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Telecom: India’s Knight in Shining Armor 5 Mar, 2009

“When the United States sneezes, the world catches a cold.” However, the telecom sector in India seems to have clearly defied this saying by witnessing robust growth in the past quarter.

Picture this, the total telecom subscriber base for India grew from 70.83 million in the first quarter of 2008 to 90.98 million in the second quarter. If you thought this was outstanding, there is more to come. Telecom companies added a record 15 million customers last month. The numbers can make anyone dizzy, especially at this time when nearly all industries across the world are witnessing a massive slowdown.

There is also clear evidence that revenue from telecom services is unlikely to be hurt by a recession. It is one of the fastest growing industries in the world and India is projected to become the second largest global telecom market by 2010. When closely looking at the other sectors in the country, telecom has clearly survived the present slowdown. Contrast this to sectors like real estate, automobiles and construction which have been hit hard. The commodity sector has also been hit despite the rising demand, and job buoyancy in the IT sector has decreased as well.

What’s more, 20 important deals worth $9.15 billion took place in India’s telecom sector this fiscal. The largest deal during the period was the buyout of a 26 percent stake in Tata Teleservices by Japanese company NTT DoCoMo Inc. for $2.7 billion. Other major deals included Italian multinational Telecom Italia’s acquisition of a 49 percent stake in Unitech Telecom for $2 billion and Dubai-based Emirates Telecommunications Corp’s (Etisalat) buyout of a 45 percent stake in Swan Telecom Pvt Ltd. for $900 million.

India: massive mobile industry growth

Telecom is clearly shining amidst the gloom. The Indian wireless industry, with a 32% penetration is the second largest after China in terms of subscribers at 325 million. Reliance Communications launched its GSM service in January and by the end of the month it had made a record by acquiring over half a million subscribers. The GSM subscriber base had touched 27.25 crore in January 2009. More recently, State owned MTNL’s launch of 3G services – ‘Jaadu’ – is all set to create further magic.

Predictably, this growth is now coming from the hugely untapped rural market consisting of villages and small towns. According to figures from Q2 2008, rural India has so far contributed a 71% growth in the telecom sector, while the remaining 29% growth came from urban India. The rural segment is witnessing a growth of 8-10% every month – giving a substantial boost to the telecom sector.

In the village of Karanehalli, about 40 miles from India’s high-tech capital of Bangalore, mobile phones have changed the way farmers do business. Here, a farmer commonly does not have a toilet for his home or a tractor for his field. But when a cellular tower was erected in his village, he splurged on a cell phone.

Here in Karanehalli, the old family tradition of crushing rice with a massive stone roller has not changed, but a mobile phone has certainly changed farming. Farmers use it to decide when to plant and harvest by calling other farmers, to get the best prices for rice, coconuts and jasmine by calling wholesalers, and to save hours of time waiting on the road for deliveries and pickups that rarely come on time. Farmers believe that their life is much better with the mobile phone, as they can be reached by anyone while they are working in the fields. In fact, a majority of the rural population thinks that they are in a better shape after the global crisis.

People who have observed this sector closely would mirror our views that the Indian telecom has stood strong against these tough times. In the next couple of months, India will rise into a towering position in terms of telecom subscriber base. VNL’s revolutionary WorldGSM™ system, which was recently showcased at MWC 2009 in Barcelona, is another momentous step in helping bridge the last mile and drive the mobile telecom success story.

Clearly, telecom is proving to be India’s knight in shining armor.

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