The Hindu Business Line : 4 majors to survive telecom shake-out, says Gartner

ONLY four cellular groups — Bharti, Reliance, Tata and BSNL — will survive and thrive through 2004, research firm Gartner has said in its predictions for the telecom industry for the year.

Provisional forecasts suggested that cellular connections would reach 56 million by the end of 2004, representing a 96 per cent growth over 2003, and that the telecom arena would see no more than four large nationwide players, Gartner said.

The other operators will survive as niche market players or be absorbed through mergers and acquisitions.

The number of cellular connections is projected to overtake fixed phone lines around the third quarter of 2004. However, although overall penetration and addressable market will increase, thinner margins will prevail.

The unified licensing regime will act as a catalyst for consolidation; the major players will expand their presence through acquisitions rather than operational partnerships. Restructuring is set to accelerate in 2004, with size and volume set to increasingly matter.

For the fixed line operators, the year is going to be both one of new and missed opportunities. Demand for their services, especially data, will be accelerated by large MNCs' consistent drive towards IT outsourcing to India.

However, the growth of the outsourcing market will be significantly inhibited by problems of poor quality of service, high prices charged by telecom network operators and perceptions that the existing network infrastructure is inadequate. Consequently, decisions on outsourcing will be delayed as enterprises struggle to comprehend the uncertainties in the Indian telecom industry.

Gartner is optimistic that the Government will support the industry's demand to increase the cap on foreign direct investment from the current level of 49 per cent to 74 per cent, and has pegged the probability at 0.8.

Additional foreign investment will accelerate service growth. The downside is that much of this investment is likely to come from financial institutions, whose business models factor in short timelines for return on investments.

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