The increasing demand for mobile phones, a fall in the handset prices, a favourable revenue-sharing regime and a drastic reduction in technology costs besides infrastructure sharing and outsourcing, have fuelled the growth.

While the total revenues of the six telecom companies have grown to $22 billion (Rs 90,700 crore) in 2006-07 from around $10 billion two years ago, the net profit of the companies, estimated at $4.4 billion (Rs 18,130 crore) in 2006-07, is up from $2.5 billion (Rs 10,300 crore) two years ago. These nationwide operators account for over 90 per cent of the market.

With the government estimating the mobile figures to touch 500 million by 2010, revenues should comfortably touch $50 billion by 2010, a compound annual growth rate of 31.5 per cent.

BSNL, the largest telecom player in India, clocked revenue of over $10 billion (Rs 41,200 crore) in 2006-07 and net profit of over $2 billion (over Rs 8,240 crore). Bharti Airtel, the private sector telecom giant, reported revenues of $4.4 billion (Rs 18,349 crore) in 2006-07, and expects revenues to be around $7 billion (Rs 28,840 crore) during this financial year.

Reliance Communications is the third largest player with revenues of $3.50 billion (Rs 14,420 crore) and net profit of $765 million (Rs 3.152 crore) for the 12 months ended March 2007. Analysts expect the company's revenues to grow at around $4.7 billion (Rs 20,000 crore) and profit to touch over $1 billion (over Rs 4210 crore) in 2007-08. GSM player Hutchison Essar's figures were not available. Analysts project the revenue of this telecom giant to be around $2.50 billion (around Rs 10,300 crore).

When the mobile penetration crosses 10 per cent (it is currently around 13 per cent), there is a significant acceleration in the mobile user base and usage, leading to a sharp pick-up in the mobile revenues, states a UBS Investment Research report. A 100 per cent tele-penetration would mean that everyone in the country, including senior citizens and new-born babies, have a mobile.

However, a person can have two mobiles and hence the penetration rates would be lower than teledensity. Hence, while India's current penetration rates stand at around 13 per cent, the teledensity figure as of March 2007 stood at 207 million, representing an 18.31 per cent overall teledensity (the number of lines per 100 people) rate.

The sector's phenomenal growth also negates the effects of declining average revenue per user (ARPU). It was about $7 in 2006 and will fall to less than $5 by 2011 as rural penetration increases, according to research firm iSuppli.

Three-fourth of the subscriber base consists of pre-paid customers who yield low revenues. While the ARPU is declining, minutes of usage for both Bharti and Idea rose by 10-14 per cent in 2006-07. Value-added services such as SMS, MMS, gaming and call management services now contribute nearly 5-10 per cent of the mobile revenue.

Moreover, reducing technology costs is helping shore up the bottomline of these companies. Alok Shende, VP, ICT Practice, Frost & Sullivan, says, "Technology costs have reduced drastically. While the cost was around $400-500 per subscriber in 1999, it is now a little over $100. Besides, towers now consume less power than earlier and can be erected at a lower level, thus reducing capital expenditure costs."

"We believe the continuous decline in radio pricing and higher steel/manpower costs have now led to almost two-thirds of site capex being on passive infrastructure (mainly towers) development rather than radio capex (up from one-third previously). Hence, operators such as Bharti, Hutch and Idea have started sharing passive infrastructure to reign in their otherwise fast rising capex," corroborates a Lehman Brothers report.

Most Indian operators share passive infrastructure such as towers, generator sets and shelters. "This results in a significant amount of cost savings. Operating levels should be able to take care of the rising capex spends by the telecom firms. Besides, there is an increasing return on capex by these firms.

For instance, Bharti Airtel recorded returns of over 30 per cent," notes Harit Shah, Analyst (IT&Telcom), Angel Broking. He adds that outsourcing by firms such as Bharti has also helped in saving on costs which is reflected in the savings in selling, general and administration (SG&A) costs. For instance, the 'other costs as a percentage of sales' figure declined by 113 basis points in 2007-08 compared with the previous year, which indicates that the firm saved around Rs 200 crore (Rs 2 billion).

However, as Shah puts it, what could spoil the party is that the spectrum shortage could result in a loss in revenues for the operators. Other analysts nod in agreement.