sks presentation

8/9/2019 Sks Presentation

http://slidepdf.com/reader/full/sks-presentation 1/23

THE DIFFUSION OFMOBILE PHONES IN INDIA

-

Dr. Sanjay K. Singh

Department of Humanities and Social Sciences

Indian Institute of Technology Kanpur

INDIA



Mobile is becoming the dominant means for accessingcommunications primarily because deploying mobilenetwork is not only more cost-efficient but also mobile

provides greater flexibility and convenience to its

subscribers than landline telephone.

Growth in telephone subscriber base in India



Growth in mobile-density has been phenomenal during thelast 5 years or so. Mobile-density in the country hasincreased more than 23-fold from 0.35 in 2000-01 to 8.12 in

2005-06.

Teledensity in India from 1995-96 to 2005-06



There has been 25-fold increase in mobile subscriber base ina span of just five years from 2000-01 to 2005-06. During thesame period, mobile-density has increased more than 23-fold

from 0.35 in 2000-01 to 8.12 in 2005-06.

Growth in Mobile Subscriber Base in India



An effective management of mobile services requires anunderstanding of the factors that underlie the evolution of the market. Factors such as market potential and timingand speed of adoption are of great importance for telecomoperators for capacity planning. Understanding theevolution of mobile phone market and its likely futuretrend is equally important for policy makers.

The main objective of this study is to analyze thediffusion of mobile phones in India to inform the larger discussion of managing the communication services as

well as to assist analysts concerned about assessing theimpact of public policies in the evolution of telecomsector.



E stimation of the future trend and analysis of the pattern and rate of adoption of mobile phones in India.

S pread of a successful innovation over time typically follows asigmoid or S -shaped curve. During an early phase of diffusion only afew members of the social system adopt the innovation whereas, over time, due to network consumption externality and dissemination of information, many people opt for innovation as the diffusion processunfold. Finally, during the maturing phase, the rate of diffusion goes

down when diffusion curve approaches a saturation level.

Therefore, it is hypothesized that the growth in mobile-densityover time follows a sigmoid curve. Among various functional forms that can describe sigmoid curves ( the logistic, Gompertz,

logarithmic logistic, log reciprocal, simple modified exponential,etc. ), the first two are the most widely used ones. Therefore, it is decided to use these two functions to model and forecast thedevelopment of mobile-density in India.



The logistic model can be written as:

where Md t is mobile-density (no. of mobile phones per 100inhabitants), (time)t is value assigned to time at period t, Eis the saturation level and I t is an error term.

All the parameters: E, F and K are positive.

Md t ranges from a lower asymptote of 0 to the upper boundE as time ranges from -g to +g. Maximum growth rate (=

EF/4) occurs when Md t = E/2 (i.e., at half of the saturationlevel). Thus, the logistic curve is rotationally symmetricabout its inflection point (the point at which maximum rateof diffusion takes place).

t t

t ti ed I

K

!

))(exp(1(1)



Similarly, the Gompertz model can be written as:

where all the variables and parameters have their previousmeaning and Lt is an error term.

Again, all the parameters: E, F and K are positive. In this case,maximum growth rate (= EF/e) occurs when Md t = E/e (i.e.,at 37% of the saturation level).

These two models are estimated using non-linear least square method once by assuming no restriction on thesaturation level and then by imposing restrictions on thesame. This is because there is no guarantee that the final estimate of the saturation level, E , will be close to the global optimum (Heij C. et al., 2004).

t t t ti ed L FK ! )))(exp(exp( (2)



The shape of logistic and Gompertz curves

0

20

40

60

80

100

120

1 8 1 5

2 2

2 9

3 6

4 3

5 0ime

M o

b i l e

- d e n s i t y

Logist ic (a=120, b=0.6, g=8000)

Logist ic (a=120, b=0.6, g=5000)

Logist ic (a=120, b=0.5, g=8000)

Logist ic (a=120, b=0.5, g=5000)

ompertz (a=120, b=0.15, g=15)

ompertz (a=120, b=0.15, g=20)

ompertz (a=120, b=0.20, g=15)

ompertz (a=120, b=0.20, g=20)



The saturation level of mobile-density for a country is likely to dependon whether it is an early adopter or a late adopter of telephones. Earlyadopters (developed countries) are expected to have lesser reliance on

mobile phones (due to high switching cost) whereas late adopters(developing countries) are expected to have lesser reliance on mainline telephones (due to high infrastructure cost).

Teledensity and Percentage Share of Mobile in Selected Developed Countries



Analysis reveals that the saturation level of mobile share in developedcountries could be anywhere between 50% and 70% whereas the samewould be between 80% and 90% for the developing countries.Assuming that the saturation level of teledensity could be anywhere

between 120 and 150 telephones per 100 inhabitants, the saturationlevel of mobile-density in developing countries is likely to be between100 and 120 mobile phones per 100 inhabitants.

Teledensity and Percentage Share of Mobile in Selected Developing Countries



M odel estimationSince India is a late adopter of telephones, its saturation

level of mobile-density is likely to be between 100 and 120mobile phones per 100 inhabitants.

However, both logistic and Gompertz models are estimatedfor six different saturation levels (70, 80, 90, 100, 110 and120 mobile phones per 100 inhabitants) along with without

imposing any restriction on the same. The mean absolute percentage error (MAPE) for the last three observations isused to find out the most appropriate model and thesaturation level.

Annual data of mobile-density from 1995-96 to 2005-06 is

used for the estimation of the models.Data on mobile subscriber base and mobile-density is takenfrom Telecom Regulatory Authority of India (TR AI)

publications (www.trai.gov.in) and telecom sector databasefrom www.infraline.com.



Estimation results (with t-statistic in parentheses ): According to both R 2 andMAPE, the Gompertz models fit the data better than the logistic ones. Asexpected, final estimate of the saturation level in the no restriction model doesnot seem to be globally optimal. It seems that the Gompertz model with the

saturation level of 120 mobile phones per 100 inhabitants is the best model todepict the diffusion of mobile phones in India.

Model Estimate

No restriction on the saturation level

ogistic (1) E = 18.9 (3.8), F = 0.7347 (11.0), K = 4331.2 (2.9); R 2

= 0.997; Adj. R 2

= 0.997; MAPE = 5.43

Gompertz (2) E = 217.9 (0.7), F = 0.1392 (3.1), K = 15.2 (8.7); R 2

= 0.997; Adj. R 2

= 0.997; MAPE = 4.70

Saturation level, E = 70

Logistic (1) F = 0.5970 (26.9), K = 5361.6 (4.3); R 2 = 0.995; Adj. R 2 = 0.996; MAPE = 5.12

Gompertz (2) F = 0.1954 (32.1), K = 18.6 (16.0); R 2

= 0.997; Adj. R 2

= 0.997; MAPE = 5.10



Gompertz (2) F = 0.1865 (32.6), K = 17.9 (17.0); R 2

= 0.997; Adj. R 2

= 0.997; MAPE = 5.04



Gompertz (2) F = 0.1793 (33.0), K = 17.4 (17.9); R 2

= 0.997; Adj. R 2

= 0.997; MAPE = 4.99



Gompertz (2) F = 0.1733 (33.2), K = 17.0 (18.6); R 2

= 0.997; Adj. R 2

= 0.997; MAPE = 4.94



Gompertz (2) F = 0.1683 (33.4), K = 16.6 (19.3); R 2

= 0.997; Adj. R 2

= 0.997; MAPE = 4.91



Gompertz (2) F = 0.1639 (33.6), K = 16.4 (19.9); R 2 = 0.997; Adj. R 2 = 0.997; MAPE = 4.88



Assumptions and Projections of M obile-density in IndiaFurther analysis will primarily be based on the estimated Gompertzmodel at saturation level of 120 mobile phones per 100 inhabitants:

)(1639.04.16120

timeee Md

!



Rate of growth of mobile-densityThe analysis reveals that the inflection point (the maximum growthrate point) of the curve will occur between 2011-12 and 2012-13

(when mobile-density will be around 45). During the year 2015-16,there will be 71 mobile phones for 100 people in the country. Analysisshow that the no. of mobile phones will exceed the no. of people inthe country by 2022-23.

0.4 .1

36.5

43.7

50.

57.

64.7

71.0

0

10

20

30

40

50

60

70

0

2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

N o . o f m o b i l e p h o n e s p e r 1 0 0 i n h a b i t a n t s



Note: Future population of India is taken from the United Nations PopulationDivision publication.

F uture M obile Subscriber Base in India

4

90

433

526

620

715

808

899

0

100

200

300

400

500

600

700

800

900

1000

2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

N o

o f

o b i l s b s r i b

s ( i

i l l i o n )

It is pr o j t d that al ost 350 illion n w obil s bs r i b s will

b add d b tw n 2005-06 and 2010-11 and o than 450 illionwill b add d b tw n 2010-11 and 2015-16



E stimates of revenues collected by mobile operatorsand the government

Average Revenue per Mobile User per Month in India

Mobile operators¶ revenue depends on ARPU and no. of subscribers

Assuming that the ARPU will stabilize at around Rs. 300 per month by the year 2010-11, mobile operators¶ revenues during the year

2010-11 and 2015-16 have been estimated



E stimates of M obile Operators¶ Revenueo. o

mobilesubscribers

(in million)

obile

A per year

( s.)

evenues

rommobile

services( s. in

billion)

G

( s. in billion atactor cost at

current prices)

obile

revenue as a percentage o

G

2005-06 90 4500 405 32000 1.32010-11 433 3600 1559 57600 2.72015-16 899 3600 3236 103680 3.1

apid increase in mobile subscriber base and mobile spending

will have equally important implications or the government revenue

particularly in the orm o regulatory charges (license fee includinguniversal service obligation and spectrum charges) and ser vice tax.



E stimates of the Government¶s Revenue

Presently, on an average, annual direct regulatory charges faced

by the operators in India is around 13% [far more than that inPakistan (4.5%), Sri anka (0.3%), Malaysia (6.5%), and SouthAfrica (5%)]. If we include the education cess of 2% (of 12%),service tax burden on the sector would be 12.24% from thefinancial year 2006-07 onwards.

stimates of the Government¶s evenueate of

regulatory

charges

(%)

evenue from

regulatory

charges

( s. in billion

at current

prices)

ate of

service tax

(excluding

education

cess of 2%)

(%)

evenue from

service tax

( s. in billion at

current prices)

Total revenue

( s. in billion

at current

prices)

2005-06 13 53 10 41 942010-11 10 156 12 187 3432015-16 10 324 12 388 712



Concluding Remarks

In this study, the growth of the mobile phone and mobile-

density in India has been analyzed using S -shaped growth curvemodels.

The result shows that the Gompertz model adequately describesthe path of mobile phone diffusion in India.

The analysis shows that the high growth phase of the diffusionof mobile phones will continue till 2012-13.

It is estimated that there will be 71 mobile phones per 100inhabitants in India at the end of year 2015-16. The number of mobile phones will exceed the number of people in the country

by 2022-23.

Total mobile phone demand is projected to increase from 90million in 2005-06 to 433 million in 2010-11 and nearly 900million in 2015-16.



Concluding Remarks «.

Rapid growth in mobile subscriber base in the India will have

important implications for revenues collected by the operatorsand the government.

Revenue collected by the mobile operators is projected toincrease from Rs. 405 billion (1.3% of GDP) in 2005-06 to Rs.1559 billion (2.7% of GDP) in 2010-11 and Rs. 3236 billion

(3.1% of GDP) in 2015-16.

The government¶s revenue from regulatory charges and servicetax will increase substantially due to rapid increase in operators¶revenue.

Revenue from regulatory charges is expected to increase fromRs. 53 billion in 2005-06 to Rs. 156 billion in 2010-11 and Rs.324 billion in 2015-16. Revenue from service tax is projected toincrease from Rs. 41 billion in 2005-06 to Rs. 187 billion in2010-11 and Rs. 388 billion in 2015-16.



Concluding Remarks «.

It is quite likely that the rapid expansion of mobile services will

provide economic, logistic and strategic challenges to theoperators.

As operators expand coverage into urban, semi-urban, and ruralareas, they will be confronted with the daunting tasks of developing a countrywide infrastructure and improving and

maintaining the quality of service.Mobile operators should be ready with contingency plans todeploy and operate infrastructure including customer care,

billing, applications, etc., faster than that they might haveinitially planned.

Infrastructure providers, handset suppliers, and vendors shouldalso be geared up to respond to such plans.



THA NK S

sks presentation

Documents