Growth of mobile phone subscribers in India

Transcription

1 Basic Research Journal of Business anagemen and Accouns IN Vol. 1(1) pp Augus 2012 Available online hp// Copyrigh 2012 Basic Research Journal Full Lengh Research Paper Growh of mobile phone subscribers in India Debabraa Das Indus Business Academy, Plo No. 44, Knowledge Park-III, Greaer Noida , Uar Pradesh, India. Tel Acceped 13 Augus, 2012 The aim of his paper is o forecas he growh of mobile phone subscribers in India. Based on he daa of mobile phone subscribers from he year o , a shor erm forecas is made up o he year Under assumed sauraion level, he logisic and Gomperz disribuion funcion are used for forecasing he growh of mobile phone subscribers in India. I is observed ha, he coefficien of deerminaion is high and mean square error is low in case of logisic disribuion. This disribuion forecass he growh of mobile phone subscriber o 98 per 100 people in India by he year This sudy will be useful for planners, policy makers and researchers in he area of he elecommunicaions secor for realisic view of he subjec and for planning appropriae sraegy accordingly. Keywords: obile phone subscribers, Logisic model, Gomperz model, auraion level, Forecasing. INTRODUCTION Today is he era of wireless communicaion which gives rise o mobile phones. obile phones are he laes invenion and common way o communicae now-a-days. I is a long range, porable and wireless elecronic device of communicaion. A few years back, when mobile phones were no so common, he device was expensive and communicaion coss were prey high o he user. Bu in las a few years as he use of mobiles increased, heir cos decreased considerably and his facor helped a lo o make hem available for common man. obile phones are now inexpensive, easy o use, and comforable and equipped wih almos every laes feaure we desire. The growh of mobile phone subscribers and is usage is expanding rapidly hroughou he world. The abiliy of mobile phone o keep in ouch wih family, business associaes, ec., provides he user wih a sense of safey and securiy. Today's echnologically advanced mobile phones are capable of no only receiving and making phone calls, bu also soring daa, aking picures and can even provide access o and inerne, o name jus a few of he available opions. The laes developmens in mobile communicaion include, able PCs, which are handheld devices ha help you in boh communicaions as well as using hese devices as mobile offices. obile phones also proved o be a big help in emergencies. These devices have proved o be lifesavers as helping people in emergencies; when someone ges suck in he middle of he road and find no one for help hen he or she can call for help by using hese mobile devices. There is also his obvious convenience of quick access o help in emergencies big and small. The mobile phones are boh economical and essenial for ravelers rying o say conneced. Nowadays i has become a necessiy for many people. However, in recen ime some of he repors have been published, which have highlighed he poenial impac of elecromagneic fields generaed by cellular phones on he human brain. Accumulaing evidence indicae ha microwave radiaion from mobile phones may cause serious diseases and disurbances in he human physiology. This includes an increased cancer risk and geneic damage, disurbed brain funcion and oher effecs. Besides, he mobiles have been helpful in making he markes efficien. They have proved o be a boon for small producers, in effecive price discovery mechanisms. In he olden imes, when mobile phones were available a premium, and was ou of reach of common man; small ime businessmen like fishermen, farmers ec., used o ake heir produce o he neares wholesale marke and sell hem a prices prevalen in he marke place. In case of many suppliers reaching he same wholesale marke, i would make he farmers and fishermen o sell heir produce a hrow-away prices; someimes even below heir cos. However, in anoher nearby wholesale marke, which would only be a couple of hundred kilomeers away, here could a shor supply and he prices could be soaring. Wih he adven of mobile phones, and is cheap availabiliy;

2 Debabraa Das 15 Table 1. obile Phone ubscribers and Populaion in India Year Toal Populaion* Toal ubscribers Densiy of obile ubscriber# ource: Telecom Regulaory Auhoriy of India * Esimaed by Regisrar General of India based on 1991 and 2001 census. # obile phone subscriber per 100 persons such anomalies have been removed, and i has enabled he producers o communicae wih oher producers as well as raders in differen markes; ascerain he prices prevalen in differen markes; and diver heir vehicles/boas in he direcion of he marke where supply is less and hey are able o fech beer prices. India is one of he fases growing mobile markes in he world. In erms of mobile phone subscribers i holds he second posiion, jus afer China. However, he densiy of mobile phone subscribers in India is sill low i.e. 23 percen unil year (Cellular Operaor Associaion of India, 2007). As here is a huge poenial for growh of mobile phone subscriber in India, he objecive of his paper is o forecas he growh of mobile phone subscribers, up o year Using an exogenously defined sauraion level and annual mobile phone subscriber s daa from he year o , he logisic and Gomperz aggregae diffusion models are used o forecas he growh of mobile phone subscribers. On he basis of curve fiing, he coefficien of deerminaion (R 2 ) and he mean square error (E) are calculaed for he mos accurae model o be seleced. Developing models, based on hese disribuions is o explain he growh of mobile subscribers, especially in evoluionary markes, is criical for policy formulaion, capaciy planning and inroducion of new services. These models will help he mobile service providers o formulae appropriae sraegies and policies o ap he fuure marke in India. This paper proceeds as follows. ecion 2 discusses he mobile marke in India; review of lieraure is presened in ecion 3; ecion 4 models he mobile marke in India; evaluaion of he models is presened in ecion 5; and conclusion of he paper is summarized in ecion 6. obile marke in India In 1995, he firs mobile elephone service sared operaing in mero ciies of India, afer he elecom secor was opened up by he Governmen for privae invesmen, as a par of Liberalizaion-Privaizaion-Globalizaion policy. A year laer, he services spread owards res of he geographical areas of India. During he iniial five o six years, he average growh of mobile phone subscribers was very ardy; probably due o he high price of mobile phone equipmen and air ime charges of he service providers. Afer he New Telecom Policy in 1999, he mobile phone indusry inroduced several consumer friendly iniiaives. ince hen he mobile subscriber addiions sared picking up and crossed he fixed-line connecions in epember Till January 2009, India had million mobile phone subscribers (Cellular Operaor Associaion of India, 2007). In India, he mobile phone service operaors use he G (global sysem for mobile communicaions) and CDA (code-division muliple access) echnologies. Abou 75 per cen of he mobile phone users under G echnology wih 900 Hz band bu, recenly, he providers operae in he 1800 Hz band, as well (TRAI Annual Repor, ). A presen, he dominan players in India are Airel, Reliance Infocomm, Vodafone, Idea cellular, AirCell, Taa Telecom and BNL (Bhara anchar Nigam Limied) / TNL (ahanagar Telephone Nigam Limied). There are also many smaller players, operaing in only a few saes. The growh of mobile phone subscribers in India has increased remendously over he las few years (Table 1). From year o , he number of mobile phone subscribers increased from 0.34 million o 26.11

3 16 Basic Res. J. Bus. anag. Acc. Figure 1. obile phone subscribers million i.e. more han 77 fold increase; while in he same duraion populaion rose o abou 1.21 fold i.e. from million o 1.15 billion. imilar growh rae can also be observed in he analysis of densiy of mobile phone subscribers. In , he densiy of mobile phone subscribers was abou 0.04 per cen, bu afer welve years, i increased o per cen. The daa reveals he real poenial for growh of he Indian mobile phone marke. Thus, he rapid increase in mobile phone subscribers during he las decade may be primarily due o he increase of he average household income and mobile phone producion. Besides, here has been a significan decrease in price of mobile phones along wih corresponding ariffs. All hese facors have conribued o he increase of he mobile phone subscribers. However, equally imporan reasons are o be found in he decrease of growh rae in land line phone. ervice qualiy, convenience, flexibiliy and availabiliy favor adopion of mobile phones han land line phones. Laes research suggesed ha he growh of mobile phones in India would be among he fases anywhere for years (Cellular Operaor Associaion of India, 2007). Figure 1 shows he graph of mobile phone subscribers per 100 persons wih respec o he year from o I is observed ha he acual growh of he curve is iniially slow up o and hen i increases rapidly. Therefore, hese daa seem o fi well in shaped curve of Gomperz and he logisic model for forecasing he mobile phone subscribers. Finally, using his rend he forecasing model will be developed for India. Lieraure review The shaped or sigmoid curves have ofen been used in he fields of demography, biology and economics. In case of demography and biology, hese curves describe he evoluion of populaions, bu laer on, he processes of disseminaion and self organizaion associaed wih he spread of new echnologies and producs, echnological change and in general, economic growh is described. Firs use of hese models o analyze he economic growh is aribued o he French sociologis Tarde (1903) more specifically, in relaion o innovaion. Tarde s idea followed by oher scholars like ansfield (1961) sough o explain he observed paerns of diffusion in erms of he expeced profiabiliy of he innovaion, and he disseminaion of informaion abou is echnical and economic characerisics. Arle and Averous (1973) were analyzing he elephone sysem offered a nework consumpion exernaliy explanaion wherein he value of he nework for a subscriber increases wih he number of adopers of he sysem. imilarly, Rogers (1983) employed a communicaions-based model for explaining diffusion paerns. There are a number of differen funcional forms ha can describe -shaped curves, for example, Brass, logisic, Gomperz, ec. (Kim and Kim, 2004, ichalakelis e al., 2008). These curves are o forecas how and when a given new produc (innovaion) based on a number of parameer such as rae of peneraion, marke poenial and indusryspecific consan will reach is sauraion limi. The wo frequenly used diffusion model of -curve represening differen growh paerns are he logisic and he Gomperz funcions (Boelho and Pino, 2000, Barros and Cdima, 2001, ridhar, 2006). Boh he Gomperz and he logisic funcions were developed in reacion o he alhus naural growh funcion, in which he populaion grows exponenially, which seems o be unrealisic because environmen imposes limiaions o every growh paern. Gomperz original work was presened a he Royal ociey of London in 1825 and is described in he lieraure of mih and Keyfiz (1977). However, he logisic model was applied for he firs ime by Verhuls, who published his research in 1838 in he journal Correspondence ahemaique e Physique. Almos a cenury laer, in

4 Debabraa Das , Pearl and Reed rediscovered he logisic model in course of heir sudy of he evoluion of fly populaion (Jarnc, e al. 2005). Originally hese models were developed o describe he self-limiing growh of populaion. Alhough he pah of hese growh funcions can be represened in general -shape fashion, differen ypes of eniies can grow differen paerns. Hence, he exac form of he curves, including he slope and he asympoe, may be differen for each paricular growh paern. For example, he slope may be very seep during early phases, including rapid growh, or i may be gradual, suggesing a slow and hesian sar; bu all of hem will level ino sauraion limi. ain advanage of hese models is o reach he sauraion level in long erm forecas, as mos of he sysems, wheher naural or arificial, aain sauraion level afer a cerain period. The properies of he -curve growh model is such ha if he growh is quie rapid a an early phase and relaively slow when approaching he sauraion level, hen he Gomperz funcion is he bes mehod because i aains is maximum rae of growh a an earlier phase han ha of logisic model. If, on he oher hand, he diffusion process is such ha growh is iniially slow and relaively rapid during he mauring phases, hen he logisic model is a superior forecasing mehod because, i grows more rapidly owards he maximum level han he Gomperz model. The major problem ha has o be solved firs in hese models is he sauraion level. A few sudies have esimaed he sauraion level from he -curve growh funcion, bu mos of he sudies provide he sauraion level exernally by applying rule of humb, e.g. 60 mobile phone subscribers per 100 persons (Gruber and Verboven, 1999), 70 mobile phone subscribers per 100 persons (Barros and Cadima, 2001), 100 mobile phone subscribers per 100 persons (Kim and Kim, 2004, Ozan e al., 2007). odeling he mobile marke in India Consisen wih hese heories and research findings, i is hypohesized ha he cumulaive number of mobile phone subscribers in India grows over ime according o a sigmoid or -shaped curve. Based on pas research and curren marke scenario, his paper assumes he sauraion limi will be aained, when he densiy of mobile phone subscriber is 100 per cen in India. Anoher problem is o find ou he saring year of diffusion of mobile phone service. The firs mobile elephone service was launched in India in he year Using sauraion level and ime period, he model is developed based on logisic and Gomperz disribuions o forecas he mobile phone subscribers. Le be he mobile phone subscribers per 100 persons a ime (year) and be he sauraion level. The logisic disribuion has been developed as follows: The change in mobile phone subscribers wih respec o ime i.e. d d is proporional o he produc of he level of mobile phone subscribers a ime i.e. fracion of marke unapped i.e. corresponding differenial equaion is d d b ( b [1] ) and he. The where 0 is he proporionaliy consan i.e. he peneraion rae. Inegraing equaion [1] over he inerval 0 o, we ge ha he logisic funcion is 1 b ae [2] The parameers a and b model he locaion and shape of he curve, respecively. For 0, 0 is he 1 a saring level of he mobile phone subscribers and for = very large, is he sauraion limi. The logisic curve reaches is maximum peneraion rae a half of he sauraion level i.e. / 2, called he poin of inflecion of he curve and occurs a ln a b. The logisic curve is symmeric abou he poin of inflecion. imilarly, he Gomperz disribuion has been developed as follows: The change in mobile phone subscribers wih respec o ime i.e. d d is proporional o he produc of presen level of mobile phone subscribers a ime i.e. level i.e. d d and he logarihm of mobile phone subscriber densiy ln b. The corresponding differenial equaion is ln [3] where b 0 is he proporionaliy consan i.e. he peneraion rae. Inegraing equaion [3] over he inerval 0 o, we ge ha he Gomperz funcion is e b ae [4] The parameers a and b model he locaion and shape of

5 18 Basic Res. J. Bus. anag. Acc. Table 2. Esimaed resuls of Logisic and Gomperz models odel Parameer aximum Growh Rae b ln a R 2 E obile ubscriber Year Logisic (41.87) (79.12) Gomperz (14.41) (31.15) Noe: Figures in he parenhesis are value of -saisics Figure 2. Forecasing mobile phone subscribers in India he curve, respecively. The Gomperz curve reaches is maximum peneraion rae a, which is he poin / e ln a of inflecion of he curve ha occurs a. For 0, b a 0 e is he saring level of mobile phone subscribers and for = very large,, is he sauraion limi. Unlike logisic curve, i is no symmerical abou is poin of inflecion. Finally, using sauraion level and ime variable, he parameers a and b are esimaed by ordinary leas square procedure afer ransforming he logisic {equaion [2]} and Gomperz {equaion [4]} funcions ino logarihmic form, ln 1 a b ln [5] ln ln a b ln [6] where is aken as 0 for , 1 for , 2 for , and 12 for The ordinary leas square esimaion is carried ou using icrosof Excel sofware. Based on he coefficien of deerminaion (R 2 ) value and he mean square error (E), he model is seleced and used for forecasing he mobile phone subscribers up o he year , where E is he average of square of he difference beween acual and forecased values. Evaluaion of he models The esimaed resuls of mobile phone subscribers growh, using he logisic and he Gomperz diffusion model are repored in Table 2. Though hese disribuions have differen funcional forms, hey have several feaures in common. All of hem are monoonically increasing and have horizonal asympoes wih one of hem represening sauraion level. According o he R 2 value, boh of hese models fi he daa very well. imilarly, he esimaed parameers of hese disribuions have he expeced sign and all are highly significan i.e. significance under 99 per cen confidence level as observed from -saisics. However, beween hese wo models, he logisic provides he highes R 2 and he lowes E values, as compared o he Gomperz model. In Figure 1, he original growh of mobile phone subscribers is iniially slow, and hen i follows a, relaively, rapid growh, hence following he logisic curve as observed in Figure 2, where i becomes clear ha in he near fuure he growh rae will be higher. On he oher

6 Debabraa Das 19 Table 3. Projeced Populaion and obile Phone ubscribers Toal Populaion obile Phone ubscribers Year # Pessimisic oderae Opimisic * Noe: * Acual Daa Noe: # Populaion is esimaed by Regisrar General of India hand, he slow growh of mobile phone subscribers in iniial phase is due o he expensive and communicaion. Alernaively, he growh of mobile phone subscribers is quie rapid in early phase, as prediced by he Gomperz curve, which is no in accordance wih acual growh of mobile phone subscribers. Therefore, i is inferred ha he logisic model provides beer fiing for mobile phone subscribers in India han he Gomperz. Finally, using sauraion levels = 100 and he seleced parameers a and b (Table 2) in logisic equaions [2], we ge he forecasing models of mobile phone subscribers per 100 persons as given below e 62 [7] Using = 15, 20 and 25, he equaion [7] forecass he growh of oal number of mobile phone subscribers in differen scenarios such as pessimisic, moderae and opimisic in India for he years and are repored in Table 3. The oal number of mobile phone subscribers in India will rise from million in o 1.24 billion in , which is equivalen o he projeced populaion a ha ime in moderae forecasing scenario. In he year , he mobile phone subscribers is significanly difference in all he scenarios, however he difference is minimize in he year On he oher hand, following he analysis of he growh of mobile phone subscribers per 100 people, i is also observed ha he densiy of mobile phone subscribers will increase o 98 per cen by year Addiionally, he mobile phone subscripion is likely o aain he maximum growh rae in , when he densiy of mobile phone subscripion is expeced o be around 50 per cen ( / / 2). As discussed earlier, he logisic and Gomperz models assume differen disribuion funcions for he hreshold values of mobile phone subscribers. While he logisic funcion is based on a symmeric frequency disribuion, he Gomperz funcion is derived from a skewed frequency disribuion. The disincion has imporan implicaions for capaciy planners. The resuls show ha he rae of growh in case of mobile phone subscribers is closer o symmeric, as implied by logisic model, raher han aaining is maximum growh a an earlier phase as he Gomperz model suggess. This forecasing of fuure growh of mobile phone subscribers will help in esimaing he unapped marke of mobile phone subscribers in India. CONCLUION Technological advances in recen years made available mobile elecommunicaion services a an unprecedened scale. The inroducion of he digial echnology as well as a more liberal sance on specrum licensing has lead o a fas diffusion of mobile elephones. A simple examinaion of rends over he pas welve years clearly shows he rapid increase in mobile phone subscribers in India. This rend employs he logisic and he Gomperz diffusion models o forecas he growh in densiy of he mobile phone subscribers up o year Using annual daa for mobile phone subscribers from year o , he parameers of he wo models were esimaed by he means of ordinary leas squares. These parameers are saisically significan and fi well under he assumed sauraion levels. The R 2 values and mean square errors of hese models sugges ha he Logisic disribuion is a beer fi, for forecasing mobile phone subscribers. This indicaes high expensive and communicaion coss of mobile phone user resric he growh a iniial phase of he inroducion of new echnology. In year , he oal number of mobile phone subscribers in India is likely o be around 1.24 million. This sudy is very useful for planners, policy makers and researchers in he area of elecommunicaion secor for a realisic view of he subjec and he accordingly up aking of appropriae sraegic moves. I is eviden ha, in hese models, he mobile phone subscribers depend only on ime. I can be also esed by aking oher independen facors like income, mobile phone cos, call rae, ec. Exending he models wih more independen facors may resul in beer forecasing of mobile phone subscriber growh. Despie his huge growh, he Indian marke sill has lo of poenial. ajoriy of Indian populaion lives in he rural areas; which remains predominanly unapped. There is sill lo of scope. The mobile operaors is dominaed by he privae players, who do no find much incenive in geing ino he rural regions, because, hese are geographically scaered and he buying poenial and average revenue per user (ARPU) is also seeming low. Hence, governmen should

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