FORECASTING OF CELLULAR SUBSCRIBERS IN

GUJARAT

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 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

ABSTRACT

This report aims at analyzing and comparing various methods of Demand

Forecasting for total cellular subscription in the state of Gujarat for the
month of March, 2010.We have historical data of the number of mobile
subscribers since March,1997. The growth in mobile-density over time
follows a sigmoid curve. Among various functional forms that can describe
sigmoid curves (the logistic, Gompertz, logarithmic logistic, log reciprocal,
simple modified exponential and many more.), the first two are the most
widely used. Bass model is also used to predict the forecast. The demand
forecast may be used in making pricing decisions, assessing future capacity
requirements or in making decisions on whether to enter a market or not.
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

1. Introduction
Telecommunication industry overview:

Post economic reform, there are many sectors that have shown tremendous
growth in terms of productivity, revenue, market penetration et al and the
telecommunication industry of India is one amongst them. There was a
period when people paid for the incoming calls but the industry is changed
in years. The pain of yesteryears has become the gain of the current
generation.

Indian telecommunication industry is the third largest telecommunication

network in the world and the second largest in terms of the number of
wireless connections with about 525.65 million mobile phone connections.
Out of this, the number of wireless subscribers has reached a figure of 471.7
million. The overall current tele-density has reached 43.5 percent. The most
interesting fact is that the set target of 500 millions telephones by the end
of 2010 has been achieved by September 2009.

The extraordinary growth in the telecommunication sector since last one

decade is not something that happened overnight. The industry progressed
very slowly in the beginning after the commercially launch in August 1995.
Mobile and cell phones were considered as a luxury items then. For the first
5-6 years, the monthly subscribers additions were meager 0.05-0.1 millions.
But the liberalization policy adopted by government, increase in mobile
operators and improvement in service, tariff reduction, regulators entry and
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

so forth have augmented well towards the continuous improvement of the

mobile industry.

Scenario in Gujarat:

Gujarat is one amongst the few metros where the mobile phones were
commercially launched in the very beginning. The metro has grown
momentously since then. The number of subscribers has changed from a
meager 4100 in March 1997 to almost 2 crores in September 2009 and this
growth has been achieved in just 12 years.

The number of GSM subscribers in Gujarat (as on September 2009) is given

in the table below:

Bharti Airtel 4769501

9001337
Vodafone Essar
IDEA 4445774
BSNL 2609797

2. Survey Of Literature
In order to gather a basis for the practical work, a variety of concepts,
methods and their applications have been used through existing literature
and research on the topic. The literature survey carried out is expected to
provide comprehensive context and rationale to the readers.

To convert a non-linear model (NLM) to a linear model (LM) for regression

was another obstacle in obtaining the correct equation for the forecasting
model. Different reports and journals gave enough indication of using
logarithmic model to change an NLM to LM.

The following are the sources:

Fitting a Logistic Curve to Data by David Arnold

In his article, Dr. Cavallini describes a number of Mathematica routines he

designed to t a logisticcurve to a given set of data. In this
activity, we will design Matlab routines to accomplish a similar fitting of the
logistic equation to Dr. Cavallini's data set.
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

The diffusion of mobile phones in India by Mr. Sanjay Kumar Singh

Indian Institute of Management Lucknow, India

The paper estimates the future trends and analyzes the pattern and rate of
adoption of mobile phones in India by using S-shaped growth curve models.
It envisages the future trends by observing the Mobile phone demand, the
Diffusion Model used and the model estimates.

Demand Forecasting: Evidence Based Methods by J. Scott

Armstrong and Kesten C.Green

Department of Econometrics & Business Statistics, Monash

University, Australia

The paper looks at evidence from comparative empirical studies to identify

methods that can be useful for predicting demands in various situations and
to warn against methods that should not be used.

3. METHODOLOGIES USED

(A) Logistic Function

A logistic function or logistic curve is the most common sigmoid curve. It
models the "S-shaped" curve (abbreviated S-curve) of growth of some set
which might be thought of as population. The initial stage of growth is
approximately exponential; then, as saturation begins, the growth slows,
and at maturity, growth stops.
The formula for the Logistic Function is:
Y=L/(1+a*e-bt)
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

It involves 3 parameters L, a, and b.

L – The Scaling Factor alters the size and position of the curve.
a– The Slope Factor, a positive result is returned when y is decreasing as x
increases

A negative result is returned when y is increasing as x

increases.

b– The Scaling Factor alters the size and position of the curve.

To identify the exact meaning of the parameter L, set x = 0 in the formula:

y (0)=L/(1+a*e-b*0)

 y(0)=L/(1+a)

Clearing the denominator gives the equation (1 + a)*y(0) = L. One way to

interpret this last equation is to say that

The limiting value L is 1 + a times larger than the initial output y(0)

An equivalent interpretation is that

a is the number of times that the initial population must grow to

reach L

The parameter b is much harder to interpret exactly. We will be content to

simply mention that

If b is positive, the logistic function will always increase,

While if b is negative, the function will always decrease

Conversion to Linear Model

1 +a*e-bt = (L/y)

 a e-bt = (L/y) -1

 a e-bt = (L–y)/y
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

 ln a – bt = ln { ( L – y ) / y }

 ln { ( L – y ) / y } = - bt + ln a

Comparing with the equation of a straight line:y = mx + c, and using Linear

Regression, the Slope & Intercept can be determined.

(B) Gompertz Function

A Gompertz curve or Gompertz function, named after Benjamin Gompertz, is
also a sigmoid function. It is a type of mathematical model for a time series,
where growth is slowest at the start and end of a time period.

The left-hand or lower valued asymptote of the function can be approached

much more gradually by the curve than the upper right-hand or future value
asymptote, in contrast to the logistic function in which both asymptotes are
approached by the curve symmetrically.

The formula for the Gompertz Function is:

y = L e{ -a *e-bt }
The 3 parameters are:
L– The scaling factor alters the size and position of the curve.
a– The Slope Factor, a positive result is returned when y is decreasing as x
increases

A negative result is returned when y is increasing as x

increases.
b – The Scaling Factor alters the size and position of the curve.

Conversion to Linear Model

y = L e{ -b* e-bt }
 ln y = ln L – a e -bt
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

 ln ( y / L)= - a e-bt

 ln ( L/ y )= a e-bt

 ln { ln ( L / y ) } = - bt + ln a

Comparing with the equation of the straight line: y = mx + c & by using

Linear Regression, Slope & Intercept can be determined.

(C)Bass Model
The Bass diffusion model was developed by Frank Bass and describes the
process of how new products get adopted as an interaction between users
and potential users. It has been described as one of the most famous
empirical generalizations in marketing, along with the Dirichlet model of
repeat buying and brand choice. The model is widely used in forecasting,
especially product forecasting and technology forecasting.

The formula for Bass model is –

S(t) = [p+q*{N(t-1)/m}]*[m-N(t-1)]
Where,

S(t) - number of new adopters for the product during the time period t.

N(t-1) -cumulative number of consumers who have adopted the product at the
preceding time point (t-1).

m - Market size coefficient

p - Innovation coefficient

q - Imitation coefficient

The equation can be simplified to the form,

S(t) = a + b*N(t-1) + c*{N(t-1)}2

This is of the form, y = a + b*x + c*x2. a, b and c can be obtained by regression and can
be solved for the coefficients m, p and q.
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

4. Empirical Results
Project
L A B ion MAPE

447.79 0.0491 290452 9.24150493

60000000 01 11 33 1
L A B Projection MAPE
348.78 0.0504 264004 7.47150562
45000000
72000000 81
7.290897 45
0.014371 60
20736708 3
15.53263

170000000 285.90
7.805803 0.0522
0.011058 239175
22934014 6.08465101
9.887869
35000000 55 35 52 2
200000000 7.926689 0.010609 23301375 9.24321

4.1 Logistic Function:

Fig. 1. Logistic Function Curve for L=3.5 crore

4.2 Gompertz Function:

Fig. 2 Gompertz Curve for L= 20 crore

 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

a b c MAPE
-4746.70987 1.05627449 -1.816E-09 1.5565084
8

m p q Projected
581720271 - 1.056266339 22561128
8.15978E-
06

4.3 Bass Model

4. Conclusions:
In this study, the growth of the mobile phones and mobile-density in Gujarat
has been analyzed using S-shaped growth curve models (Such as Logistic
and Gompertz) and Bass model.

The result shows that the Logistic function and the Bass model adequately
describes the path of mobile phone diffusion in the state of Gujarat and the
forecast for them shows low Mean Absolute Percentage Error(MAPE) of
about 6.08% and 1.55%, respectively. The most likely forecast for March,
 FORECASTING OF CELLULAR SUBSCRIBERS IN
GUJARAT

2010 using Logistic curve would be 23917552 with an increase of 3091143

in the number of subscribers in Sep’09. The forecast for March, 2010 using
Bass model was 22561128. It is evident that there is an upward growth in
the mobile subscriptions in Gujarat which is increasing at relatively constant
rate and is expected to increase in similar fashion for the next few years,
provided the similar conditions prevail. Government policies, tariff rates,
quality of service provided by operators and technological innovation can
augment the pace of growth of the telecommunication industry.

5. References:
http://www.censusindia.gov.in/

http://coai.com/statistics.php

http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/706/pr4nov
09no73.pdf

http://bassbasement.org/BassModel/Default.aspx

http://en.wikipedia.org/wiki/Logistic_function

http://en.wikipedia.org/wiki/Gompertz_function