Economic survey 2005-06 on Telecom

Posted on | February 28, 2006 |

Taking stock of progress made on the telecom infrastructure front, through the eyes of the economic survey of 2005-06.

The last fiscal was another year of reckoning for the telecom sector. Explosive growth rate in the mobile telephony segment was almost counterbalanced by sedate growth of the fixed line and broadband businesses. Pressure on tariffs continued and this aided the improvement in teledensity.

The year also witnessed increasing gap between the urban and the rural teledensity. At the close of the year, while urban teledensity stood at around 33%, rural teledensity was a low 2%. India currently has a telecom subscriber base of 126 m, including 78 m mobile subscribers and 48 m fixed line subscribers, with an over penetration level of 11.3%.

The economic survey states that the increasing penetration of mobile phones has been brought about by rising income levels, increasing need to be ‘on the move’, and of course, from the service providers’ side, the lowering capital costs of establishing a mobile telephony network. The economy survey indicates that by the end of 2007, Indian’s telecom base has the potential to cross 250 m.

However to reach this target, we believe that a large amount of investment is required. Opening up of the sector to greater FDI is a right move in that direction. As a matter of fact, the total FDI approved for the telecom sector up to September 2005 was Rs 415 bn, including investments from behemoths like Hutchison, SingTel, AT&T and Vodafone.

Source: Equitymaster.com

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