Trade Analytics

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July, 2010

The Indian telecommunications industry is one of the fastest growing in the world. According to the Telecom Regulatory Authority of India (TRAI), the number of telephone subscriber base in the country reached 653.92 million as on May 31, 2010, an increase of 2.49 per cent from 638.05 million in April 2010. With this the overall tele-density (telephones per 100 people) has touched 55.38. The wireless subscriber base has increased to 617.53 million at the end of May 2010 from 601.22 million in April 2010, registering a growth of 2.71 per cent.

Value-Added Services (VAS) Market

Mobile value added services (VAS) include text or SMS, menu-based services, downloading of music or ring tones, mobile TV, videos and sophisticated m-commerce applications. As per an industry report, VAS that accounts for 10-12 per cent of the telecom operator's revenue is expected to reach 20 per cent growth by 2013. The report further predicted that after the introduction of 3G services in India, the segment may garner US$ 5.98 billion in turnover by 2013. Currently, the segment stands at US$ 2.07 billion.

Major Investments

The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services. According to the Department of Industrial Policy and Promotion (DIPP), the telecommunications sector which includes radio paging, mobile services and basic telephone services attracted foreign direct investment (FDI) worth US$ 2,554 million during 2009-10. The cumulative flow of FDI in the sector during April 2000 and March 2010 is US$ 8,930.61 million.

Further, the Indian telecom sector is expected to witness investment of around US$ 40 billion during the current fiscal, as per the Telecom Equipment and Services Export Promotion Council. With the development of 3G, expansion of the current networks and widening of Broadband Wireless Access (BSA) network, the investment in the sector is likely to increase from the US$ 20 billion witnessed last year.

As per an industry report the telecom industry witnessed merger and acquisition (M&A) deals worth US$ 22.73 billion during April-June 2010, which represented 67.19 per cent of the total valuation of the deals across all the sectors during the period analysed. The sector had seen M&A deals of around US$ 439.4 million during April-June 2009. The biggest M&A deal in the sector was made by Anil Ambani's Reliance Communication Ltd that merged GTL infrastructure Ltd, its telecom tower business, for US$ 11 billion. Other major M&A deals included acquiring of Kuwait-based Zain telecom's African business for US$ 10.7 billion by Bharti Airtel and acquisition of Infotel broadband for US$ 1032.26 million by Reliance Industries.

Norway-based telecom operator Telenor has bought a further 7 per cent in Unitech Wireless for a little over US$ 431.3 million. Telenor now has 67.25 per cent hold of the company. Telenor has now completed its four-stage stake buy and has invested a total of US$ 1.32 billion in Unitech Wireless as agreed on with the latter last year.

The government has approved the foreign direct investment (FDI) proposal of the Federal Agency for State Property Management of the Russian Federation to buy 20 per cent stake in telecom service provider Sistema-Shyam for US$ 660.1 million.

Going Global

In March 2010, Bharti Airtel bought the African operations of Kuwait-based Zain Telecom for US$ 10.7 billion, driving the Indian player into the league of top ten telecom players globally.

The Reserve Bank has liberalised the investment norms for Indian telecom companies by allowing them to invest in international submarine cable consortia through the automatic route. In April 2010, RBI issued a notification stating "As a measure of further liberalisation, it has now been decided... to allow Indian companies to participate in a consortium with other international operators to construct and maintain submarine cable systems on co-ownership basis under the automatic route." The notification further added, "Accordingly, banks may allow remittances by Indian companies for overseas direct investment."


With increase in cellphone users to around 600 million and introduction of 3G services soon in the country, remote treatment and diagnosis of patients through mobile phones would become a reality in the near future. In fact, a few telecom operators and value-added service developers are planning to use mobile phones for diagnostic and treatment support, remote disease monitoring, health awareness and communication.