India among the Top Few Fastest Growing Telecom Markets

In FY 2009-10, ILD has seen a steady growth of nearly 17% with the total
revenues for FY 2009-10 reaching Rs 17,600 crore. A booming subscriber base
which is close to 600 mn, and an early emergence from the global downturn have
led to several investments in the submarine cables as well as new players
entering the ILD space, and cheaper calling rates from all operators due to the
competitiveness of the Indian market with its fifteen operators now. From the
wholesale voice perspective, there has been a substantial growth in terms of
inbound traffic into India with falling rates. Popularity of VoIP has also
propelled the growth, with most operators aiming to switch over to a single IP
network.

Regulations and Challenges

Players are asking for some control on the Internet based service providers
operating from outside the country who have an advantage over Indian operators
as they do not have to pay the AGR prescribed by the government. The continued
drop in termination rates-from 40 paise last year to 50 paise this year-along
with the dollar rate dipping has been a major challenge for players like Sify.

New Players

Pacnet India, which got licenses for NLD and ILD this year, announced in
December 2009 its plans to build West Asia Crossing (WAC)-a new submarine cable
network that will provide direct connectivity between India and Asia, and help
India meet its growing requirements for international bandwidth. The license
will also help the company in establishing an international gateway in Chennai,
which is an integral part of its India strategy.

This year, REVE Systems-a leader in the IP telephony and VoIP space-also tied
up with a leading Internet telephony service provider (ITSP) in India to deliver
its iTel Mobile Dialer-a mobile VoIP applications platform, providing cheaper
international voice calls to Indian mobile subscribers.

SingTel which forayed into the ILD space last year, also came under heat in
January, with DoT asking Bharti Airtel and Tata Communications-who had signed
ILD contracts with the Singapore telecom firm-to terminate the same on account
of improper licenses for operation in this space. SingTel joins the list of
other reputed foreign telcos such as AT&T, British Telecom, Equant (France
Telecom) and Verizon for illegally offering services before obtaining licences
to operate in India.

Established, But Still Growing

The year also saw Sify introducing 'Hubbing' to support by and large the
whole voice business. Sify has grown by over 190% with revenues of Rs 87 crore,
up from Rs 30 crore last year when it entered the ILD space. In the current
fiscal, it has planned to grow NLD/ILD by about 35%; and the new services around
Hubbing and enterprise voice would add another 30%.

Bharti Airtel-which occupies the #2 space in the ILD segment-witnessed a
slight fall in growth of about 1.2%, with revenues for FY 2009-10 at Rs 2,600
crore, down from Rs 2,632 crore in the last fiscal. Airtel carried 3.2 bn ILD
minutes this year, up from 2.7 bn last year. Some of the operator's achievements
this year have been NGN with four global media gateways, achieving 100%
ownership of i2i cable system and landing station, consortium ownership of Sea
Me We 4 cable and landing station, IRU capacity on TAT-14, Apollo, EAC, APCN2,
JUCN. It is also a consortium partner in major cable systems under construction:
IMEWE, EIG, AAG, Unity.

Reliance Communications that occupies #3 position in this space saw a 4%
growth in Reliance Global Call's market share was 30% for ILD wholesale inbound
traffic, with over 2.5 mn customers and 40% of the total retail market calls
from the US to India using Reliance Global Call. Reliance is further expanding
its global network with the implementation of the FLAG Next Generation Network
cable system and by becoming a part of the Singapore-HK-Japan (SJC) consortium
cable system.

Tata Communications which saw 24 bn minutes of international voice this year,
with international voice volumes growing at 10-15% pa is the leader in the ILD
segment with a 52.5% market share and a growth of 12.7%.

BSNL is the #4 player in this space with revenues estimated to be Rs 1,090
crore in FY 2009-10, showing a growth of 3.6%. Vodafone has also done very well
in this space in FY 2009-10, with 40% growth. Aircel, AT&T and BT also recorded
growth of 468%, 62% and 7.6%, respectively in FY 2009-10.

Going Forward

According to the statistics by TeleGeography, Skype's share of international
calling minutes has jumped to 12%, a 50% increase as compared to the last year's
figure of 8%. Out of the 3,00,000 users added per day-50% are from the non-english
market, with 4% of the company's revenues coming from video calls. Skype
recently announced Skype mobile video which allows two way video calling over 3G
or Wi-Fi-desktop or mobile. This will have an impact on the Indian market which
has just welcomed 3G, and will use it for a mix of voice and data. As India
continues to be among the top few fastest growing telecom markets in the world,
the sector will see growth in multiple revenue streams, other than the voice
services, mainly from MVAS and other data based services.

Beryl M

berylm@cybermedia.co.in