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The Indian telecom industry is going to witness an unprecedented market condition in the next five years.

There are alarm bells ringing loud in the wake of stiff competition between the new operators and existing players over a possible tariff war. Factors such as the possible sharp decline in the number of additional users, that will be shared among possibly fifteen operators (from the present five pan-India players); dwindling ARPU; and non-voice revenue streams will decide the future. If we top this up with government policies; regulatory hurdles; and weak economic conditions the picture could become even more grim.

During the last fifteen years of the telecom liberation, ever since the launch of the revolutionary NTP 1994 in India, the industry has identified the strengths and shortcomings that it has to work to keep the success story alive. With A circles across the country seeing mobile penetration touching the 100% mark, a larger share of growth is coming from the rural markets.

The present is prefect for the industry. Undeterred by the chill in the global market, the Indian telecom industry continues to tread strongly-through FY 2009 to the current fiscal. The telecom subscriber base has grown in the last three years at a CAGR of 44% to reach 415.2 mn at the end of May 2009, supported by a progressive regulatory regime, falling tariffs and the increasing disposable income of Indian consumers.

The future of the telecom industry in India seems bright, but small hurdles could blur the picture that appears perfect at the moment. The players believe that the next five years are going to play a crucial role in deciding the growth chart of the industry. The country's telecom industry has reached a stage of transition from a developing market heading towards maturity. Thus, all the stakeholders must act towards eliminating the roadblocks that are likely to slow the growth rate.

Positive Signs
Bharti Airtel CEO & Joint MD, Manoj Kohli believes that the telecom sector will be among the top three in the country. “Already, we have moved ahead of FMCG as a sector and you will see this sector moving far ahead of many other sectors,” he says.

“We have seen that infrastructure areas always take time to pick up, and infrastructure investment takes time. I believe the growth could be faster because by that time the infrastructure investments and rural investments will start having positive impact,” Kohli adds.

The CEO sees bright prospects for the sector in the next five years: “The next five years are going to be extremely attractive. But at the same time, we have to keep in mind the intensity of competition and its the impact on the sector,” he says, adding that “the sector needs a lot of maturity and prudence in terms of viability and setting tariffs. I hope all the major players in the sector will be prudent enough to take long term oriented decision. If this happen, not only will the size of the sector grow but the viability of the sector will also grow,” he says.

Sustenance of the growth of the industry at the same EBITDA levels and meeting the stock market expectations is going to be a challenging task, observes CS Rao, chairman, WiMax Forum.

There is no denying the fact that there are issues revolving around sustenance of the growth, and players will have to chart out solutions for these. “The sector will have to actually enhance the business models and make it more and more viable for higher competitive intensity and lower tariffs. So, business models have to become more lean and cost effective if the viability of the sector has to be robust,” says Kohli.

There lies a big opportunity in rural markets. The rural push is going to generate both direct and indirect employment, according to Satya N Gupta, chief regulatory advisor, BT.

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