Rediff.com« Back to articlePrint this article

Telecom sector to see funds bonanza

February 06, 2008 01:08 IST

India's booming mobile services market will see investments of over Rs 100,000 crore (around $24 billion) by 2010, the fastest investment ramp-up seen in any telecom market globally even as analysts predict a bruising battle that will see tariffs fall sharply.

The investments include between Rs 48,000 crore and 60,000 crore ($12 billion to $15 billion) from six new telecom players (including Reliance and Tatas' proposed GSM mobile services) over 12 to 24 months to create capacity for 250 million more mobile subscribers.

This fresh investment will be over and above the estimated Rs 48,000 crore ($12 billion) being put in by incumbents like Bharti Airtel, Vodafone-Essar, Idea Cellular, Bharat Sanchar Nigam Ltd, Reliance Communications and Tata Teleservices (the latter two for ramping up CDMA mobile operations) in 2008-09 alone.

The new entrants in GSM services, which account for the bulk of mobile telecom services in India, were offered letters of intent for licences by the Department of Telecommunications and have since paid the required upfront licence fees together with some incumbents.

The companies are expected to be granted full-fledged licences sometime next week.

The funds will flow in the form of equity and borrowings doled out by lenders keen to grab a slice of one of the world's fastest-growing mobile services markets.

The proposed investments are riding on predictions of a doubling of India's subscriber base by 2010 from the current 240 million subscribers (on both GSM and CDMA networks) to 500 million.

Standard Chartered Bank has already forecast the Indian mobile services market size at over 600 million subscribers by 2012, implying a mobile in the hand of every second person in the country.

Tony Worthington, Standard Chartered Bank's global head, telecoms, media and technology, told Business Standard that the aggressive forecast was based on the current growth pattern and the entry of new operators, which will lead to increased competition.

However, some incumbents said the market might not be big enough for so many new players -- there are currently seven telecom companies offering pan-India services.

This number will almost double once the new players enter the fray.

"I see tariffs falling another 20 per cent to 30 per cent. Only two of the new players are likely to survive and companies will have to wait for at least five years before they can make any money. At least 70 per cent of the marketĀ  in 2012 will continue to be with the older players. The battle will be for the rest," said Vikash Saraf, who heads Essar's telecom investments.

Saraf's prediction suggests that the six new players will battle it out for 200 million subscribers.

Surajeet Das Gupta & Siddharth Zarabi in New Delhi
Source: source image