Indian telecom outshined global in 2009

Telecommunications, especially mobile, has been a key sector driving growth for several economies in the world, with the number of mobile connections having reached 5 billion globally in July. India and China have been leading this growth, with about 652 million and 720 million subscribers respectively as of July.
However, according to a recent report by Ovum research, the year 2009 saw the worst telecom growth rate in a decade as global telecom operator revenues grew only by 2.2 per cent year on year. The study said slow growth could be attributed to the global economic downturn.
However, even though 2009 might have been a bad year for telecom globally, it had a mixed impact on the Indian telecom sector.
RN Prabhakar, former member, Telecom Regulatory Authority of India, says, "There has not been much impact on Indian telecom sector in 2009, unlike globally where recession led to a decrease in demand for telecom services as people started cutting their expenses. There was also low demand for high quality value added services in these markets."
The year 2009 marked the beginning of an intense tariff war amongst operators in India, with each vying for a greater hold of the mobile subscriptions market. This led to a substantial increase in the number of mobile subscribers. In 2009, about 180 million new subscribers were added, as compared to only 83 million additions in 2008.
According to industry magazine even the Indian telecom equipment industry reported a 20per cent growth in revenues during FY 2008-09 compared to a 24 per cent growth recorded in the previous financial year 2007-08.
Jaideep Ghosh, executive director, KPMG, says, "From government's perspective, 2009 was good as tariffs were low and more people were getting covered by telecom. Even in rural areas, the teledensity increased last year."
The huge increase in subscriber numbers also led to a rise in demand for value added services, with operators treating these services as a major revenue generator in coming times since voice average revenue per user (ARPU) have been falling.
Moreover, prices of handsets also came down with several new entrants, both local and international, in the mobile handset industry. This was responsible for an increase in handset sales, which led to growth in overall industry revenue, with about 100 to 125 million handsets sold every year.
SC Khanna, secretary general, Association of Unified Service Providers of India, is of the view, "From 2008 to 2009, there has been a growth of about 23-30 per cent in the telecom sector. Telecom market in India is different from any other telecom market in the world. India and China are doing very good in telecom. In fact, India is expanding at a faster rate than China now."
The year 2009 also saw several negatives such as delays in 3G and BWA auctions and mobile number portability. These delays impacted the industry as a whole as operators were not able to place orders with equipment vendors, and were uncertain as to when auctions would take place. There was a lot of financial pressure on telecom companies.
The delay in auctions also prevented telcos from launching advanced revenue generating services such as mobile TV and mobile commerce.
Anil Prakash, secretary general, ITU-APT Foundation of India, says, "We can say that 2009 was somewhat a mixed year for Indian telecom. 3G and BWA auctions could not happen, and with no new services getting launched, the customers were deprived."
Moreover, newer operators that received 2G spectrum in 2008 such as Uninor, MTS, Etisalat etc, were also unable to roll out services due to the financial crunch, mainly arising of their headquarters being deep in recession. Also some operators, such as Videocon, could not roll out services as they were looking for partners and were not able to rope in any.
Gross revenues of the Indian telecom sector in 2009 were fluctuating. In the quarter that ended in March 2009, the telecom sector's revenue was about Rs 40, 400 crore. In the next quarter (June) it fell to Rs 39,000 crore, followed by a drop of about Rs 253 crore to reach close to Rs 39,000 crore in the September quarter. Gross revenue again surged to reach close to Rs 40,000 crore for the quarter ending December 2009.
Despite fluctuations, overall revenue grew marginally. However, individual revenues of telecom operators were dwindling.
Gross revenue of major operators at the end of March 2009 was about Rs 14,200 crore. It went up to almost Rs 15,000 crore in the quarter that ended in June 2009, followed by a huge drop to almost reach Rs 14,000 crore in September, and remained about Rs 14,000 crore in December 2009.
Prakash says, "Business-wise, the year 2009 was good. However, price war that started last year led to a drop in revenues of major telecom operators."
Echoing Prakash's views, Ghosh says, "The year 2009 was quite bad for operators and other stakeholders in the ecosystem. Their financial position was shaky and EBITDA kept falling."
Kunal Bajaj, partner, director of India division of research firm Analysys Mason is of the view, "2009 was definitely a tough year for Indian telecom. It was the first time we saw a quarter on quarter decline in revenues of operators."
Speaking about the future of the industry, Bajaj says, "We are already seeing a major improvement. While some operators have stabilised their revenues, some have in fact seen a marginal increase in their revenues. Lot of analysts are of the view that the tariff war is still not over and we will see tariff wars in the ILD segment. Moreover, with the roll out of 3G services proving expensive for operators, we can say that we will see challenging times ahead."
He added, "In the long run, consolidation will happen in the industry in a big way, and that will lead to robust growth and a bright future."
In its report, Ovum also says that global telecom revenue will bounce back in 2010 owing to a strong rally in the mobile sector. Total revenues, as reported by service providers, will grow by 6 per cent in 2010, with a CAGR (compound annual growth rate) of 5 per cent by 2014.
The report also says that in 2010, China and India alone will add 329 million new mobile phone connections, equivalent to more than the combined total population of Germany, France, Italy, Spain and the UK.