Data, Not Voice, Will Drive Telecom Growth: Report

Value-added services like mobile banking will drive the growth of India’s booming telecom sector in the next phase, with the market for such offerings set to rise four-fold to Rs.482 billion ($9.64 billion) by 2015, says a new report.

“Data is undeniably going to be the key driver of the Indian mobile market in the years to come,” says the study by KPMG, commissioned by the Department of Telecommunications (DoT) and the Federation of Indian Chambers of Commerce and Industry (Ficci). “Mobile value added services (MVAS) is expected to increase from Rs.122 billion in 2010 to Rs.482 billion by 2015, driven by the uptake of third generation (3G) services in urban as well as in rural areas,” says the report.

According to KPMG, the Indian mobile phone market is still dependent on revenues from voice calls, with data accounting for just 15 percent of the total mobile revenues in March 2011, as against close to 30 percent in China and Britain.

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But this is set to change after better networks and 3G and broadband services.

Some of the services expected to make an impact on the Indian telecom market include mobile banking, mobile education, basic governance services, health information services, agriculture and entertainment.

In developing markets like India, mobile banking, in particular, will see huge uptake as regulators evolve clearer guidelines to reach out to the large un-banked population base. The increase in income levels and large young population will also drive demand.

Globally, too, telecom service providers are increasingly looking at broadening their value added services offerings as declining revenues from voice segment and rising costs put pressure on margins.

The report also says that the Indian telecom industry will continue to add subscribers at a healthy rate, even though the number of users has already crossed 900 million in a country with a population of around 1.2 billion. “Even after this strong rise in tele-density, the Indian telecom market is far from saturated,” the report says. “A large part of the country’s population base, primarily in rural areas, still does not have access to quality telecommunications services and therefore it presents significant opportunities for growth.”

The telecom sector has been a major recipient of foreign investment and will continue to attract overseas investors with policy initiatives - Rs.6.5 trillion ($124 billion) in the 12th Five Year plan that runs from 2012-13.

Also attractive will be the manufacturing of equipment locally, even as research and development alone may see new investment worth $1.5 billion.

“Market-driven factors such as planned expansion of networks, development and deployment of 3G infrastructure and the widening of broadband wireless network by players will also drive investments,” says the Ficci-KPMG report.

In the 10 years from April 2000 to March 2011, the Indian telecom sector has received foreign direct investment amounting to Rs.482.2 billion, accounting for an average of about 8.3 percent of the total such capital received by the country.