Indian Telecom IT Spending Has Grown At 14.3% In FY12: Zinnov

Zinnov, the market expansion and globalisation advisory firm, has released its much awaited study to evaluate the Indian Telecom Market for 2012 in its report, titled, ‘Indian Telecom Market Overview 2012’. The study covers in detail the overall industry growth, key technology trends and government regulations that have shaped the growth of the Indian telecom sector.

The released study found that the Indian telecom industry, characterised by a large subscriber base, substantial tele-density but low revenues per user (ARPU), has witnessed a 3-fold increase in subscribers since 2008. The wireless subscriber market stands at 933.7 million subscribers and is dominated by Bharti while the wireline segment stands at 31.4 million connections dominated by BSNL.

The report also highlights new avenues for revenue generation for the telecom companies, like MVAS, cloud and datacentre services which in turn are providing ample opportunities to IT companies. Currently datacentre market and capacity in India is valued at over $4.0 billion and is expected to reach at approximately $6.0 billion by 2014; nearly 1/5th of this segment is governed by third party while the rest is captive; Lack of in-house skills, high investments, and long gestation periods pose challenges for captive datacentres in India.

Additionally another trend has been noticed by rising focus on MVAS opportunities necessitated by declining share of voice in telecom Average Revenue Per User (ARPU). Indian MVAS market is expected to move from the traditional SMS based services to Internet based and app based services. Currently valued at over $5 billion Indian MVAS industry is expected to reach well over $6 billion by 2013.

IT Adoption In Telecom

Telecom companies are spending on upgrading their technologies and in better management of business processes.

• Upgrading legacy infrastructure

• Platform integration

• Managing partner network

• Implementing security solutions

• New infrastructure for datacentre/network expansion

• Private cloud adoption

Praveen Bhadada, Director-Market Expansion, Zinnov Management Consulting, said, “This study examines various trends that have shaped adoption of IT across the entire value chain of the telecom vertical. IT spending in the telecom vertical is mature and has grown at a rate of 14.3 percent in FY 12 and has reached $2.4 billion out of which the maximum spending takes place in hardware followed by services and BPOs. Focus on 3G and LTE has forced many telcos to re-look at modernising their IT systems. Additionally, new avenues for revenue generation for telecom companies like MVAS, cloud and datacentre services are providing ample opportunities to IT companies, with whom service providers are looking at establishing strategic partnerships. Further to this, it is interesting to know that the IT spend in this sector will cross over $7.0 billion by 2020.”

Telecom companies are facing some challenges in IT adoption which includes: Lack of clarity on consumer preferences, uncertain government regulations, predictability of future IT requirements is difficult, falling ARPUs affecting profit margins, management issues in PSUs, high operation costs in remote areas.

Last but not the least and drawing some analysis on the government regulations, the study read that a host of regulatory changes are being sought through the National Telecom Policy – 2012 such as- Promoting R&D and manufacturing in domestic telecom equipment industry, moving towards a unified license regime through which revenue could take a hit of as much as 5 percent due to roaming abolition, permitting spectrum pooling, sharing and trading, making additional spectrum available every five years and framing policies to ensure rapid expansion of cloud services and technologies.