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'Telecom sector offers big growth opportunity'

Shobha Warrier in Chennai

Contrary to the fear that many entrepreneurs have when it comes foraying into the telecom sector in India, the sector offers big growth opportunities. Or says an expert.

Prof Jhunjhunwala, who created a revolution in the field of communications with his low cost wireless in local loop (WLL) technology, told the future entrepreneurs at a meeting organized by TiE (The IndUs Entrepreneurs) that there is an abundance of opportunities waiting for them to tap in the telecom market. But, he cautioned, that the right segment within the telecom sector had to be chosen to propel individual growth.

Jhunjhunwala said there are two different markets for the future entrepreneur to explore: the market in the West - the United States, Europe, etc. - and the market in the developing countries, particularly India and China. Size wise, no country can compete with the Indian and Chinese markets, he said.

The most important aspect about the Indian market is affordability. Affordability is the key to success in India, though it is not a factor in the western markets, he said.

Till about two years ago, telephone infrastructure in India cost about Rs 30,000 per line. Hence, the yearly revenue had to be 35 per cent of the investment (15 per cent finance charges, 10 per cent depreciation and 10 per cent operation) to break even which was next to impossible as it implied revenues of Rs 11,000 per year per line, or a bill of Rs 1,000 per month for a subscriber. Only to 2-3 per cent of India's population can afford this.

The scenario, however, is changing, said Jhunjhunwala.

The cost of telephone and Internet connection can easily be brought down to Rs 10,000 per line, he said. "Suddenly, you will see a huge market of 500 million lines in India and other developing countries." When the cost comes down to Rs 10,000 per line, 50 per cent of the Indian population will be able to afford a telephone connection. India is a potential market size of 150-200 million telecom and Internet connections, he said.

However, the question is can the cost of providing a telephone line be reduced to Rs 10,000 from Rs 30,000?

"Yes," says Jhunjhunwala. "It is a challenge for the research people. When rewards are great, everybody should try to make the most of it. You are looking at a very large market in India and other developing countries. This is a chance for India to be the leader in technology."

It was because the West had invested hundreds of billions of dollars in the optical fibre network, which forms the backbone telecom networks, that the cost fell by a factor of five in the last decade. "It is predicted that it will fall further by a factor of five in the next five years. So, Indian companies cannot compete in mainline products like optical fibre networks and switching. It is also difficult to compete in terabit packet switches and routers, Jhunjhunwala warned.

"But there is a tremendous opportunity for services," he stated.

"There are tremendous opportunities for India in the wireless space, that is, in deployment services, integrating data on mobile services, network management services, and customer care, customer support and billing. Similarly, there are opportunities in protocol development services, like SMS, MMS, WAP and i-Mode," he said.

"As far as enterprise products are concerned, the West presents India with major opportunities in services and products. It is easier to break through the fragmented product market, in VoIP, router, gateways, PBX, wireless, IEEE 802.11, etc," Jhunjhunwala remarked. He also reminded entrepreneurs about a significant market for enterprise products in India itself.

"There is a primary market in India, China and other developing countries. Even though Indian products have the potential to dominate, many Chinese companies like Huawei can provide tough competition," he cautioned.

Although a great market for products exists in India and other developing countries, the key factor to remember is affordability, while what is important for the western market is 'value', new features and other services. Price is not a big factor there, he reiterated.

"Indian entrepreneurs who are interested in the western market will have to learn to market their products effectively," he stated.

"The problem with us is we are not competitive. Here, companies have a tendency to look at their competitors as their enemies. This has to change if Indian telecom sector has to grow. Big companies should learn to share the pie with others. As the pie grows big, your share of profit also will grow which. Unfortunately, they have not realized this," he said.

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