Network carriers ride on data boom

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all this there is no denying the fact that more needs to be done as India sits at the cusp of a data boom. Data services at the moment constitute about 25-30% of a network carrier’s business. Players are looking to take this figure upwards as the market for data services looks set to grow in the coming years.

In fact, according to Gartner Research, the market for data services in the country will go up to about Rs 11,085 crore by 2011 from Rs 8,515 crore right now. This is a growth of about 30% in the next four years, which is fairly significant. Gartner says that the buildup to this has been happening over the last few years with the market moving from Rs 6,204 crore in 2005 to Rs 7,403 crore in 2006 and Rs 8,515 crore in 2007. By the end of the current year, the market will be about Rs 9,418 crore, moving up to about Rs 10,130 crore in 2009 to Rs 10,616 crore in 2010. This kind of growth cannot be ignored by any account, which is why network carriersare are making investment to strengthen their data operations, say analysts.

The cause for this boom can be attributed to the emergence of India as an outsourcing hub and an important destination for multinational companies. Says Neha Gupta, analyst, Gartner India, “India is becoming a big data centre, so the opportunities it presents are many.” Also, Indian companies are expanding their operations abroad, increasing intercommunication between offices. Managing all of this requires a fair bit of expertise, which is where network carriers step in to provide value-added services such as multiprotocol label switching networks, virtual private networks, internet protocol-led services, data hosting and content delivery. What is drawing carriers to the business is the high margin they derive from these operations, which is in stark contrast to traditional voice-related activities undertaken by them, which is more or less a commodity business.

The need for volumes on the voice front is driving down tariffs to such an extent that margins are being hit substantially. As a Mumbai-based telecom analyst says, “The return on capital employed, if you take into account the voice business of network carriers, is merely 12-15%.”