Morphing Tele-economy

Updated: Jan 2 2006, 05:30am hrs
M&A highway on fast track

With global telecom bigwigs keenly looking at the fast-growing Indian market, domestic majors will be busy dialing in new deals. Estimates peg foreign investment in the IT and telecom sector to double to $22 million this year.

European companies like Vodafone and Telecom Italia as well as Korean, Japanese and Malaysian telecom majors are already scouting in India. And a majority of Indian telecom firms are also looking for funds to expand since the industry is working overtime to further accelerate its already fast pace of growth.

Indian domestic players would need to access capital investments to the tune of $10 billion in the sector in the coming years. With foreign investment cap being raised to 74 % from 49%, the wave of consolidation will only intensify next year.

While global players want a footprint in a growth market like India, larger Indian players want to consolidate a pan-India presence and are looking at smaller fish in the market. On the card is a windfall for those with substantial overseas holdings like Bharti, Hutch and

Idea and even mid-sized and smaller regional players.

The major deals struck last year include Vodafone picking up a 10% stake in telecom major Bharti for $1.5 billion and Hutch Essar's acquisition of BPL's mobile business. Analysts expect the much-awaited IPOs of Hutch and Idea to finally see the light of the day this year.


Next-gen 3G will ring in

Third generation mobile services promising high-speed data (upto 2 megabytes per second) on cellular handsets, enabling users to watch live TV or movies are all set to ring in early this year. This brings India closer to the 3G club including all of Europe, South Africa, most of Asia, Australia, New Zealand, some US service providers, Canada and United Arab Emirates among others. After an unsuccessful stint, 3G is finally moving mainstream in Europe and seems to be finally finding its business models.

Starting from the second-generation mobile services, today we operate in the 2.5G2.75G spectrum of services and 3G obviously seems to be the next milestone for Indian telecom operators. Analysts predict 3G might not succeed, as a premium service in India but Indian operators will need to build new models.

Though there is still no clarity on how the spectrum will be priced, industry is expecting a gold rush. The communications and IT minister, Dayanidhi Maran, has promised to spell out the policy for spectrum allocation early this year and is expecting this to open gates for new players. Promising to make the services affordable, the minister has gone on records saying "Just like it happened in Europe, we want new players who are currently not offering telecom services to enter the 3G segment.''


One India, one tariff

It'll soon be time to step up your long distance communications, as the long distance calls will ring in at rates inching closer and closer to local calls. Falling long distance tariffs are no big news today, but uniform calling rates are surely expected to change the telecom landscape in the country.

The idea is to simply grow the volumes as happened with local calls or mobile telephony in the country. However, two different slabs one for inter-circle and one for intra-circle are expected currently.

The STD rates today incorporate the carriage cost and the access deficit charge.

The carriage charge is the amount paid to the long distance carrier by the cellular and fixed telephone operator and private telecom companies pay access deficit charge to state-owned Bharat Sanchar Nigam Ltd.

Though India One tariff is no more expected to happen this month as promised earlier, the uniform calling rates are very much on the cards in 2006.

On the anvil are many more goodies like carrier access code which will allow subscribers to chose their long distance operator and number portability, which allows subscribers to retain their phones numbers even if they change the operators, but India One seems to have the brightest future.


Phones take on computers

Running to your desktop or notebook for checking emails with be pass. Mobile phones will beep everytime you have an email. Smartphones will begin to do virtually everything a PC does run Excel sheets and powerpoint presentations and surf the Internet. Clearly, snazzy MMS pictures and hottest music downloads will not be the only ones rocking the mobile industry this year.

With smartphones entering the mainstream, the phones are finally bringing enterprise productivity and not just entertainment features. More and more cellphones are morphing into versatile web-browsing information appliances that can send and receive email and hook into corporate computer networks. Mobile service providers are further accelerating the trend by dropping the prices for service too.

Entry-level smartphones already cost less than Rs10,000. And soon humble, mass-market cellphones in your pocket will start sending and retrieving emails when you are halfway across the world. And the privilege will not be restricted to the top echelons of corporates for long but will spread to a wider workforce.

IDC predicts more than 100% growth in unit shipments over a year for converged voice-centric devices. Obviously, dangers are lurking too. Mobile security threats are expected to triple next year as smartphones and other mobile devices become more prevalent.


Dial made in India phones

Get ready to see a flurry of 'made in India' cellphones in the market. Virtually every big handset manufacturer announced manufacturing facilities in India in 2005 and few even kick-started it. Analysts expect this to help lower prices of phones and tune them closer to Indian requirements including language.

Low-end handsets seem to be the norm for those planning manufacturing in the Indian market currently. For most of those investing in India, the first models are the start-up, low-cost models. World's largest mobile phone maker Nokia has more than half of the estimated market and is investing $100-$150 million in its plant. Motorola, the world's second largest mobile phone maker, with a marketshare close to 10% in India has said it will start assembling handsets in the country by December and that it is considering full-scale manufacturing later. LG Electronics, aiming to sell phones priced in the low- to mid-range, has invested $60 million in a plant to make 20 million GSM and CDMA phones a year in India by 2010.

This is a significant change from the time when almost all the global manufacturers were shying away from manufacturing in India, insisting volumes could not justify the investments. With India adding close to 3 million new mobile users every month, manufacturing wave seems to be on a high. Of the expected 810 million global mobile phone sales this year, India is expected to account for about 34 million.