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The telecom industry in India has achieved its first NTP '99 milestone. But it still has a long way to go before it crosses the other achievements.

The day of 31 March 2004 is a landmark in Indian telecom as the country achieved the first NTP '99 milestone by crossing a tele-density of seven. This achievement will help in reaching a tele-density figure of 15 before the target year of 2010.

In the last fiscal, India added around 22 million lines, i.e., around 1.8 million lines per month. A remarkable achievement considering the fact that in FY 2002–03, the industry added around 10.25 million lines only. In FY 2002–03, the industry almost doubled its additions thanks to cellular services, which contributed around 90 percent of the additions.

The Groups
DoT is still the biggest group with revenues of Rs 39,317 crore and is followed by the Tatas at Rs 6,763 crore. Reliance was the fastest growing group with a growth of around 433 percent and Reliance Infocomm, the dream project of Mukesh Ambani, outgrew all the Top 10 players by achieving a growth of over 750 percent.

Bharti group was not to be left behind, and did well to keep its number one position intact in the cellular services space. The group scored a steady 60 percent growth to join the billionaire club with revenues of Rs 5,262 crore. On the other hand, Tata is consolidating and will have a bigger role to play in FY 2004–05. The groups have aggressive plans both on cellular as well as broadband.

Hutch is the only MNC in the services sector who has been in India for a long time and is presently, consolidating its operations in the country. The group plans to encash on the mobile boom, as it is the only pure-play cellular player. On the revenue front, the company grew by around 56 percent and 138 percent in terms of subscriber base.

The Services Industry
India's communications (services) industry was pegged at Rs 56,367 crore ($12.25 billion), in comparison to 47,121 crore ($10.24) in FY 2002–03. The main attraction in the services industry was the cellular services segment. The cellular segment grew by around 72 percent in revenue terms and 135 percent in subscriber terms. The cellular services segment netted a revenue of Rs 14,748 crore ($3.2 billion) in FY 2003–04. This fast growing segment will give a good fight to the fixed services and will overtake it in about two–three years' time.

The Top 10 club is made up of two incumbent players, four from the Tata stable, and four other private operators. Reliance Infocomm has made a surprise entry into the club, and firmly positioned itself at the number five slot. Bharti Tele-Ventures has moved a step forward and is placed at number three and is likely to replace MTNL. The fixed services wing of Tata Teleservices has made a surprise entry in the Top 10 club with a growth of 191 percent from Tata Teleservices and 77 percent from Tata Teleservices (Maharashtra). Data Access, the pure play ILD player has been able to retain its seventh position despite the entry of Reliance Infocomm in ILD services. Hutch Max Telecom (Orange) has slipped two positions as the company could grow only by 20 percent (in revenue terms), which is well below the industry average of around 23 percent. Despite a negative growth of around 30 percent, VSNL has been able to retain its position in the Top 5 club and is at number four. On the incumbent front, BSNL has outstripped MTNL and has grown by around 20 percent. MTNL recovered ground and registered a positive growth in FY 2003–04.

V&D estimates CyberMedia Research

The Equipment Industry
The Indian communications (equipment) industry was estimated at Rs 30,348 crore ($6.6 billion) in FY 2003–04. The carrier equipment contributed 32 percent, enterprise equipment around 18 percent, mobile phones around 27 percent, and others (fixed phones and telecom software) contributed 23 percent. The mobile phone segment was the star performer with an astounding growth of around 568 percent. Carrier equipment faced a negative growth whereas enterprise equipment grew marginally and registered a growth of around 19 percent.

The Top 10 equipment vendors had new entrants; Nokia and LG from the wireless sector, and Wipro and Infosys from the telecom software front. Ericsson, Motorola, and Cisco have been able to retain their position at number three, four, and five respectively. Nokia and LG have replaced Lucent and ITI, occupying the first two slots. Both companies have shown splendid growth in the mobile handsets business.

Last years' star performer Lucent has slipped to number six with a 27 percent drop in revenues in FY 2003–04. Despite negative growth, ITI has been able to retain its position among the Top 10 companies. The three telecom software companies share the last three slots and they have grown by over 24 percent. TCS, Wipro, and Infosys have been the big names in the IT sector and are replicating their success story in the telecom sector too.

The Outlook
FY 2004–05 is expected to be a good year for both services as well as the equipment industry. The catalyst for this growth will be mobile and broadband services. Service providers are expanding their mobile networks by leaps and bounds, which is good news for the equipment industry.

BSNL, Tata, Reliance, and Hutch are rolling out their expansion plans. Bharti, darling of the bourses, also has big plans and is looking at the expansions from a different perspective, giving it an edge over other players. The company does not believe in numbers, and has opted for network outsourcing deals with Ericsson and Nokia on a per Erlang basis. This approach frees the company from managing and maintaining large networks that are growing exponentially, so it may concentrate on service delivery and marketing.

The large expansion plans of service providers cannot be implemented without huge investments. The FDI cap currently limits investment opportunities, and companies are now exploring the IPO route to raise funds. The probables include Reliance Infocomm, Hutch, Idea, and TCS.

With complete unified licensing expected to come into force this year we might see some movement in the industry, which will give a big push to the growth of the Indian communications industry. The mantra for service providers this year will be cost optimization and aggressive marketing. And the winner will be the one who can manage both efficiently.

Pravin Prashant Deepak Kumar Balaka Baruah Aggarwal Ravi Shekhar Pandey and Anurag Prasad