Emerging Markets Calling...

The Indian telecom market has not only grown at a scorching pace in the last 5-6 years but also created some world-class companies that have now emerged as potential global challengers. There is now great level of excitement amongst investors, customers and bankers worldwide about the next moves of the Indian telcos. Whether it is mobile mergers or submarine cable builds or Wimax investments, India appears to be in the thick of things.

 

Over the next few years, growth in telephony will be driven by emerging markets in Asia, LatAm and Africa. These markets, with low teledensities, have been using wireless / mobile technologies to leapfrog several generations of telecom.  Emerging markets are also leading the growth in data and bandwidth consumption partly driven by increasing Broadband penetration but more importantly on the back of growing enterprise connectivity. These markets, typically growing 6-10% p.a., are now attracting attention from MNCs as growth or revenue opportunities, and not just as cheaper alternatives for back-office functions.  We are also seeing the rise of the new multinationals, from India, China and other rapidly developing economies, creating the reverse, outbound flow of investment. An obvious consequence of this economic activity is the need for improved cross-border communications and networking services. 

Some of the Indian telcos like Tata Communications made significant investments in global submarine cable networks at a time when most western telcos, smarting from the excesses of the previous decade, stayed away from the game. The previously under-supplied regions of Asia, including India and Middle East and Africa are now the hot-beds of cable laying activity, with Tata Communications alone involved in at least half a dozen projects simultaneously. We are also now moving up the value chain through investments in new networks (MPLS and Ethernet) and the creation of managed services like managed security, hosting and collaboration, with investments of several billions of dollars. Not only do we have the advantage of growing local businesses, we also bring with us a distinct knowledge of operating in the complex business, regulatory and policy environments of the emerging markets. As Indian companies and multi-nationals seek to build and expand their presence in this new world, they have greater comfort in partnering with those that have global capabilities but are locally superior. 

Indian telcos may have the disadvantage of a relatively small home market - the Indian enterprise market is about $5Bn in size compared to most western markets that are 4 to 20 times larger. Being small and late to market however is possibly our biggest strength. Determined to make a mark and without the burden of legacy networks and systems, we can seek to successfully take on the larger, more established and usually bureaucratic competitors. In particular, as relative new entrants, we can focus on innovation around new services capabilities and commercial models. At the same time, ownership of the core transmission and IP infrastructure provides us the ability to create distinctive network or cloud based managed services. Our managed security offerings, for instance, combine superior technology platforms with the strength of a global, Tier-1 IP network. Similarly, the ownership of a global MPLS network and a unique private plus public room business model have translated into a world-leading managed Telepresence service.

Indian telecom companies are not yet amongst the largest in the world, perhaps we will never be as large as some of the big players from the US and UK. However, in several segments and markets that have the highest growth potential in future, one can safely expect us to play a leading role. As developed markets age and slow down further, India and other emerging markets will become the center of gravity for the new world of communications. We can proudly say “hello” to that. 

(This article also appeared in the Annual issue of Communications Today in October 2008.)