Wednesday, Mar 31, 2004
Telecom set for big leap: E&Y study
By Our Staff Correspondent
CHENNAI, MARCH 30. Indian telecom operators could see almost three-fold jump in revenues - from $9 billion in 2002 to $25 billion by 2007, according to a study released by Ernst &Young.
The study has also said that the total telecom subscriber base, which has grown by 38 per cent in 2003, will reach 203 million in 2007. The teledensity has increased from merely 2 per cent in 1999 to around 7 per cent in 2003, and is set to cross 20 per cent in the next five years, according to the report, titled "Redefining Indian Telecom".
The report has stated that the Indian telecom network will become the second largest in the world after China in the next five years. Outlining the key drivers of future growth, the report has said that small operators with low economies of scale will not be viable due to the very high cost per minute. Eventually only three or four large operators with pan-India operations will remain dominant.
The report adds that state owned telecom majors, MTNL and BSNL, would eventually merge in the face of stiff competition from integrated private players. Once mobile operators are allowed to route inter circle calls within their own network, the long distance operators will lose relevance, and therefore such players will integrate with large wireless or wire line players.
The study has also found that India has more than 31.4 million wireless users, and the number is expected to hit 100 million by 2005 because of low penetration rates as only three in a 100 people own a mobile phone compared with more than 20 in China.
The telecom industry is already the fastest growing component of the Indian economy, which is forecast to expand at 8.1per cent in the year to March 2004.
Although growth is at a rapid clip, Ernst & Young has stated that the industry was ripe for consolidation as more than a dozen players, many of them money-losing, are unsustainable in the longer term. Wireless is becoming a volume game with thin margins, and therefore, only large players, that possess economies of scale and deep pockets, will be profitable, the report said.
Copyright © 2004, The Hindu.