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India Curries Wireless Favor

India’s burgeoning wireless industry has been given a helping hand this week with cuts in custom duties on network infrastructure equipment, a move expected to boost both subscriber growth and vendor fortunes in the region.

On Thursday the Indian Finance Minister abolished custom duty of up to 15 percent on infrastructure equipment in an effort to promote the rollout of both GSM (Global System for Mobile communications) and CDMA (Code Division Multiple Access) networks in the country.

With a relatively poor fixed-line infrastructure, India’s wireless industry is regarded as one of the world’s most potentially lucrative markets. In less than five years the country has hit approximately 28.6 million subscribers, out of a population of 1 billion.

According to James Moore, research analyst at EMC, the GSM standard dominates the region, claiming 22 million subscribers as of the end of December 2003, from 13 different carriers. CDMA customers numbered 6.6 million at the end of November 2003, from a total of six carriers.

Expectations for the future are high. Growth in India’s wireless sector is among the fastest in the world, with about 1.3 million subscriber additions a month. The Cellular Operators Association of India (COAI) also expects the region to challenge China as the world’s largest wireless market in the next few years (see Global Vendors to Rule China?).

“We will grow faster than China and overtake them,” COAI director-general T.V. Ramachandran told Associated Press.

Analysts believe the duty cuts will help India achieve this aim. Lehman Brothers expects the cost savings to be partially reinvested by carriers and passed through as lower call charges, further stimulating subscriber adoption.

“We are increasing our mobile subscriber forecasts to factor in the customs duty reductions,” note Lehman Brothers analysts. “We expect the Indian mobile market to cross 50 million subscribers by December 2004 (from April 2005 earlier) and 100 million subscribers by August 2006 (from January 2007 earlier). We expect the Indian mobile market penetration to hit 20 percent by April 2010.”

Vendors are also expected to reap the rewards of such explosive growth. “We view these changes in tariffs as positive... for mobile systems providers including Ericsson, Lucent, Motorola, Nortel, Siemens, and Nokia,” add the L Bros.

— Justin Springham, Senior Editor, Europe, Unstrung

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