Mobiles can add value to GDP, says study

Mobile phones are not just about getting connected, they can prove to be a great money spinner for the country's economic health by the virtue of productivity gains achieved by its users, especially in a developing market such as India.

According to a new study of three developing markets "" the Philippines China and India "" conducted by global consultancy giant McKinsey, the economic impact of all wireless activities on the economy of these countries is up to four times of the combined value of mobile operators.

The overall wireless activities in India contributed about two per cent to the country's gross domestic product (GDP) in 2005, the study says, adding this could rise considerably going ahead as the mobile penetration was a mere seven per cent in the year.

Even a two per cent contribution to the GDP amounts to a whopping $14 billion, taking into account GDP of $700 billion in 2005. In markets like China and Philippines, where wireless penetration is higher, the wireless activities contributed 5 per cent and 7.5 per cent, respectively, in 2005.

Wireless penetration in China stood at 28 per cent and 41 per cent in the Philippines in 2005. Much of the value created by wireless activities appears to come from the productivity gains and economic surplus that wireless customers receive simply by using their mobile phones, the study shows.

According to the report, these results should encourage regulators and operators to get mobile phones into more hands more quickly.

"By promoting the use of mobile phones, regulatory and industry players can amplify such gains, as well as the contributions that wireless industries make to GDP. India has two per cent contribution while having the lowest penetration," McKinsey analyst Luis Enriquez said.

A 10 per cent increase in penetration will add $2.3 billion to the end-user surplus and a further $6.2 billion in operator revenues in the country, he added. India, the world's largest growing telecom market, is expected to grow to 500 million mobile users by 2010 and 250 million by 2007 from currently 150 million.

Mobile phones already come with a price tag of less than Rs 2,000 and both affordable STD and ISD call charges, the number of users will increase as as the decreasing average age of cell-phone users are likely to translate to additional subscribers.

"Regulators and operators can best spread the use of mobile phones by lowering the cost of owning and operating them," the report said, adding the lowering subscription prices could decrease the operators' profitability and dampen their ability to increase mobile-phone ownership.

McKinsey suggested that the regulators and operators should consider subscription schemes that appeal to lower-income customers, while still allowing operators to make a profit.

One such measure could be "calling party pays" arrangement, which is already present in different variations in all three countries, the report said.