Indian Telecom is Looking Bright and Prosperous

The Indian telecom sector has undergone a major transformation since key policy reforms were initiated in the late 1980s when telecom equipment manufacturing was opened to the private sector, followed by the National Telecom Policies in 1994 and 1999. Historically, the telecom network in India was owned and managed by the government. It was considered a strategic service, best under state control. However, when the telecom revolution in other countries in the 1990s resulted in a better quality of service along with lower tariffs, Indian policy makers opened up the telecom services sector. India is divided into 18 telecom circles and four metropolitan jurisdictions.

Today, India is the fourth largest telecom market in Asia, after China, Japan and South Korea. It is also the eighth largest telecom network in the world and the second largest among developing countries. In wireless telecom, India is one of the world’s fast – growing mobile markets, adding 6.4 million subscribers a month on average.

Although wireless penetration is just 13% among a population of 1.1 billion (compared to 40% in China and close to 100% in Western Europe), India is forecasted to have 525 million mobile subscribers by 2010, but wireless service providers may have to be consolidated to make services more affordable through higher economies of scale. For its part, the Telecom Regulatory Authority of India (TRAI) has developed a set of M&A norms that have limited the market share of a merged entity to 40% in the particular market, against the earlier 67%, based on the number of subscribers and revenues.

Given the continued growth opportunity, Foreign investors are lining up to enter the Indian Market. In Late 2006, AT&T became the first foreign telecom operator, in partnership with Mahindra Telecom, to obtain a telecom license under the foreign direct investment policy that allows up to 74% foreign ownership. Vodafone, the wireless operator based in the UK and the half-parent of Verizon Wireles, recently acquired a 52% stake in Hutchison Essar, which was renamed Vodafone Essar. Russian telecom major, Sistema, has acquired a 10 per cent stake in Shyam Telelink for fixed – line, cellular and internet services in the North Indian state of Rajasthan.

Major telecom operators in India include Bharti Airtel, Reliance Communications, the government-owned Bharat Sanchar Nigam, and Vodafone Essar.