Marginal Rise

According to VOICE&DATA estimates, the current ILD market stands at Rs 11,532
crore as compared to Rs 11,506 crore in FY 2006-07. Although, total ILD minutes
have increased, revenue has managed a meagre 0.2% growth which is attributed to
increase in competition among operators and reduction of ISD tariffs.

Lowering of the entry fee and some other initiatives from the government has
also helped put a stop on the monopoly in this segment by players like Tata and
Bharti.

Though there is a negative growth of 8.9% in the revenue of Tata
Communications for FY 2007-08, the company retained its leadership position in
the ILD arena. Tata Communications recorded revenue of Rs 6,966 crore in FY
2007-08 as against Rs 7,648 crore in FY 2006-07. The company recorded a market
share of 60%.

There is a huge gap between Tata Communications and Bharti, which ranks
second. Bharti recorded revenue of Rs 1,897 crore with overall growth of 53%.
While Reliance managed to grab the # 3 with estimated revenues of Rs 1545 crore.
BSNL occupies the fourth rank with revenue of Rs 477 crore in FY 2007-08. BSNL
is followed by AT&T, which recorded a growth of around 68%, with revenue growing
from Rs 176 crore in FY 2006-07 to Rs 294 crore in FY 2007-08. British Telecom
and Vodafone recorded revenue of Rs 105 crore and Rs 104 crore, respectively.

Market Dynamics

The ILD communications market is expanding and providing more opportunities
of growth as companies apply and receive licenses in India. Indian companies are
also aiming to provide smoother connectivity in services on a global level, and
are acquiring licenses in regions like the US, Russia, Africa, etc.

Also, with the telecom commission's agreement to allow resale of
international bandwidth, the ILD rates are poised to get cheaper. The
introduction of reseller license will create tough competition for players like
Bharti, Tata communications, and Reliance.

BT Telecom acquired Mumbai-based IP global managed network service provider,
i2i during FY 2007-08. The acquisition has helped BT to become the country's
biggest foreign carrier provider.

While players like Idea, Pacnet, and Orange are expecting to attain their ILD/NLD
licenses by the end of this year, companies that managed to grab licenses during
the last year were Cable&Wireless, Spice telecom (existing cellular service
provider in Punjab and Karnataka), Tulip IT services, and MTNL.

Cable&Wireless has entered into a joint venture with the TTK Group, called
Cable&Wireless Networks India. The company intends to roll out a next generation
network (NGN) across India, with managed IP services. It has also entered into
an enhanced partnership aggrement with Telecom Italia to drive and expand its
business presence in key growth areas.

MTNL, the state run incumbent operator, has received ILD license from DoT
recently, which will help it to route international traffic through its own
network instead of depending on other service providers. MTNL's current mobile
rate ranges from Rs 5.99 to Rs 9.30 per minute, which is expected to reduce
quite significantly after the announcement.

In a strategic move, Trai recently came out with a consultation paper to
allow long distance service providers the issue of calling cards. According to
the paper, the carrier selection, if implemented, will offer the ease of
selecting the long distance carrier for ISD calls. Further, service providers
would also benefit by the ability to sell their services in a straight line to
consumers, thereby resulting in revenue growth.

The price of ILD is expected to come down heavily if the government permits
phone calls between computers and telephone.

Orange, which is expected to achieve its ILD/NLD license latest by July, 2008
is planning to expand its operations in the country by providing international
and national long distance network related services. The company's customers
include various Indian and multinational companies that will now be able to
deploy France Telecom's internationally certified network technologies.

Outlook

In the present scenario, network management has not been limited to
transport or maintenance. With the concepts of localization vastly changing into
globalization, enterprises today expect managed networks, as well as management
related services from communication providers.

With an increase in demand, many telecom service providers are offering
services bundled with management of network, security, and infrastructure. Also,
hosting and managing some key applications, controlling application performance,
etc into their IT services portfolio. IP convergence, diversity in access
technologies, IPVPN, and growth in IT services are factors that would drive the
growth of the ILD market in the country.

In the current scenario, where unified communications applications are on the
radar of most companies, investments in VoIP, IPT, and similar technologies are
expected to fuel the growth in the long distance connectivity market.

In FY 2008-09, the competition for market share could reach an all time high
because of an increase in the number of private players in the ILD space. This
will further result in reduction in tariffs, leading to disheartening revenues
for the players. However, the price reduction could also increase usage in the
total minutes, thus resulting in a growing market in terms of opportunities for
players.

Service providers need to have a variety of offerings to cater to the
different types of market demands. Some enterprises may have requirements for
low bandwidth while others may demand high bandwidth, To meet such varied
demands, the service providers need to be equipped to provide adaptive solutions
to the customer.

Jatinder Singh

jatinders@cybermedia.co.in