Indian phone market lures foreign firms

Mumbai, March 12:

Faced with stagnating growth in their home countries, foreign telecom firms are courting Indian companies like never before to get a bigger slice of the world’s fastest growing mobile phone market.

In a clear sign of the times, India’s thriving telecom market has seen the entry of nearly half a dozen overseas companies in as many months in tie-ups with local service prov-iders. Analysts say many more foreign firms are waiting in the wings to tap the huge and under-penetrated market as the Indian economy continues to boom and the regulatory roadblocks are dismantled.

“Major overseas telecom players are increasingly looking beyond their home markets in the face of flat growth,” said Kobita Desai, principal analyst (telecom) at research firm Gartner India, “India hol-ds great potential because of low telephone penetration and sharply higher economic gro-wth. The investment inflows has been helped by some far reaching regulatory decisions taken in the last 18 months.”

Telekom Malaysia, a leading phone services provider in Malaysia, has become the most recent entrant to India’s mobile telephone market after it signed a deal with Spice Communications to pick up an equity. The Malaysian telecom operator has picked up a 49 per cent stake in Spice Communications, a regional mobile service provider with a customer base of nearly two million, for $178 million. The deal was announced close on the heels of Singapore’s private equity firm Temasek Holding buying a 9.9 per cent stake in Tata Teleservices, an arm of conglomerate Tata Group and a CDMA-based mobile operator, for $245 million.

In a major vote of confidence in India’s mobile phone business, Britain’s Vodafone Group picked up a 10 per cent equity in India’s largest mobile operator Bharti Tele-Ventures for a staggering $1.5 billion in October last year. “These deals offer win-win situations for all the parties involved,” said Alok Shende, director (technology practice) at Frost and Sullivan, “All these overseas firms have huge cash and they are targeting markets that are on the growth curve, while Indian phone operators need massive capital inflows to expand their services all across the country. If the Indian operators don’t expand, they are going to lose market share in a rapidly growing market. This is something no one will accept and hence this willingness to tie up with foreign players.”

India’s mobile phone subscriber base in 2005 grew at a blistering clip of 47 per cent to reach approximately 75.3 million at the end of 2005, up from 48 million at the end of 2004. The country, with a population of over one billion people, currently has 85 million mobile users — a small number when compared with other emerging economies like China. The Indian mobile industry, however, is adding a whopping 4-4.5 million new users every month. This has triggered hopes that the country will have the second largest mobile subscribers’ base by 2010, second only to China.

Increasing consumer spending and cheaper service rates, have aided the rapid growth in the mobile phone users’ base in the last few years.