Saturated urban markets, declining average revenue per user, tighter acquisition laws and the desire to achieve global scales is driving Indian telecom operators to foray into other emerging countries.
Bharti Airtel, Reliance Communications, Tata Communications and State-owned Mahanagar Telephone Nigam Ltd have already launched services in some of these new markets and are hungry for more.
"This is not a surprise development because as the Indian urban market gets saturated, these companies are looking at other emerging markets to sustain the growth. Africa, for instance, is one of the growing markets outside India. The other reason would be to get global scales, just like foreign multinational companies that are entering India. Indian telcos are also eyeing the advantages related to global scales," said Ms Arpita Pal Agrawal, Associate Director, InfoComm Advisory Services, PricewaterhouseCoopers.
High Revenue
While ARPU in India is just around the $5 level, this is much higher at around $11 in other emerging markets. By foraying into such territories, Indian companies are hoping to cash in on higher margins.
Analysts also point out that Indian mobile market has already reached the 300 million mark and another 200 million subscribers are expected, mostly from rural areas. This is enough to sustain the current growth rate for only about 3-4 years more after which operators may come under pressure.
M&A norms
The recent mergers and acquisition norms have also made it impossible for existing telecom companies like Bharti and Reliance Communication to grow organically. A deal with South Africa's MTN will give Bharti access to nearly 60 million subscribers across 21 countries.
For a company like MTNL, foreign markets offer an opportunity to go beyond Delhi and Mumbai. "MTNL has the licence to offer services in Delhi and Mumbai, which is already becoming a saturated market with more than 25 million subscribers and seven different operators. We need to look elsewhere to increase our revenues," says an MTNL executive. MTNL's profits have been dipping over the past few years and the company is, therefore, betting big on the foreign telecom forays.
For Tata Communications (formerly VSNL) too, expanding its presence to global markets has been part of a well thought-out strategy to reduce its dependence on domestic market where its share has been dwindling over the past few years due to competition. The company plans to invest $2 billion for global expansion over the next few years.
Operation costs
But Indian companies also have to deal with challenges related to higher cost of operations, different regulatory environments and competition from large global European and American majors who are also eyeing these emerging markets.
However, analysts don't see too much resistance. "Indian operators are aware of these issues better and they will make a bid or acquire a licence only if it makes any business case. In the past too, some of the Indian operators have bid for licences but they have not quoted huge sums even if that meant losing out," says Ms Agrawal.
One advantage that Indian operators have is that they have learnt the trick to make profits even as they offer the lowest tariffs in the world. Bharti's talks with South African major MTN, if successful, will take this strategy to a new level. Other companies are eyeing countries such as Kenya, Egypt, CIS and the Gulf region to expand their footprint.
via BL
Bharti Airtel, Reliance Communications, Tata Communications and State-owned Mahanagar Telephone Nigam Ltd have already launched services in some of these new markets and are hungry for more.
"This is not a surprise development because as the Indian urban market gets saturated, these companies are looking at other emerging markets to sustain the growth. Africa, for instance, is one of the growing markets outside India. The other reason would be to get global scales, just like foreign multinational companies that are entering India. Indian telcos are also eyeing the advantages related to global scales," said Ms Arpita Pal Agrawal, Associate Director, InfoComm Advisory Services, PricewaterhouseCoopers.
High Revenue
While ARPU in India is just around the $5 level, this is much higher at around $11 in other emerging markets. By foraying into such territories, Indian companies are hoping to cash in on higher margins.
Analysts also point out that Indian mobile market has already reached the 300 million mark and another 200 million subscribers are expected, mostly from rural areas. This is enough to sustain the current growth rate for only about 3-4 years more after which operators may come under pressure.
M&A norms
The recent mergers and acquisition norms have also made it impossible for existing telecom companies like Bharti and Reliance Communication to grow organically. A deal with South Africa's MTN will give Bharti access to nearly 60 million subscribers across 21 countries.
For a company like MTNL, foreign markets offer an opportunity to go beyond Delhi and Mumbai. "MTNL has the licence to offer services in Delhi and Mumbai, which is already becoming a saturated market with more than 25 million subscribers and seven different operators. We need to look elsewhere to increase our revenues," says an MTNL executive. MTNL's profits have been dipping over the past few years and the company is, therefore, betting big on the foreign telecom forays.
For Tata Communications (formerly VSNL) too, expanding its presence to global markets has been part of a well thought-out strategy to reduce its dependence on domestic market where its share has been dwindling over the past few years due to competition. The company plans to invest $2 billion for global expansion over the next few years.
Operation costs
But Indian companies also have to deal with challenges related to higher cost of operations, different regulatory environments and competition from large global European and American majors who are also eyeing these emerging markets.
However, analysts don't see too much resistance. "Indian operators are aware of these issues better and they will make a bid or acquire a licence only if it makes any business case. In the past too, some of the Indian operators have bid for licences but they have not quoted huge sums even if that meant losing out," says Ms Agrawal.
One advantage that Indian operators have is that they have learnt the trick to make profits even as they offer the lowest tariffs in the world. Bharti's talks with South African major MTN, if successful, will take this strategy to a new level. Other companies are eyeing countries such as Kenya, Egypt, CIS and the Gulf region to expand their footprint.
via BL
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