Cellular mobile in India: competition and policy

Abstract

Telecommunications has been one of the success stories of economic reforms in India. From a teledensity of 2 percent in the not too distant past the sector has grown to a point where the teledensity exceeds 60 percent. The Indian cellular market is marked by strong competition, a large number of operators and some of the cheapest tariffs in the world. The sector experiences growth rates in excess of 80 percent in terms of the number of subscribers. However, all is not well in this sector. There have been a number of upheavals in the past and the latest one involves alleged favouritism in allocating spectrum.

This paper analyzes the state of competition in the cellular mobile industry in India. Standard measures of competition such as HHI and concentration ratios are used as well as market share, revenues, access to funds and profits. We also look at the degree of rivalry in the industry through changes in rankings in market share. We provide a brief discussion of the major developments in telecommunications and cellular mobile in particular after the introduction of reforms. Effects of policy making by different institutions within India are discussed in relation to their effect on competition and market development.