Abstract
India's slow process of telecom deregulation has finally produced results in
the last two years. Viewed by many as the Last Great FrontierEfor telecom
investment, access points to the telecom network have exploded recently: as of
10/05, it had 48 million fixed lines and 66 million mobile subscribers, for a
total of 110 million access points to the network. This is nearly quadruple
the figure at year-end 2000, when India had 3 million mobile users and 27
million fixed lines. As India targets stable, 6-8% annual economic growth, and
regulatory policy fosters investment, this trend should continue; for example:
- Lehman Brothers forecasts roughly 250 million mobile users for 2010
- The Telecommunications Regulatory Authority of India (TRAI) targets 20
million broadband and 40 million total Internet subscribers by 2010.
Unless current trends reverse, India will see massive investments in its
telecom networks over the next 5-10 years. While there are some parallels to
China's late 1990s/early 2000s experience, India is unique. Government policy,
for example, is more open:
- Regulatory: India's government, while it still majority-owns the incumbent
domestic fixed carriers (BSNL and MTNL), has encouraged private operators to
push growth forward; the emergence of the Reliance, Tata, and Bharti telecom
groups is the main result. Rules regarding foreign ownership of local carriers
are now quite liberal, with a 74% share ownership ceiling. Local suppliers of
equipment, cable, and other inputs have some advantages, but generally must
compete equally with foreign vendors.
Industrially, India is not on the same development path as China:
- Industry: China has used its low cost base to attract global
manufacturers, and then encourage Chinese firms to enter into global markets
using expertise acquired through various means of technology transfer (as well
as, increasingly, true local innovation). India has some manufacturing base,
but is primarily focused on using its strengths in software and business
process outsourcing to develop firms able to compete globally. Arguably, the
success of the Indian model relies more heavily on efficient, advanced telecom
infrastructure than in China.
Economically, the two markets are at quite different stages:
- Economy: while both are close in population (India at 1 billion and
growing, China at 1.3 billion and peaking), China's per-capita GDP is roughly
double India's (an estimated $1,340 in 2005, v. $619 in India). China is also
growing at a slightly faster rate. As a result, average revenues per user
(ARPUs) are much lower in India; this makes carriers more cost conscious, and
affects how they build and pay for networks.
To sum, India is a vast, largely untapped, unique opportunity for telecom
suppliers, and requires careful study to understand the market's key players
and how to thrive in this booming market.
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