our country.” Multinational companies will benefit from making the equipment in India because of the cost advantage the country’s low-cost labor offers, according to Maran. India is a price-sensitive market, and making the products locally will help the multinational companies keep their prices low, he added.
Bharat Sanchar Nigam Ltd. (BSNL) in Delhi, India’s state-owned telecom services provider, for example, will shortly be introducing a change in its purchase policy, that will require its suppl-iers to manufacture equipment locally, according to Maran. “BSNL is going to make changes in its purchase policy, and they are going to insist that whenever they buy equipment, it will have to be manufactured in India, because they can get good service backup,” Maran said.

The BSNL measure will put a lot of pressure on multinational telecom equipment companies to manufacture in India, Maran added. About 80 million of the 150 million new mobile subscribers will come from BSNL and another government majority-owned company, Mahanagar Telephone Nigam Ltd., in Delhi, Maran said.

A number of multinational telecom equipment vendors including Nokia Corp in Espoo, Finland, and Telefonaktiebolaget LM Ericsson in Stockholm have announced that they will make equipment in India. The Indian government is expecting an investment of about US$800 million in telecom manufacturing in India in the fiscal year ending March 31, 2006, Maran said.
Motorola Inc. in Schaumburg, Illinois, is planning to launch later this month a GSM (Global System for Mobile Communications) handset priced at below US$40 phone, which is expected to give a boost to the market, said Maran, who added that the government is persuading Motorola to set up a manufacturing facility for these handsets in India “For Motorola to produce a sub-$40 phone, they require low cost and efficient labor,” Maran said. Motorola officials said last week in Bangalore that they were considering manufacturing in India, though no final decision had been taken.

The Indian government is also trying to get service providers to tap into India’s rural market, and is planning some incentives, such as allowing operators to share infrastructure, Maran said.

If service providers are not to cut into each other’s business they have to explore India’s large market outside its cities, according to Maran, adding that telephone penetration in India is 25 per 100 people in urban areas, although it is as low as 1.6 per 100 in rural areas. “The rural market is going to be the accelerator for growth in the telecommunications sector,” he added.
Mobile telephony tariffs in India have come down by about 35 percent over the last one year, according to TRAI. “Lower ARPUs (average revenue per user) does not mean the service providers are losing money,” said Maran. “India is a volume game.”