History

The Indian telecom market has been displaying sustained high growth rates. India is one of the largest telecom market in Asia after China, Japan and South Korea. The Indian telecom network is the eighth largest in the world and the second largest among emerging economies. The industry has witnessed an explosive growth in past years.

Teledensity has more than doubled from 2.3 per cent in 1999 to 4.8 per cent in 2002. However, the world average is almost 7.5 times and the Asian average 4.5 times the Indian average. The Indian telecom market size of over US $ 8 billion is expected to increase three fold by 2012. The expansion of the telecom industry in India has been fuelled by a massive growth in mobile phone users. The exponential growth of mobile telephony can be attributed to the introduction of digital cellular technology and decrease in tariffs due to competitive pressures. The growth of cellular subscriber base has exceeded the fixed line subscriber base.

Over the past 10 years, India has registered the fastest growth among major democracies. It represents the fourth largest economy in terms of “Purchasing Power Parity”. According to a recent Goldman Sachs report, over the next couple of decades, Brazil, Russia, India and China – the BRIC economies- could become a much larger force in the world economy. “India could emerge as the world’s third largest economy and of these four countries; India has the potential to show the fastest growth over the next 30 years”. The report also states that, “Rising incomes may also see these economies move through the ‘sweet spot’ of growth for different kinds of products, as local spending patterns change. This could be an important determinant of demand and pricing patterns for a range of commodities”. The share of the services sector as a percentage of total GDP is also predicted to rise from the current 46 per cent to about 60 per cent by 2020.

Future Opportunities

India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. A host of factors are contributing to enlarged opportunities for growth and investment in telecom:

• An expanding Indian economy with increased focus on the services sector
• Population mix moving favourably towards a younger age profile
• Urbanisation with increasing incomes

Investors can look to capture the gains of the Indian telecom and diversify their operations outside developed economies that are marked by saturated telecom markets and lower GDP growth rates.

Further, at a time when global telecom majors are struggling to cope with their losses and the rollout of 3G networks, which has been a non-starter for close to a year now; India, with its telecom success story, represents an attractive and lucrative destination for investment.

A comparison with countries in the Asian region indicates that India still has some way to go, to reach the levels of tele-density in these countries, which brings in its wake a host of opportunities for investment in the Indian market.