The Hindu Business Line : Expanding the footprint...

Indian telecom operators are going after global markets, both to cut dependence on domestic turf and to grow profits away from competition. The call of the world is getting louder.

Indians are not famed all that much for conquering new lands. Or for venturing out to invade markets abroad. But Indian telecom operators are looking to change the rules of the game and are eyeing the global communications business.

Almost all the large telecom players in the country are firming up big plans to foray into foreign countries, either through acquisitions or by taking a fresh licence.

Be it Bharti Airtel, Reliance Communication, Tata Teleservices or the state-owned telecom majors Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd, Indian telecom firms are looking to replicate the phenomenal growth in their home country in other developing and high-growth countries.

Deals on the cards

Bharti, for instance, already has cellular services in Seychelles and is now looking at countries in Africa, such as Gabon.

Sunil Mittal, Chairman, Bharti Enterprises, has evinced interest to take a 51 per cent stake in Gabon Telecom, the state-owned operator in that country.

MTNL and Bharti are also bidding for the second national telecom operator (SNO) licence in Africa's third largest economy, Kenya. The Indian firms will be competing with the likes of France Telecom, Telkom of South Africa and Emirates Telecommunications Corp, who have also lined up for a licence.

"We believe that Indian telecom operators are delivering services that compare with the best in the world. We keep evaluating various options for expanding our operations beyond India, both in terms of acquiring licences or existing operations. We are keen to invest in Gabon," said Mittal, after a meeting with authorities in Gabon a few months ago.

The Tata-promoted Videsh Sanchar Nigam Ltd is also going big on foreign operations. VSNL has picked up a 26 per cent stake in InfraCo, a telecom infrastructure company in South Africa. VSNL is also the largest shareholder in NeoTel, South Africa's second national operator, which began operations in July.

VSNL has also acquired under sea cable networks Tele Globe and Tyco, making it one of the largest under sea cable operators in the world.

The country's largest CDMA operator Reliance Communications, which had unsuccessfully bid for a cellular licence in Egypt, is in the reckoning for the second mobile licence in Bhutan and fifth cellular licence in Sri Lanka. Reliance also owns an international cable system FLAG, which has presence in over 30 countries.

Not to be left behind, the state-owned MTNL is considering an agreement with Reliance Communications to jointly foray into other countries. MTNL already holds a licence to offer fixed line services in Kenya in a joint venture with Telecom Consultants of India and a local partner.

It also has a licence to offer telecom services in Nepal through a joint venture with VSNL and a Nepalese company and in Mauritius, it operates a subsidiary that provides CDMA-based services.

Rationale behind forays

But what is it that is making the Indian operators look externally even as the tele-density within the country is just over 12 per cent with 70 per cent of the country yet to be covered? The answer depends on the company you talk to.

For a company like MTNL, foreign markets offer an opportunity to go beyond Delhi and Mumbai. "MTNL has the licence to offer services in Delhi and Mumbai, which is already becoming a saturated market with more than 20 million subscribers and 7 different operators. We need to look elsewhere to increase our revenues," says an MTNL executive.

MTNL's profits have been dipping over the past few months and the company is, therefore, betting big on the foreign telecom forays. For VSNL too, expanding its presence to global markets has been part of a well-thought-out strategy to reduce its dependence on domestic international long distance telephony market where its share has been dwindling over the past few years due to competition.

"VSNL is no more dependant on only the revenues being earned from domestic international long distance calls. Our strategy has been to make VSNL a global company, which helps us in managing risks related to geographical constraints," says N Srinath, Director, VSNL.

For others, such as Bharti and Reliance, it is a matter of getting the scale and making their respective brands global.

Formidable competition

Indian operators, however, have a long way to go before they can catch up with the global communication majors.

While Vodafone, which is one of the largest operators in the world, earned revenues of $44 billion with over 180 million subscribers, the largest Indian operator BSNL earned revenues of Rs 36,000 crore with just about 50 million users.

Bharti Airtel, the largest private operator, had revenues of just over Rs 11,000 crore at the end of March 31, 2006.

`Advantage India' factor

On the other hand, the advantage that Indian operators have, compared to global telecom giants such as Hutchison and Vodafone, is pricing. While in countries such as Gabon, per minute charge at present is around 20-25 cents, in India, operators are offering tariffs that are as low as 5 cents.

"Indian operators have learnt the trick to make profits even as they offer the lowest tariffs in the world. So it is easier for them to break into a new market," says a market analyst. Analysts also point out that with the Indian telecom market growing at more than 5 million new users a month, Indian operators are on a stronger footing than the global majors who have been facing huge losses in recent months.

Can Indian operators challenge the might of the likes of France Telecom, Hutchison and Vodafone? Maybe not in the next decade, but history tells us that the great conquerors took a few decades to spread their empire.

tkt@thehindu.co.in

Graphics: K.B. Jawaharr

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