India boasts of very low telecom prices, and it is often wondered if these prices can be maintained in the long run, and if any company can make profits with these numbers. Without having concrete numbers, we can still make an attempt to study this.
First, we must realise that prices are not as low as they seem to be on paper. People talk of schemes which make the call rates much cheaper than they are. Think of it, to send 15000 text messages free of cost in a month, I pay a rental of Rs. 80 per month. Now, the question is do I send those 15000 text messages per month. Or do I even send say 300 text messages a month. I probably send closer to 300 text messages a month, and that too to people whose calls I cant take at work, etc. I end up paying around 25 paise per message. People might argue this is still 'n' times cheaper than in western countries, but the point I am trying to make is that call rates are not 'as cheap' as they are claimed to be. In a basic vanilla plan, a call would be charged 1.5 per minute, or 1 paisa per second and a message would cost around 1 Re.
Secondly, we must realise that most of the people in India are pre-paid subscribers who use their phone only to receive calls. People just recharge their phone to keep the number active. Which is like paying some amount of money for just receiving calls. Its a different argument that they find it more economical just to keep the number active and not make any calls.
Thirdly, Indians especially in rural and semi-urban places use a lot of VAS features like call-back tunes, Mobile Radio(which is chargeable), etc. These are features which make a lot of money, and being feature-rich, it is easy to lure people with different products.
Indian mobile penetration has increased a lot over the last few years, but there is scope for further penetration. There are large territories in India with no network, or with no competition for the government organization, BSNL. These are areas which need to be targetted for development. A large customer base is waiting to be tapped in these areas. It will help these people as well as help boost profits for the Operators.
India has a large number of users for above mentioned VAS, but there is a very small population which uses internet over the mobile, or accesses official mail over mobile(invariably this is limited to people who get this facility funded from work). This is an area which can be targetted for development as well.
What I have tried to list and emphasise is that Indian call rates are not as cheap as they are claimed to be, and the profit levels for operators is sustainable as of now, despite the competition in the market, because of a large market potential which needs to be tapped into.
Will keep updating this blog more often now!