However, the overall ILD market size will decline in the short term, due to falling tariffs and settlement rates.
In the long term, however, ILD revenues are slated to grow at a 2.5 per cent CAGR and will rise from the current level of Rs 7,200 crore to Rs 9,800 crore by 2010.
CAS/PA predicts that that the current ILD monopoly VSNL will lose at least 45 to 50 per cent of its marketshare over the next 3-4 years and marketshare loss over certain profitable routes may be more significant.
Low entry barriers to the ILD business will lead to an influx of players into the ILD arena, but only 4 or 5 players are expected to survive in the long term. Integrated telecom operators who bundle their services are expected to be successful.
Some of the key issues for potential ILD entrants to consider will be competition and increasing pressure from FCC and regulators in other countries, which will drive down the average settlement rate to $0.13 by 2008, from the current level of $0.46.
Average tariffs will fall to Rs 20.2 by 2008, a drop of over 50 per cent from the current levels.
Moreover, terms of entry for Internet telephony will significantly affect the business valuation and prospects of ILD operators, says the report.
The report adds that key success drivers in the Indian ILD market will be the ability of operators to negotiate favourable interconnect arrangements, offer bundled service offerings and provide quality of service.