Bundeep Singh Rangar [Ariadne Capital]

When the Chairman & MD of India’s top cellular phone company Bharti Tele-Ventures, said to me in his New Delhi office, “I want us to be 12-18 months behind the rest of the world mobile phone market,” that took me by surprise.

For those of us in the early stage technology business, this was anathema! No first mover advantage, no creation of barriers to entry?

But Sunil Mittal knows the dynamics of India’s telecoms industry. In 15 years, his $10 billion company has grabbed 20 percent of India’s booming cellular market.

India works differently, he said. India’s telecoms market is not about being innovative with technology. It’s about deploying technology at a low enough price point that makes it mass market and avoiding the premium associated with early adoption of technology products.

That formula's working.

India has the lowest national call rate in the world – 2 cents a minute anywhere, anytime, across any cellular network. That’s fuelling a market growing by 2 million new subscribers a month. It will have 75 million subscribers by the end of this year from nearly 60 million, according to the Telecom Regulatory Authority of India.

India is, quite simply, all about volume. That’s why the mass market is all important.

When Reliance Infocomm sparked the “mobile phone revolution” in India, it had one simple premise. Make a phone call cheaper than the cost of mailing a postcard – a long-time favourite means of mass offline communication.

Overnight, India went from a slow-growing market to the world’s fastest growing mobile phone market of this magnitude. So much so that Nokia is undertaking a venture in India that it no longer does in the western world – the setting up a manufacturing plant.

The telecoms growth has spurned a host of ‘ecosystem’ businesses. You don’t hear a phone ringing when you call a third party. Instead, you might find yourself listening to a ring tone of a Cold Play song, a bhangra tune or Martin Luther King Jr.’s “I Have a Dream” speech. Phones have been given personalities by their owners and you experience it from the moment you ring it. Some clever entrepreneur supplies the carriers with the outsourced service – which has become another profit centre in India’s mobile value chain.

Telcos are happy to outsource everything except for their customer relationship, traffic and network management. If they want to add a voicemail feature, that’s supplied by Hotmail founder Sabeer Bhatia’s company, Navin Communications.

Even payment procedures are outsourced. This time to the subscribers themselves! If you’re looking to top up your mobile phone, pay cash to any other subscriber on your network and he or she can SMS you credits worth minutes and text and multi-media messages. That’s peer-to-peer payments with real value!

Add to this growth, a huge demand for content. That's easily met by Bollywood, which makes four times as many movies as Hollywood each year. Turbo-charged by the mobile market, the Indian media and entertainment market is growing at an annual rate of 20 percent according to Ernest & Young. The mobile content layer is growing rich in Bollywood-based ring tones, wallpapers, cartoons and games.

Investors are flocking to the market. Bharti Tele-Ventures gave its investor Warburg Pincus a near 6X return on its $300 million investment. That’s cash out of the business already and doesn’t include the stake it still holds in the now public company.

Other investors in the market range from Singapore Telecom, Hutchison and European VCs such as New Media SPARK and Argo Global Capital. Expect more to follow soon.

Bundeep Singh Rangar is the Founder and COO of Ariadne Capital where he has helped secure capital and revenue for European, Israeli and U.S. companies in the software, communications, telecoms and nanotechnology sectors.