The Tale Seldom Told
Facing tough times on the retail front, Indian telcos are eyeing enterprise mobile services, which entails collaboration and investment in the right technology
While talking about the Indian telecom opportunity or success story, the focus of the discussion is mostly on the retail opportunity. And why not; with 806.13 mn subscribers at the end of January 2011, the addition of 18 mn connections a month, and the second largest wireless network in the world after China as per the Dot—the retail play deserves the attention it gets. One of the reasons for this could also be the media attention and the coverage given to blockbuster events affecting the daily life of the consumer segment such as 3G spectrum auctions, mobile number portability, and the advertising monies spent by the retail telecom service providers. Another possible reason is that telcos themselves have been going after the seemingly lucrative mass business that the retail opportunity has to offer. But what of the enterprise telecom opportunity that has characterized and brought about growth in the Indian industry by assisting MNCS set up shops in India and the Indian companies
expand globally. The enterprise telecom opportunity in India is a quiet but equally interesting (if not as sensational) story of the Indian telecom sector.
The Soaring Golden Bird
MNC investment in India has been in excess of $100 bn since 2000 with FDI inflows in India having increased at a rate of 30% as compared to 14% for all emerging markets between 2000 and 2007. As per the UNCTAD World Investment Report 2010, India is the 2nd most attractive destination for FDI. These statistics are further augmented by flourishing story of the Indian enterprises taking on the world. There are 57 Indian companies on the Forbes 2000 list today as compared to 27 in 2005. And the rise of the Indian enterprise just doesn’t end there. According to a report published by audit and advisory services firm PWC, India is expected to produce most new multinational companies, overtaking China (again) as the emerging world’s largest source of MNCS. Over 2,200 Indian companies are likely to open operations outside the country over the next 15 years. Contrary to the popular belief, these new MNCS will shift away focus from investment into other emerging markets towards a direct entry into developed markets. All major technology providers are looking towards India as their revenues from the developed world stagnates. The enterprise telecom sector has played a major role in helping Indian companies establish a presence on the world map. Enterprise telecom services set up the foundation for the success of other sectors in particular, the IT/ITES sector’s outsourcing success, which had a CAGR of 24% in the last decade.
Painting a Picture
The traditional enterprise telecom market can be divided into 3 major segments: Fixed, mobile and, data services. According to the research firm Frost and Sullivan, the overall revenues from the sector amounted to nearly 22,407 crore in FY09 and are expected to grow to 47,039 crore in FY14 at a CAGR of 16%. The data services segment which currently comprises 27% of the market
The enterprise telecom sector has played a major role in helping Indian companies establish a presence on the world map
is expected to constitute nearly 36% of the market by 2014. As a result of device proliferation and consumerization of IT, the enterprise mobile services market has seen a trend of increasing ARPU despite there being a trend of decreasing ARPU in the retail segment.
Enterprise Segment Revenue, as per a report by E&Y, were $3,556 mn in 2008 and estimated at $6,169 mn in 2011. The managed services in India alone is growing at 20-40% CAGR and the current managed IT market in India is about $6 bn, out of which cloud services is over $80-100 mn in 2011-12, while the enterprise mobility market in India was worth about 346 crore in FY09 and is estimated to reach 1,880 crore by FY16, growth rates for which are estimated to be among the highest in the Asia region as per Frost and Sullivan.
Who’s Out There?
This sector comprises pure-play enterprise service providers such as Tata Communications and Tulip Telecom, as well as the retail players trying to sustain margins in the face of price erosion in the consumer space. The retail telecom sector is facing a tough time in the face of declining margins and price pressures. Market revenues have been flat in the past year with the addition of 190 mn new subscribers but a meager 2.5% growth in revenues. However as a result of the opportunity offered by the retail story, major telcos have shied away or are devoid of a focused strategy in the enterprise space. Having invested heavily in building infrastructure to deal
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with retail volumes, they are now looking towards the enterprise play to get out of the mire.
The segregated nature of the product offerings’ need for a global footprint as well as the ability to provide a holistic offering to the enterprise customers makes it imperative for players in the enterprise telecom space to build in geographical as well as horizontal and vertical partnerships, which might not be built into the DNA of retail focused players.
What the Future Bodes...
The scramble for everything as a service is a threat to the present day telco model. The changing nature of the telecom industry provides an opportunity for telcos to move from traditional services into providing more value added services to the enterprise customers. Telcos are looking to leverage seminal trends like the cloud revolution, ubiquitous computing, need for unified communications, and collaboration to move away from traditional bread and butter services to providing more value added services. Several telcos have forged partnerships in the cloud space with Bharti and Savvis, Reliance and Microsoft forging alliances. The ultimate aim for telcos competing in the enterprise telecom market in India would be to keep up with the growth of their enterprise customers along with the fulfillment of their expanding needs. From basic service providers to owning the enterprise customer by providing connectivity, collaboration and cloud solutions seems to be the way ahead. Tata Communications has invested heavily in gaining market leadership in the enterprise telecom space, having emerged as the #1 data provider to the enterprise segment consistently. Without the distraction of the retail play, Tata Communications has been able to focus on investing in the right technology trends to take advantage of emerging trends and cater to end- toend enterprise customer needs. The author is senior vice president, corporate strategy and marketing,
Tata Communications vadmail@cybermedia.co.in