The Impact of India Inc. on Telecommunications
I recently returned from my first ever trip to India, and experienced firsthand the juggernaut that this country has become across most of the major industries in the world. You almost can’t open a newspaper or an Internet browser these days without seeing the impact this world-changing nation continues to have. Experiencing an average of 9% GDP growth per year for the last 3 years alone, India’s quick rise to global prominence and economic influence has been fueled in large part by the phenomenon of”globalization”, or the outsourcing of well-defined business processes to fast-growing Indian IT and professional services companies. In recent years, leading companies in India have begun re-defining globalization by turning the tide, expanding out and establishing leadership positions, or acquiring companies outright, in a variety of industries previously dominated by businesses from established nations. According to KPMG, Indian companies acquired 62 companies in the first 8 months of 2005, to the tune of $1.7B, and the pace just keeps accelerating. The world’s largest steel company, Arcelor-Mittal, was created less than two years ago by the successful pursuit by an emerging markets bellwether firm of an established Western counterpart, consisting of a small group of 100+-year-old companies. And if the purchase of a Jaguar or Land Rover is in your future, you will soon be making the check out to an Indian firm, Tata Motors.India Inc.’s acquisitive bent is showing up in the IT management and telecommunications spaces as well. Wipro recently acquired Infocrossing, a U.S.-based provider of remote infrastructure management, enterprise application and business process outsourcing services, for about $600M. In very short order, the combined entity won a $275M multi-year outsourcing deal for Missouri HealthNet Division, an agency run by the state government to provide health care services to Missouri residents. Tata Communications, the newly re-branded combination of VSNL, VSNL International, Teleglobe and Tata Indicom Enterprise Business Unit, has announced it is seeking acquisitions across the globe in the managed services space, focusing on companies with technological prowess who lack the scaling capabilities to go global. While they haven’t announced any U.S.-based acquisitions yet, India-based mobile giants such as Bharti Airtel are looking toward the U.S. to add to their already mammoth number of subscribers. The growth rate of mobile subscribers in India continues to accelerate, rising to a healthy 8+ million per month and born out of the rise in the last 15 years of a robust middle class of some 300M people with money to spend on such luxuries as telecom services. Bharti Airtel is the largest mobile carrier in India, reaching 50+M subscribers by November, 2007, and continuing to add 2+M subscribers per month. Now, Bharti Airtel is adding to their numbers and expanding outside their home footprint by launching their new”Airtel CallHome” service for calls made from the U.S. to India. The service is targeted at the more than 2.5M Non-Resident Indians (NRI’s) currently living and and working in the U.S., but still with family in India. The service features single-key access dial to the customer’s ten most frequently dialed numbers at an average of 30% less cost than competitive offerings -it also includes other benefits, such as a customer referral reward program (offering free talk-time), configurable dialing for up to 50 numbers, and soon, access to other value-added services, such as astrology horoscopes, cricket scores and other services that promote connection to the customer’s Indian roots.On both the business and consumer fronts, Indian communications and outsourced IT/managed service providers will very soon be a force to be reckoned with by U.S. carriers and hosting providers. Around the globe, the telecommunications industry is going through tumultuous change as traditional wireline, cable and mobile carriers all vie to grow revenue by retaining existing customers, gaining new ones and growing ARPU through flexible and innovative new service offerings, and managing cost. All are starting from varying positions of strength, and all are moving into each other’s territories, in order to accomplish these objectives; cable providers have branched into voice, wireline providers are launching new video services, and the mobile carriers are trying to convince everyone to take their triple play on the go. Leading service providers in the U.S. are carefully following these trends and evaluating the global landscape. I would not be at all surprised if companies such as Tata Communications, Bharti Airtel and others became the world’s largest carriers in the next 10-20 years, with footprint in every major geography. These companies are incredibly innovative in their development of next-generation business and consumer telecom services, and they are nimble in their design and deployment of services because they don’t have existing infrastructure that they have to continue to”sweat” to gain the maximum ROI. They are dreaming big about what is possible, and moving quickly to design and implement new services, custom-fit to both their local customer base, and to those outside their traditional footprint.So, what do you think about the”globalization of telecommunications”? As the geographic and technology lines continue to blur, how do you think all the players across the globe will be able to compete? How will they differentiate themselves from everyone else and retain loyal subscribers?