Indian Telecom
The Indian telecommunications industry is on the verge of Great Expansion with abundant possibilities. The industry is growing at the fastest pace in the world [9 million mobile lines per month and India is the second largest mobile market globally.
The new Government policies [declared on 1st August, 2008] on 3G, WiMax, Mobile Number Portability will further augment the growth rate.
The world's leading telecom handsets manufacturers, such as Nokia, Samsung, Motorola and LG have their presence in India, along with leading global service companies and infrastructure majors, such as Vodafone, AT&T, Ericsson, Alcatel, Singapore Telecom and Siemens.
On June 18, 2008, India reached the target of having 300 million telephone subscribers, becoming the second largest telecommunications network in the world after China. According to the report titled 'Mobile BRIC: Extreme Growth Ahead', BRIC (Brazil, Russia India and China) India is expected to be the second largest mobile market in the BRIC nations, with 560 million mobile users, by 2012 (after China with 800 million users).
In July 2008, the cumulative revenues of cellular, fixed line, national long distance, international long distance, broadband, radio trunking and VSAT services, had risen to a humongous US$ 30,888 billion registering a growth of 21.3 per cent, as revealed in a Voice & Data survey. The Indian telecom market had generated revenues around US$ 20 billion in 2006-07.
The market saw a growth rate of 33 per cent over previous year and recorded a compounded annual growth rate (CAGR) of 22 per cent for the period from 2002-03 to 2006-07. This growth has resulted in the revenues of the segment growing two-fold, in the past three years. It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10.
India's overall tele-density stood at 26.89 per cent in June 2008, and the government has plans to raise the tele-density to 40-45 per cent by 2010, thereby offering greater growth opportunities for service providers to exploit the large untapped potential.
Growth in Segments
Indian mobile operators are adding over 8 million subscribers a month, with a majority of the new users being from rural areas. The share of mobile phones had increased from 71.69 per cent at the end of March 2006 to 87.68 per cent at the end of May 2008. While the total mobile subscriber base was 277.92 million, wire-line subscriber base was 39.05 million. The number of mobile subscribers in India, (India is the world's second-largest wireless market after China) has gone up to around 280 million.
According to a report by Gartner Inc., India's mobile subscriber base is projected to exceed 737 million connections by 2012 growing at a CAGR of 21 per cent and India is likely to remain the world's second largest wireless market after China in terms of mobile connections. The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent from 19.8 per cent in 2007.
GSM companies added over 6.3 million new customers in June 2008, (excluding the GSM subscriber base of Reliance Telecom) crossing the 212 million mark, with a growth of 3.07 per cent over May 2008, according to the Cellular Operators' Association of India (COAI).
According to an analyst firm Springboard Research, India will become the leading market for WiMAX in the Asia pacific region and is expected to have 15.8 million WiMAX subscribers by 2012, accounting for 46.7 per cent of total subscribers in Asia-Pacific and 35.7 per cent of revenues from the region. However, India had only 3.4 million broadband subscribers in January 2008, which was much lesser than the government's target of 9 million.
Global consumer electronics and mobile phone vendors are going green in India. Bigwigs like Nokia, LG, Samsung and Haier, among others, are planning to introduce products that will be positioned on an environment-friendly platform, starting the trend of environment as a brand strategy in the Indian consumer electronics industry.
Value-Added Services Market
Consequent to a fall in revenues from voice-based services, mobile value-added services (MVAS) is all set to see massive growth across the world. According to a report by PricewaterhouseCoopers (PWC), the Indian value-added services (VAS) market is all set to grow to US$ 2 billion in 2008. Currently, MVAS in India accounts for 10 per cent of the operator's revenue, which is expected to reach 18 per cent by 2010. According to a study by Stanford University and consulting firm BDA, the Indian MVAS is poised to touch US$ 2.74 billion by 2010.
Mobile advertising, which is an important VAS segment, is still miniscule in India. According to analysts, it has the potential to grow at 200 per cent a year, becoming an important revenue source.
According to global technology research firm Gartner, the value-added services market in India is expected to grow to about US$ 5.6 billion by 2011, and data services will be the major factor behind the growth. India's share in Asia-Pacific (excluding Japan) data revenue is estimated to almost double from about 6 per cent in 2007 to 11.5 percent by 2011. India is expected to lead Asian countries in terms of mobile gaming revenues. The mobile gaming revenues in India, in 2007, stood at around US$ 80 million and it is likely to touch US$ 450 million by 2012.
Echoing similar sentiments, research firm Gartner estimates data services to account for 22 per cent of the total revenues by 2010 from 12 per cent in 2007.
Manufacturing: Charting a Growth Path
India's telecom equipment manufacturing sector is set to become one of the largest globally by 2010.
Mobile phone production is estimated to grow at a CAGR of 28.3 per cent from 2006 to 2011, totaling 107 million handsets by 2010. Revenues are estimated to grow at a CAGR of 26.6 per cent from 2006 to 2011, touching US$ 13.6 billion.
Presently the telecom hardware manufacturing sector is dominated by international majors like Nokia, Ericsson, LG, Motorola, Samsung and Alcatel-Lucent, who have set up manufacturing bases in India. Domestic manufacturers have little contribution in the segment.
Other foreign majors that have set up manufacturing bases in India include Foxconn, Flextronics Elcoteq Celestica, Elextronics Aspocomp, Salcomp, Siemens, Cisco, Perlos and Solectron.
Concurrently, India's surging domestic market is also providing excellent investment opportunities in other segments of telecom equipment industry. Telecom Regulatory Authority of India (TRAI) estimates that the country will need about 350,000 telecom towers by 2010, as against 125,000 in 2007.
LG Electronics has announced that it will be further expanding its handset manufacturing facility in India. Nokia will now be targeting rural India in its expansion plans.
Great Expectations
Having 500 million telephone connections by the year 2010 seems like very achievable target, with the total investment for the sector projected at a whopping US$ 76.6 billion during the eleventh plan period (2007-12). Even with 300 million telephone connections, the tele-density is merely around 27 per cent. Mobile telephony is growing at an annual rate of over 90 per cent. On an average, over eight million subscribers are being added every month. Apart from the basic telephone service, there is an enormous potential for various value-added services. In fact, the real potential for telecom service growth is still lying untapped.
The Indian rural market is going to be the next big thing for wireless telecom providers. With the tele-density in rural areas being still about 10 per cent against the national average of about 27 per cent, there seems to be huge untapped potential for mobile phone penetration in rural India.
Global Manufacturing Exports Hub
'Made in India could become the next big manufacturing exports story' says a report by McKinsey. With it’s proven track record in the skill-intensive industries and the global trend to manufacture and source products in low cost countries, India is well placed to emerge as one of the leading hub for manufactured exports.
Already a host of companies are making India their global manufacturing exports hub for their global operations. The list includes companies like Ericsson, Nokia-Siemens Networks, Nortel, Cisco, Intel, Samsung, Hyundai and Nokia, among others.
Also, manufacturing contributes about two-thirds of the total exports of the country. It is estimated that manufacturing exports could increase from US$ 40 billion in 2002 to US$ 300 billion in 2015, simultaneously increasing its share in world manufacturing trade from 0.8 per cent to 3.5 per cent.
Going Global
Indian manufacturers, with the tremendous expertise gained in the domestic market, are spreading their wings to reach out to global markets. India Inc. has been busy taking aggressive steps through both acquisitions and Greenfield investments abroad.
In addition, a clutch of Indian companies are also becoming a vital link in the global supply chain. Moser Baer has established itself as a global manufacturer of data storage media such as DVDs and CDs.
Manufacturing Excellence
Indian companies are also becoming renowned for their adherence to global quality standards. Already, India is amongst the countries with the highest tally for 2007 with total TPM Excellence Awards -- conferred by the Japan Institute of Plant Maintenance --winners standing at 132. It can also proudly claim to have 15 Deming award-winning companies (amongst the highest tallies worldwide outside Japan), and one Japan Quality Medal winner.
The industry has also been on the path of continuously increasing its productivity levels. For example, an Economic Times survey of 200 companies (arranged in terms of value of output) finds that the incremental capital output ratio (ICOR), that measures the output generating capacity of incremental capital, has improved from 0.62 in 2005-06 to 0.59 in 2006-07.