Telecom Market Present, Future

The results of reform have been encouraging. The Indian market for equipment and services is expected to jump to $24.3 billion by 2006, up from $13.7 billion in 2001, according to telecom research firm Frost & Sullivan.

The offshoring movement has created demand for networking equipment. Those facilities need the fast, secure phone and Internet connections.

“In offshoring hubs, high-quality, private-sector infrastructure is increasingly provided, giving foreign corporations better infrastructure in some areas, such as communications and health services,” UBS said.

In Cisco’s most recent conference call, CEO John Chambers called India “a great success story.”

“We put a lot of investments over the last several years, and it’s growing approximately 100 percent year-over-year,” he said. Cisco does not disclose revenue or investments on a country basis.

But it’s mobile that holds the most promise, with subscribers signing up at a rapid pace.

“It’s a combination of a huge population, the economy getting better and equipment and handsets are now getting more affordable,” Greg Collins, senior director of research at Dell’Oro Group, said.

But what most excites vendors isn’t the number of people that have signed up — it’s how many have yet to. Where mobile phone penetration is 70 percent to 80 percent in Western Europe and 50 percent to 60 percent in North America, it’s nowhere near that in emerging countries. China has something around 20 percent penetration, and India even less than that, Collins said.

Kurt Steinert, a Lucent spokesman, agrees. The company is currently working with Indian telecoms Reliance and Tata, providing base stations and other gear for CDMA (define) networks. The mobile infrastructure market in India hit $1.17 billion last year, Gartner said, and is forecast to grow to $1.885 billion by 2008.

“There is a lot of room for growth in India,” Steinert said. “Mobile is very popular in areas that haven’t even had phone service.”

There are still challenges however to sustaining mobile subscriber growth rates. India has more than 1 billion residents, but 700 million of those live in the countryside and are at or below the poverty line.

“A lot of potential customers can’t afford to pay the $50 a year we pay here, or the $30 they pay in Europe,” Dell’Oro Group’s Collins said. “[Carriers and handset makers] have to respond to that.”

Among the efforts is to offer basic handsets that stress coverage over the latest bells and whistles, as well as selling refurbished handsets at a lower cost than new ones. Cisco has about 600 employees in India and Motorola has about 1,500.

“We consider India a pretty important market,” Lucent’s Steinert said, noting that the company has about 1,000 employees in India focused on R&D, sales and service for both wireless and wireline networks.

If business and economic trends hold, expect Lucent and its sector mates to boost their presence in India even further.

Then, Bangalore, Mumbai and New Delhi will not only be historical sites, and places to farm out work, but also 21st-century centers of telecom business and investment.