BUSINESS & FINANCE INVESTING IN INDIA

CLIMATE CHANGE

Capital investment in India’s telecoms sector continues to grow, but corruption, eco- nomic turmoil and regulatory hurdles have created an air of uncertainty. By Nick Wood

crown, exemplified by the establishment in recent years of several global telecoms players’ high-rise local headquarters in Gurgaon, near Delhi. However, mobile price wars, a high-profile spectrum scandal, and regulatory and economic uncertainty have removed some of the sheen from those office buildings, and cast doubt over whether India’s telecoms sector remains a worthwhile investment. The volume of capital invested in

I

India’s telecom sector reached $67 billion in fiscal 2010-11, up 17.7% from $56.9 billion in fiscal 2009-10, according to the Telecom Regulatory Authority of India (TRAI). Mobile subscriber growth drove an 8.69% increase in total telecom service revenues to $34.3 billion from $31.5 billion. Beyond pure customer growth the

picture of India’s retail mobile market is less rosy. GSM operators saw average minutes of usage fall to 349 per subscriber per month as of March 2011, down from 410 a year earlier, while ARPU slipped to 100 rupees ($1.99) from 131 rupees ($2.61); for CDMA operators MoU fell to 263 from 307, and ARPU to 66 rupees ($1.31) from 76 rupees ($1.52).

Mobile market shares (30 Nov 2011) Loop 0.36%

Stel 0.40%

Videocon 0.62%

MTNL 0.64%

Sistema 1.64%

Uninor 3.87%

6.89% Tata

9.43% Aircel

BSNL 10.86%

11.76% Idea Pvt: 88.51% 6

PSU: 11.49% Source: TRAI

HFCL 0.13% Etisalat 0.18%

Bharti 19.75%

Reliance 16.96%

Vodafone 16.60%

180 160 140 120 100 80 60 40 20 0

Overall Urban Rural Source: TRAI

ndia is one of the darlings of the developing world and its fast-grow- ing mobile market the jewel in its

With wireless teledensity reaching

73.4% in November, eight of the coun- try’s 15 mobile operators still holding less than a 5% share of the market, and no firm plans for major upcoming spectrum auctions that would drive geographic or service expansion, the Indian telecoms party might appear be over. However, the outlook from the enterprise side is signif- icantly more optimistic. “There is a great hunger [from Indian

businesses]...The whole phenomenon around cloud computing and social networking has really got the interest of CIOs,” says Bala Mahadevan, India chief executive at Orange Business Services (OBS). “Two years ago they were satisfied with what they had; that is not the case now.” Services such as unified communi- cations, network security, migrating to IP-based communication and improving connectivity to new markets are all seeing healthy demand, he says. OBS has invested heavily in India. It has

12 PoPs and 10 offices, including one of its four Major Service Centres (MSC), which employs 1,500 of its 2,300 local staff, providing order processing and support services for its global customers, and a network operations centre (NOC). While call centres, IT, and IT business process outsourcing (BPO) will continue

India teledensity (Nov 2011)

to be lucrative sectors for enterprise telcos in India, Mahadevan says OBS is also tapping into a number of fast-grow- ing industry verticals. “The government is going to be a big spender,” he predicts, as local, state and central authorities follow through on plans to provide more services electronically. “Retail is booming...India is a consump-

tion-led economy. There is huge hunger for goods; whether it is white goods or luxury goods, retail will be a very big sector,” Mahadevan says. The country’s pharmaceutical industry is also an attrac- tive prospect, as are its manufacturing and hospitality sectors. “India is not just a base for manufacturing pharmaceuticals, it is also increasingly being recognised as a research base,” he says. As such, OBS can target multinationals expanding into India and domestic pharma players eyeing opportunities abroad. BT Global Services is another enter-

prise player taking special interest in India, investing in a regional ‘excellence centre’ in Pune, and a security operations centre (SOC) in Noida. The UK incum- bent has 600 staff in the country spread across offices in Delhi, Gurgaon, Mumbai, Bangalore, Chennai and Pune. “India continues to provide BT with

remarkable business opportunity and by virtue of its sheer size and growth contin- ues to be the preferred destination for many of BT’s global customers and Indian and Asian multinationals,” says BT Global Services’ Singapore-based

spokesman

Carson Dalton. The Asia-Pacific region as a whole represents a $12.5 billion revenue opportunity for the company. “Unified communications services such

as audio and video conferencing and telepresence presents a huge opportunity for BT in India,” he says, citing forecasts from research firm IDC which puts the size of India’s enterprise conferencing market at $154.28 million by 2015. But investors in India should be aware of its economic challenges.

www.totaltele.com February 2012

teledensity (%)