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Perspectives on building technology businesses and AcceleratorIndia from Cartezia

Opportunities in India’s Telecommunications Sector

Wednesday, August 14, 2013

The Indian telecom sector has experienced phenomenal growth in the last decade to become the second largest communications network globally, reaching 900 million current telephone connections, 97% of which are wireless, and a teledensity of almost 75%. To support this growth and to exploit the full potential, the Government of India largely through the National Telecom Policy (NTP) 2012, is providing grants, tax breaks, and preferential rate loans for the telecom tower sector. There are also proposals to make India a teleport hub for uplinking/downlinking satellite television channels similar to Hong Kong and Singapore.

Key drivers to future growth in the sector are expected from increased access to new services and technologies predominantly in the mobile sector. For example, 3G traffic has increased by over 200% in the last 12 months after the steep tariff cuts of 70-80% in May 2012. 3G subscriptions are expected to increase by 40% to almost 150 million by 2015 reaching over 300 million by 2020.

The increased penetration of smart phones is expected to provide new opportunities in Mobile Value Added Services (MVAS). India's MVAS industry has grown at 50% per annum over the last 6 years and is now estimated at $ 2.7 billion, and is expected maintain this growth rate for the next few years. Strong MVAS prospects exist especially in m–commerce, for services like mobile banking and payments, and in m-Health services where leading the Telecoms operators  Vodafone India and Bharti Airtel have formed partnerships with healthcare firms.

India’s internet user base is also experiencing rapid growth and is set to triple to 370 million users in the next three years. As a consequence of the rise in data intensive device penetration, IP traffic in India will show the highest global growth in the next five years rising at CAGR of 44% to 33.5 Exabytes by 2017. Of this, mobile data traffic is predicted to grow over fifty times to 11 Exabytes.

This searing growth, along with the expansion of 3G services and virtual technologies is placing enormous demands on networks and infrastructure. Currently, India is showing the largest growth in data centre services market in the Asia Pacific region, its market valued at over $4 billion and expected to reach $6 billion by 2015. The prospective direction of this market will be shaped by the above trends as they escalate and other disruptive technologies such as cloud, virtualisation, and big data, come to prominence.

The revolution of the Indian Telecom sector in the last decade is well poised to take a major leap forward as the transition from voice to data creates opportunities throughout the value chain. This includes openings in the telecom tower sector, hardware development for smart phones, and especially in implementation of online and mobile solutions and business models in traditional markets like retail and banking.

International companies in the Telecoms sector can leverage these opportunities to grow their business in India, but they will require insights into unique characteristics of the Indian Telecoms market and its consumers. They also require key relationships with the local ecosystem players and need to develop partnerships focused on strategic and operational aspects of new business development to position themselves to win in this challenging but fast growing market.