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Telecom firms look at global expansion

Rajesh S Kurup  |  Mumbai 

Moreover, the growth momentum needs to be maintained amid the falling average revenue per user (ARPUs) and expected saturation in the domestic subscriber base.

The recent move by Bharti Airtel to merge with South Africa's MTN Group has again brought the Indian companies' global intentions to the fore.

The state-owned Mahanagar Nigam (MTNL) is expected to soon announce the acquisition of Sri Lankan fixed line operator Suntel, while Reliance Communications has already made an array of acquisitions in the global wireless space.

"The Indian companies that have tasted success in the country want to now move beyond the country's shores, as the next wave of growth is mainly taking place in South Africa and South Asia. The South African countries hold a lot of potential for Indian companies to expand their footprint, and other Indian players are also expected to follow suit," Datacom CEO Ravi Sharma told Business Standard.

Datacom is a Videocon Industries-promoted cellular company that was provided Universal Access Service Licence (UASL) for offering services. It has received 4.4 MHz spectrum in Orissa and Tamil Nadu circles.

The Indian telecom market is growing at a robust pace. With the country adding around 8 million subscribers every month, the companies are sure of replicating this success in the global markets. Companies want stable financial conditions and robust growth, and high growth markets such as South Asia and South Africa are the best bets, Sharma added.

However, acquisition is not the only mode for expanding presence in foreign countries. Tata Communications (formerly VSNL), Bharti Airtel, Reliance Communications and MTNL have already commenced services in countries including Sri Lanka, Mauritius and Nepal.

According to Frost & Sullivan Deputy Director (ICT Practice) Girish Trivedi, even though the telecom companies are posting a robust growth in subscriber additions and revenues, these are expected to slim out in the next three to four years.

"With the issuance of new licences and spectrum allocation to follow, there will be a saturation in the Indian telecom market. The year-on-year growth is expected to plateau out and the issuance of 3G licences will witness the entry of global players, which will increase competition," Trivedi said.

Moreover, sliding ARPUs is another reason for companies to look at expanding operations into newer geographies. The average blended ARPUs in India is around Rs 295, which is lower compared to the other emerging markets' ARPU of Rs 400-500. An entry into high ARPU regions will help Indian companies sustain growth and revenues for a much longer period.

Even though certain industry watchers believe that the recent mergers and acquisition norms had made it difficult for inorganic growth in the country, Naresh Singh, principal research analyst differs. "Mobile services are a successful business in India, and Indian companies are looking at replicating it in global markets," he said.

Another analyst, who did not want to be named, said there would be issues by way of regulatory concerns, relatively high operational costs and a foray by global players into these markets.

First Published: Sun, May 18 2008. 00:00 IST