We did an analysis on how Telcos will expand and serve in the near future. Out study suggests that South India has relatively low penetration and above average ARPUs, and represents the best opportunity for near-term growth for telcos in the near term. This helps explain why several new entrants [Tata DoCoMo, Aircel etc] have chosen to initially expand operations from the South.

Bharti Airtel relies heavily on the South, with three states accounting for 32% of company revenues. These circles will likely see the greatest incremental competition in the near term.

The following Graph [Click to Enlarge] shows the distribution of ARPUs Vs Penetration across all circles in India.
Wireless ARPU Vs Penetration in India as on May-2009

Despite new entrants, the top two operators in each circle in terms of revenue and market share have remained fairly constant over the past two years, with leaders widening the gap. We believe this is largely because initial entrants typically get the cream of the population in each circle. The implementation of mobile number portability could cause churn to increase in this high-value base, which is the biggest risk to the current market leaders.

3G Auction Bidding Hints ?
Based on revenue potential and ARPUs, we expect the metros and southern circles to see the highest interest from bidders in the upcoming 3G auction, followed by Punjab, Maharashtra and Gujarat.