A Wireless Revolution in India

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New Phones for New Services

Experts attribute the surge in wireless Web use to a combination of falling handset prices, network upgrades, and an economic expansion that's leaving many young people flush with disposable income. India's economy is growing at over 9%, and younger consumers, especially those working in call centers, can now afford the personal digital assistants and Research In Motion (RIMM) BlackBerrys that, as recently as a year ago, seemed out of reach to everyone but wealthy businesspeople and other professionals.

Handset prices have dropped almost by half in the past two years, says Gartner's Chakraborti. And for fees of $2.50 to $12.50 a month, consumers can get all manner of information—market quotes, headlines, cricket scores, even the net asset value of a mutual fund investment—in the palm of their hands. Of course, hip Indian youngsters, like their peers in Europe, the U.S., and elsewhere in Asia, use mobile Web access to check e-mail, download music and games, and vote for their favorite performers on reality TV shows. Internet bigwigs Google (GOOG), Yahoo! (YHOO), and Microsoft (MSFT) are forging partnerships to get their messaging, search, and other services into users' hands, too.

Such services are of little use on outmoded phones and networks. But now, almost 90% of phones being sold in India operate on the General Packet Radio Service, or GPRS, system, which provides wireless Internet access. Today more than half of Nokia's handsets carry GPRS features, compared with 20% a year ago.

Slower Download Times

As features proliferate, the potential financial returns for service providers multiply. Whereas a standard text message typically costs 2.5¢, the cost of calling up mutual fund information is closer to 15¢ a message. Downloadable ringtones are already a $45 million annual business in India and are expected to grow at a double-digit rate through 2010. For top telecom players such as Bharti, Reliance Communications, Tata, and Vodafone, ringtones account for nearly half of all nonvoice revenue.

For all the increased reliance on cell phones to connect to the Internet, there's little danger handsets will replace PCs soon. Mobile connectivity in India is still uneven and is far slower than in other parts of the world. "GPRS is a largely dysfunctional way of accessing the Internet," says Shubham Majumdar, associate director of research at Macquarie Securities, a division of Macquarie Bank (MBL). Manoj Mehra, 25, who works at a bank in Mumbai, says downloading anything from the mobile Internet takes him a "frustrating" one to two minutes.

What's more, mobile Internet access is expensive. "I use it only when there is no landline connectivity at hand," says Singh, which translates to about 10 minutes a day.

Those struggles notwithstanding, demand for wireless Internet access is likely to keep skyrocketing. The Indian Cellular Assn. expects 200 million people to sign on to the Internet with their mobile phones by 2010. Even a couple of minutes a day multiplied by that many people spells continued headaches for state-run telcos, swelling coffers for handset makers and mobile carriers targeting the Indian market, and a greater dependence on wireless Web access for people like Singh.

Lakshman covers India business for BusinessWeek.