An Article on Telecommunications Sector in India

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Telecommunications ​

One of the fastest growing sectors in the country, telecommunications has been zooming up the growth curve at a feverish pace in the past few years. The year 2007 saw India achieve the distinction of having the world's lowest call rates
(2-3 US cents), the fastest growth in the number of subscribers (15.31 million in 4 months), the fastest sale of a million mobile phones (1 week), the world's cheapest mobile handset (US$ 17.2) and the world's most affordable colour phone (US$ 27.42).

Trends

• Indian telecommunication firms added 5.19 million new subscribers in April 2007, taking the total user base above 212.02 million.
• Wireless service providers continued to dominate user growth by adding 5.15 million subscribers in April, while 40,000 new fixed-line users signed up.
• At 500 minutes a month, India has the highest monthly 'minutes of usage' (MOU) per subscriber in the Asia-Pacific region.
• India is emerging as a forerunner in using the cell phone as a tool to access the Internet, with one in every 11 people logging on to the web across the world through mobiles turning out to be an Indian.
• The country's telecom sector will see investments up to US$ 25 billion over the next five years, projects global consultancy firm Ernst & Young.
• India is expected to register handset production of over 51 million units in 2007 to record the highest growth in the Asia-Pacific region, according to technology research firm Gartner.
• India produced nearly 31 million mobile phones in 2006 worth about US$ 5 billion. The production of handsets is set to increase by 68 per cent in units and 65 per cent in value terms in 2007. By 2011, production volumes are expected to reach nearly 95 million units at a compound annual growth rate (CAGR) of 25 per cent.
• The retail market for mobile phones -- handsets, accessories and airtime -- is over US$ 15.6 billion and growing at the rate of 15-20 per cent.
• Massive infrastructure needs in India might provide a potential private equity role. A recent study by telecom regulator Telecom Regulatory Authority of India (TRAI) has estimated that the country will need about 350,000 telecom towers by 2010, as against 125,000 in 2007.
• With a CAGR of 46 per cent, India has emerged as the fastest growing market in the data centre-structured cabling market in the Asia Pacific region, according to Access Markets International (AMI) Partners, a US-based consultancy agency. The data centre structured cabling market is expected to grow from US$ 19 million in 2005 to US$ 125 million in 2010. The overall structure cabling market is expected to grow from US$ 127 million in 2005 to US$ 345 million by 2010 at a CAGR of 22 per cent. .
• In May 2007, Indian GSM mobile phone service providers signed up 5.1 million customers, taking total users to 130.6 million, the Cellular Operators' Association of India said.
• The combined revenue of all operators from their mobile businesses would more than double to US$ 33.1 billion by 2010, from about US$ 12.8 billion in 2006.
• The total revenue of all telecom operators is also set to nearly double to US$ 43.6 billion in four years, from US$ 22.5 billion in 2006. The revenue share of mobile business would rise to 76 per cent in the same period, from 57 per cent currently. India, which is adding over six million mobile subscribers every month, has surpassed Russia to become the third largest mobile market in the world after China and the US. The total mobile subscriber base in the country is likely to reach 425 million by March 2010 with Bharti Airtel (GSM) and Reliance (CDMA and GSM) emerging as the top two mobile operators in terms of number of subscribers.

Destination India

The growth statistics of the sector combined with the Government's decision to increase the foreign direct investment (FDI) cap in the sector to 74 per cent has generated huge interest among global investors. The share of telecom in FDI rose from 3-4 per cent to 12-15 per cent in the calendar year 2006. TRAI has proposed that in view of the convergence of services, cable TV operators be allowed to increase their FDI cap from the existing 49 per cent to 74 per cent to bring them at par with the telecom sector.

• British giant Vodafone, the world's largest mobile player, has announced its decision to invest US$ 2 billion in India in 2007. This is nearly one-fifth of its global expenditure, reflecting the importance it attaches to India, the fastest-growing telecom market.
• Richard Branson's Virgin Mobile is entering the Indian market through a 50:50 joint venture with the Tata group.
• Essar Telecom Tower and Infrastructure, GTL Infrastructure and Srei Group's Quipo, the leading players in the telecom tower business, are collectively investing around US$ 1.1-billion to roll out close to 18,000 towers during 2007.
• UK-based Intec Telecom Systems, which offers operational support, access billing and retail billing services for telecommunications operators worldwide, has lined up a US$ 12 million expansion plan for its Bangalore office.
• Cellular service provider Aircel will embark on an over US$ 400-million pan-India network expansion to double its subscriber base of 5 million over 18-24 months.
• Swedish telecom equipment giant Ericsson plans to invest US$ 100 million every year in India with an option to enhance it depending upon its growth. It plans to produce its mobile handsets in Sriperumbudur in Tamil Nadu through manufacturing agreements with Flextronics and Foxconn -- global manufacturing outsourcing partners of Sony Ericsson.
• Cisco is starting a trial factory in Chennai for making Internet protocol-based phones, as part of its US$ 1.1-billion investment plan for the country.

India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. Not to be left behind, Indian cellular operators have lined up investments of about US$ 20 billion over the next two years to bring over 80 per cent of the population under mobile coverage. The planned investment for the next couple of years is 50 per cent higher than what has been invested in the last 12 years.