CALCUTTA, India, June 25 (UPI) -- Over the last eight months, a handful of ambitious telecom players from China, Korea, Singapore and Taiwan have been muscling their way into the Indian telecom scene, staking their claim to the potentially golden opportunities offered by the sector.
During that time, at least six new handset manufacturers from China have launched their products in India. These include China's largest homegrown handset manufacturer Nungbo Bird, Taiwanese DBTel and the $3.5-billion BenQ.
Then, there are other names from the east that are looking hungrily at India. Companies like Korea Telecom and Singapore Technologies are looking for ways to tap the booming wireless and broadband market in India. Korea Telecom in fact has already signed an understanding with India's largest state-owned telecom operator BSNL Ltd. to offer broadband services, while Singapore Technologies are talking to Indian cellular operators for joint ventures.
Besides, in April, Malaysian telecom major Telekom Malaysia, joined the list of large South East Asian telecom names like Singtel, Hutchison, ZTE Corporation, Huawei Technologies and First Pacific that are already embedded in the country, by acquiring 33 percent of AT&T's stake in the country's third largest mobile telephony operator Idea Cellular.
There's more, too. If interest evinced by participating in the recently concluded Supercomm India 2004, the country's largest focused telecom sector event is any indication, then waiting in the wings are other lesser-known brands like the Korean manufacturer Ezze; Mobile and Amoi Electronics from China that are planning to take on the Nokias and the Motorolas in the Indian market.
Amid the various hurdles such as governmental controls, tariff problems, stringent foreign direct investment rules and other problems that still exist in the country, why this sudden rush from the new breed of emerging telecom global players now? And more importantly, why this interest when the subcontinental markets is already crowded by such global goliaths like Motorola, Siemens, Nortel, Alcatel and Nokia.
Nokia for instance, is already huge in India; the market leader recently reported revenue of Euro 1 billion in 2003 from India alone, which means that India is Nokia's sixth largest market in the world and the Finnish company isn't about to let others get a foothold without a fight.
That's because "while most of mobile telephony's growth has occurred in China," said a recent Deutsche Bank white paper on wireless telephony called "Brilliant Past Bright Future", "India represents one of the most exciting growth opportunities for mobile." The paper adds, that with its billion plus people, India is the second most populous country on the planet, but has just 33 million wireless/mobile telephone subscribers. It is expected that the subscriber base will grow to 290 million by the end 2008 and 500 million by 2010. "This makes India one of the fastest-growing markets of this decade," Deutsche Bank said.
And according to study called "Redefining Indian Telecom", released by Ernst & Young, Indian telecom sector could see almost three-fold jump in revenues by 2007, " by when the Indian telecom network will become the second largest in the world after China", it said.
Admittedly, "India has been witnessing a very high telecom growth with phone connections growing at 22 percent and 100 percent for cellular and Internet services. To reach around 100 million connections by December 2005, India will need an investment of around $12 billion," says Michael Kennedy, chairman of Motorola and Telecommunications Industry Association (TIA) of the United States.
India is not just the fastest-growing market, but also the most competitive, and hence the cheapest. Intense competition in the telecom sector over the past two years has led to a crash in prices for everything from handsets to talk time. Talk time tariffs for instance have come down by 74 percent over the past two years, and handset prices, which were sold at a premium of as high as 40 percent over international prices even until a year back, are now at par. "The telecom service sector has shown unprecedented growth during 2003-04, mainly driven by intense competition and aggressive pricing," says the Telecom Regulatory Authority of India chairman, Pradip Baijal.
And by virtue of its size, growth rate and competitiveness, the country is setting the benchmark for the global telecom industry as well. The recent deal between India's newest and fastest growing wireless telephony company, Reliance Infocomm, and United States-based Lucent Technologies, is a good example of how India is setting the benchmark for lowest equipment prices in the world.
Industry sources say that Reliance Infocomm's negotiating capabilities managed to bring down the equipment cost of infrastructure to under $40 per subscriber from $100 two years back. Equipment rates for Reliance in fact have slipped even further to come down to $25 per subscriber - once again, among the lowest in the world.
In another landmark agreement, Sweden's equipment vendor Ericsson agreed to a revenue-sharing deal with the Indian mobile telecomm operator company Bharti Televentures that will allow Ericsson to earn a percentage of revenues every time a subscriber downloads video or plays a Java game. This kind of cooperation is quite unusual in the global wireless world, say global vendors, admitting that participating in the Indian market has forced them to radically reduce costs in their own companies.
Nevertheless, despite the scorching growth prospects that India offers, the road ahead for telecom players in the country may not be without hurdles. "In India business growth prospects cannot be celebrated without caution," says Kobita Desai, telecom analyst with Gartner India. Indeed, it is a known fact that politicians and bureaucrats with leftist leanings were always displeased with a virtually open telecom industry. Now, since the Congress-led 13-party coalition of the United Progressive Alliance is dependent on the support of the Left, the government will need to accommodate socialist views more stringently.
"China may no longer hold chairman Mao Zedong's beliefs sacrosanct, but India's communists remain loyal to his spirit," says Ramesh Venkataraman, partner in the Mumbai office of McKinsey & Company. "One is always concerned about the macro-political climate. We just pray that regulators in India remain forward-looking."