Indian telecom sector to grow to US$100 bn by 2015: Boston Consulting Group

The telecommunications sector and adjacent business opportunities such as digital devices and services for enterprises will represent a $100 billion market by 2015, according to management consultancy firm Boston Consulting Group (BCG).

The traditional telecom market is currently worth about $32 billion according to BCG. But in its latest report, the consultancy takes a much broader view of market opportunity to include laptops, personal computers, software and applications, television sets, digital advertisements, as well as managed network and connectivity services offered to large enterprises or government.

That the past year added about 200 million new subscribers, but earned only 2 to 3% additional revenue for telecom firms is misleading, because going forward the market will be driven by data-based services and devices used to consume such services, a white paper called Digital India: The $100billion prize, released on Tuesday said.

“Against the backdrop of weakening economics, the upcoming sizeable investment cycle in 3G and BWA services appears foolhardy. But that is not the case,” said Arvind Subramanian, partner and director heading technology, media and telecommunications practice at BCG.

“In fact the narrow definition of the traditional telecom market misses related businesses and opportunities, where many of the best growth prospects lie.”

It is no surprise that for Nokia, the world’s largest mobile handset maker, India is the second largest market after China. The world’s largest software maker, Microsoft, which currently sells about $800million worth of software here, is aiming to make India their fifth largest market in the next three to five years.

“Tomorrow’s market will be far different from today’s —much more oriented toward new services and characterised by intense competition from non-traditional players,” Subramanian said.

And with the growth in traditional voice-based business slowing down, operators will build new capabilities in order to develop new offerings and serve new customers.

“This high-wire act will be perilous for operators that cannot maintain the needed balance—and richly rewarding for those that can,” BCG’s report cautioned.

Along with the rollout of 3G and wireless broadband networks, which will over a period of time reach even smaller cities, the market will witness faster evolution of products, with better features such as touch screens and voice and gesture recognition, thus encouraging faster consumer adoption, the report predicts.

And the increasing consumer adoption and stiff competition will drive prices down.

“The average price of smart-phones will likely drop to less than Rs4,500 by 2015, from more than Rs11,000 today, while the price of advanced-feature phones will fall to around Rs2,500,” the report said.

The opportunity, however, also calls for substantial investments from government as well as firms hoping to profit from the market.

According to BCG estimates, investments required would easily be in the range of “$35-50 billion in order to develop the backhaul, backbone, and data centres needed to power wireless-broadband networks that can support these new services.

Going forward, telecom operators will need to increasingly get into share infrastructure agreements so that the burden of investment can also shared.