While talking about the Indian telecom
opportunity or success story, the focus of the discussion is mostly on the retail
opportunity. With 806.13 million subscribers at the end of January 2011, the
addition of 18 million connections a month and the second largest wireless
network in the world after China as per the DoT, the retail play deserves the
attention it gets. One of the reasons for this could also be the media
attention and coverage given to blockbuster events affecting the daily life of
the consumer segment such as 3G spectrum auctions, mobile number portability
and the advertising monies spent by the retail telecom service providers.
Another possible reason is that telcos themselves have been going after the
seemingly lucrative mass business that the retail opportunity has to offer. But
what of the enterprise telecom opportunity that has characterized and brought
about growth in Indian industry by assisting MNCs set up shop in India and
Indian companies expand globally. The enterprise telecom opportunity in India
is the quieter but equally interesting (if not as sensational) story of the
Indian telecom sector.
The soaring golden bird
MNC investment in India has been in excess of
$100 billion since 2000 with FDI inflows in India having increased at a rate of
30 percent as compared to 14 percent for all emerging markets between 2000 and
2007.
As per the UNCTAD World Investment Report
2010, India is the 2nd most attractive destination for FDI. These
statistics are further augmented by the rise of the flourishing story of Indian
enterprises taking on the world. There are 57 Indian companies on the Forbes
2000 list today as compared to 27 in 2005. And the rise of the Indian
enterprise just doesn’t end there. According to a report published by PwC,
India is expected to produce the most new multinational companies, overtaking
China (again) as the emerging world’s largest source of MNCs.
Over 2,200 Indian companies are likely to
open operations outside the country over the next 15 years. Contrary to popular
belief these new MNCs will shift away focus from investment into other emerging
markets towards a direct entry into developed markets. No surprise then that
all major technology providers are looking towards India as their revenues from
the developed world stagnates. The enterprise telecom sector has played a major
role in helping Indian companies establish a presence on the world map.
Enterprise telecom services set up the foundation for the success of other
sectors in particular the IT/ITES sector’s outsourcing success which had a CAGR
of 24 percent in the last decade.
Painting a picture
The traditional enterprise telecom market can
be divided into 3 major segments: fixed, mobile and data services. According to
research firm Frost & Sullivan the overall revenues from the sector
amounted to nearly INR 22,407 crore in FY09 and are expected to grow to INR 47,039
crore in FY14 at a CAGR of 16 percent. The data services segment which
currently comprises 27 percent of the market is expected to constitute nearly
36 percent of the market by 2014. As a result of device proliferation and
consumerization of IT, the enterprise mobile services market has seen a trend
of increasing ARPU despite there being a trend of decreasing ARPU in the retail
segment.
Enterprise segment revenue as per a report by
E&Y was $3,556 million in 2008 and estimated at $6,169 million in 2011.
The managed services in India alone is
growing at 20-40 per cent CAGR and the current managed IT market in India is
about $6 billion out of which cloud services is over $80-100 million in 2011-12
while the enterprise mobility market in India was worth about Rs 346 crore in
FY 2008-09 and is estimated to reach Rs 1,880 crore by FY 2015-16, growth rates
for which are estimated to be among the highest in the Asia region as per Frost
& Sullivan.
Who’s out there?
This sector comprises pure-play enterprise
service providers such as Tata Communications and Tulip telecom as well as the
retail players trying to sustain margins in the face of price erosion in the
consumer space. The retail telecom sector is facing a tough time in the face of
declining margins and price pressures. Market revenues have been flat in the
past year with the addition of 190 million new subscribers but a meager 2.5
percent growth in revenues. However, as a result of the opportunity offered by
the retail story, major telcos have shied away or are devoid of a focused
strategy in the enterprise space. Having invested heavily in building
infrastructure to deal with retail volumes, they are now looking towards the
enterprise play to get out of the mire.
The segregated nature of the product
offerings, need for a global footprint as well as ability to provide a holistic
offering to the enterprise customers makes it imperative for players in the
enterprise telecom space to build in geographical as well as horizontal and
vertical partnerships, which might not be built into the DNA of retail focused
players.
What the future bodes
The scramble for everything as a service is a
threat to the present day telco model. The changing nature of the telecom
industry provides an opportunity for telcos to move from traditional services
into providing more value added services to the enterprise customer. Telcos are
looking to leverage seminal trends like the cloud revolution, ubiquitous
computing, need for unified communications and collaboration to move away
from traditional bread and butter services to providing more value added
services. Several telcos have forged partnerships in the cloud space with
Bharti and Savvis, Reliance and Microsoft forging alliances. The ultimate aim
for telcos competing in the enterprise telecom market in India would be to keep
up with the growth of their enterprise customers along with fulfillment of
their expanding needs. From basic service providers to owning the
enterprise customer by providing connectivity, collaboration and cloud
solutions seems to be the way ahead. Tata Communications has invested heavily
in gaining market leadership in the enterprise telecom space, having emerged as
the #1 data provider to the enterprise segment consistently. Without the
distraction of the retail play, Tata Communications has been able to focus on
investing in the right technology trends to take advantage of emerging trends
and cater to end to end enterprise customer needs.
By Srinivasa Addepalli, senior vice president, Corporate
Strategy, Tata Communications
editor@telecomlead.com