In an interview with tele.net, Holger Forst, telecommunication leader, Europe, the Middle East, India and Africa, Ernst & Young, spoke about the opportunities offered by the Indian telecom market and future foreign investments. Excerpts?
What growth opportunities does the Indian telecom market offer?
There has been tremendous growth in the Indian telecom sector in the past few years. The subscriber base has more than doubled in just two years. This trend, mainly driven by voice at present, is expected to continue. Going forward, the industry is likely to witness an increasing uptake of mobile data. This will be an opportunity as well as a challenge for the industry. At one level, operators will have to make timely investments in infrastructure to build capacity on their networks for accommodating data traffic. At another level, telecom firms will have to make key decisions on how to market mobile data.
What will be the future growth drivers for the telecom industry in developed as well as emerging markets?
Clearly, mobile data will drive future growth. We have seen a huge uptake of mobile data in developed markets in the past two to three years. In developed countries, 3G has been around for a long time, but it took a while for it to make it big at the mass-market level. The change came with the availability of smartphones. Subscribers suddenly experienced the depth of mobile data usage. They started downloading music, videos and live TV on a large scale. In this regard, smartphones have played a major role in the growth of mobile data. However, the Indian market has to wait for smartphones to become affordable. The trick will be to use the data usage information and trends available with operators to promote data applications.
What is the status of competition in the global telecom sector?
We have seen pressure on margins and strong competition in developed markets. We have also seen changes in the business model because the service provider is not the only entity dealing with customers. Other players like handset and tablet manufacturers, and content and application providers are also playing an important role. The revenue share of the operator in this extended value chain will be an important factor in the future and will define the competitive landscape going forward. We see an increasing pressure on efficiencies and hence operators have taken cost reduction initiatives.
We will also see consolidation with no more than two-three players in most developed markets. India, which currently has around 14 players, is also likely to see major consolidation.
What is your view on the launch of 3G services in India?
Currently, most operators are rolling out 3G services in different pockets of the country. A major question for operators is whether to concentrate on 3G or bypass it and move directly to 4G. There is no clear direction as to where operators are headed in terms of 3G offerings. Currently, all major operators are planning strategies and trying new things to see how the technology can be optimised.
Which are the other emerging global telecom markets to watch out for?
The number of operators in India has increased as all global players want to set up base in the country. They see the Indian telecom market as a lucrative investment destination. Other emerging markets include the African continent. It is an interesting place to look at from a telecom investment point of view. We have already seen investments in the African market and Indian companies like Bharti airtel have also invested there. However, the political situation and infrastructure availability as well as quality in Africa continue to be a major challenge. Therefore, despite the huge potential, market development in the region will take some time.
How is the growth story of the African telecom industry different from India?s?
India has developed a successful business model. Its low-cost pricing model has facilitated the huge uptake of voice traffic. In this context, Africa?s growth story is very different from that of India. Africa does not have metropolitan cities like in India; it is more rural and has a very different political situation.
In the year ahead, do you see more foreign investors entering the Indian telecom sector?
Though several global players have expressed interest in investing in the Indian telecom sector, it appears that they have missed the bus. There are already several operators in India. Therefore, not many operators will want to enter the market as the fifteenth or sixteenth operator. These players will be looking at more specific telecom solutions. With data services expected to grow with the rollout of 3G services, specific investments in this segment are expected in the future.
What are your views on the broadband market opportunity in India? How will the introduction of broadband wireless access help?
Broadband has less than 1 per cent penetration in India and we do not see huge broadband uptake. It may grow in the business and enterprise domains, but mass-market adoption is unlikely. Moreover, given the large-scale penetration of mobile telephony and introduction of 3G, data services can be delivered on the mobile itself. Even for rural internet connectivity, the mobile is likely to emerge as the preferred option.
