Information and Communication Technology

Transcription

1 V Information and Communication Technology Telecom Telecom Subscribers The most dynamic sector in the Indian economy remains the telecom sector, with the wireless technology making strides and the traditional fixed telephony receding in importance. As per the latest report of Telecom Regulatory Authority of India (TRAI), the subscriber base for telephony services has continued its growth during May 2008 with an addition of around 8.62 million new mobile subscribers during this month. The gross subscriber base consisting of fixed and mobile users has touched million at the end of May 2008 as against million subscribers in April As a result, in the month of May 2008, the telecom sector has attained an overall tele-density (telephones per person) of around as compared to at the end of April Category Table 5.1: Growth of Fixed Phones, Mobile Phones and Broadband Connections (in million) March 2006 May 2007 Additions during April-May 2007 March 2007 April 2008 May 2008 Additions during May 2008 Additions During April-May 2008 Mobile Fixed Total Broadband Connections Source: TRAI ( Of the gross subscribers base, mobile subscribers [(GSM, CDMA & WLL (F)] * have numbered million and fixed line subscribers at million as at the end of May 2008 (Table 5.1). What has been more striking is the rapid growth of the mobile subscriber base. * GSM Global System for Mobile Communication, CDMA Code Division Multiple Access and WLL (F) Wireless Local Loop (Fixed). 28

2 The total wireless (GSM, CDMA and WLL-F) subscribers at the end of May 2008 touching million has meant an annual growth of around 56 per cent compared to million in the corresponding period of the previous year. Fixed Line Subscribers In the fixed line segment, a total of 0.16 million subscribers have discontinued their services during May 2008 as compared to 1.54 million in April The fixed phone subscriber base has slipped to million at the end of May 2008 as against million subscribers in April Internet Services and Broadband Growth During May 2008, approximately 1,40,000 new broadband connections have been provided taking the total broadband connections in the country to 4.15 million as against 2.34 million in March 2007 an annual rise of 77.4 per cent. Indian Telecom Companies Establishing Global Footprint On account of declining Table 5.2: Indian Telecom Companies offering Mobile Services in Emerging Countries average revenue per user (ARPU), Indian Telecom Company Name of the Countries saturated urban market and tighter Tata Telecommunications Sri Lanka, South Africa, Egypt and China Bharti Airtel Sri Lanka, Seychelles and Channel Islands merger and acquisitions (M&A) Reliance Communications Sri Lanka, Uganda and UK. MTNL Nepal and Mauritius norms, Indian telecom companies Source: Business Line, May 7, are venturing their mobile services to other emerging markets and even to developed markets. As indicated in Table 5.2, MTNL, Bharti Airtel, Reliance and Tata Communications have already launched mobile services in a few other markets; including the UK. While in India is around the $5 - $6 level, it is much higher at around $11 in other emerging markets. Besides, India s urban mobile market has already been saturated with more than 4-5 operators in one circle. It is said that the recent M&A norms have also made it impossible for existing companies to grow ARPU Average Revenue Per User 29

3 However, the Indian telecom companies also have to deal with challenges related to higher cost of operations, competition from global telecom majors and different regulatory environments. Tata Telecom Launching GSM Services Tata Teleservices Ltd (TTSL), India s fifth largest telecom operator, will be using its existing CDMA infrastructure and retail network for launching GSM services across the country. TTSL has received start-up GSM spectrum in Tamil Nadu (including Chennai), Orissa and Kerala and is expected to receive similar GSM spectrum in the remaining circles later this year. Supreme Court s Verdict The Supreme Court has held that, Tata Teleservices, Walky and Reliance Communication s Unlimited Cordless (WLL-F) services are limited mobile services and hence liable to pay access deficit charge (ADC) to BSNL for interconnection. Thus, Reliance and Tata are liable to pay Rs 400 and Rs 300 crore, respectively, as a levy to BSNL on account of ADC. The two companies had argued that since limited mobile phones (WLL-F) were being provided under the fixed line telephone licence, they were not liable to pay the ADC charges to BSNL a contention that has been rejected by apex court. Regulatory Measures The telecom regulator, TRAI, has reportedly given a formal approval to the Tata Teleservices-Virgin Mobile alliance. The controversial tie-up received Department of Telecommunications (DoT) clearance putting to rest all the allegations on the legality of the deal. The deal came into highlight as the GSM lobby COAI # had alleged that the deal was above board and violated the licence conditions. The lobby had alleged that the tie-up was in effect a mobile virtual network operators (MVNO) service, which is not allowed in the country. According to DoT, the final decision was based on Tata Teleservices arguments that it had no partnership for the use of network or spectrum with Virgin and that Virgin Mobile India was set up purely for non-licence activities. The government is set to issue guidelines for MVNOs, allowing operators without telecom licences to provide services by buying bulk airtime from telecom companies and resale # COAI Cellular Operators Association of India. 30

4 it to consumers. The proposed move would open a whole new avenue for companies in the telecom space with newer value-added features. DoT is finalising a regulation permitting operators to share active infrastructure. According to sources close to the development, the department is looking at bringing in the new regime within three months. Currently, sharing of active infrastructure including subscriber lines, electronic equipments, switches and other equipments is not permitted. However, sharing of passive infrastructure like telecom towers, shelters and repeaters is allowed. This will help lower infrastructure costs for service providers by around per cent. With operators expected to pass this on to the customers, the telecom tariffs in the country are expected to fall further. According to telecom analysts, the sharing of active infrastructure will also help in faster rollout of mobile networks in rural India. TRAI has also recommended an amendment to the licence conditions to permit service providers to share their backhaul infrastructure from base transceiver stations (BTS) to base station controllers (BSC). Highlights GSM service provider, Idea Cellular is investing $400 million (Rs 1,600 crore) for rolling out telecom services in four new circles Mumbai, Orissa, Tamil Nadu and Bihar for which it has received spectrum from the Department of Telecommunications (DoT). Idea Cellular and Vodafone Essar are exploring the possibility of floating a separate tower or passive infrastructure company in seven circles spread across 12 states. Though the controversy over the security of Black Berry services is yet to be resolved, the 4 operators that offer these services Bharti Airtel, Reliance Communications, Vodafone Essar and BPL Mobile have added over 50,000 customers in the last four months. There are over 4 million Black Berry subscribers worldwide. Research in Mobile (RIM), the Canadian company and owner of Black Berry technology, does not, however, provide country-wise subscriber numbers. Motorola Inc has bagged a $90 million contract to supply GSM network equipment to BSNL. The equipment is to add another 2.3 million subscribers to BSNL s existing GSM network in its south region. Motorola will provide a network services programme including both software and hardware support to BSNL. 31

5 US-based Providence Equity Partners has acquired 20 per cent stake in Idea Cellular, for $640 million (Rs 2,748 crore). This is said to be one of the largest private equity investments in the telecom sector. A major portion of the fund, raised from the stake sale, will be utilised for launching telecom services in Bihar. The deal, which is subject to FIPB approval, is expected to be completed by August According to a report of the Comptroller and Auditor General of India (CAG), Bharat Sanchar Nigam Ltd (BSNL) has to recover over Rs 4,000 crore from its subscribers and private operators which is having an adverse impact on its financial health. The report, tabled in Parliament recently, retreats that BSNL has yet to recover a staggering Rs 4,030 crore (by June 2007) of which Rs 3,665 crore is pending with the telephone subscribers and Rs 365 crore with the private players, for its leased circuits. The due from the private telecom players is Rs 100 crore. Information Technology Indian BPOs Dominate the Global 100 List Table 5.3: Top 100 Global BPO Companies Sr. No. Ranking Year 2008 Name of the Company 1 1 Accenture 2 2 IBM Indian BPO Companies 1 3 Infosys 2 6 TCS 3 7 Wipro 4 9 Genpact 5 10 Tech Mahindra 6 11 HCL Technologies 7 16 Mastek 8 19 WNS Global Services 9 22 Hexaware ExlService /7 Customer Cambridge ITC Infotech KPIT Cummins Patni Zensar Technologies Mindtree Mphasis Aditya Birla Minacs FirstSource Solutions VCustomer Source: Business Standard, May 5, The Business Process Outsourcing (BPO) industry in India, employing around 7 lakh people across 25 countries, is currently $11 billion in size, sporting about 40 per cent of the world s business process offshore market. Within India, there are 1,200 companies, spread across 30 locations, including metros, as well as Tier-II and Tier-III cities. Twenty-one Indian BPO companies, including Infosys and TCS, are among the top 100 outsourcing companies in the world. As per the latest 2008 Global Outsourcing 100 list, compiled by International Association of Outsourcing Professionals (IAOP), in the year 2008, Indian BPOs dominate the world top-10 32

6 list as half of the top 10 companies are from India, reflecting a robust growth in the outsourcing industry. The ranking positions of 21 Indian BPO companies have been within the top 100, spanning from 3 to 84. Amongst the foreign companies, Accenture has cornered the top slot and IBM is in the second place. Apart from the top five Indian companies falling within the world top-10 list, the other Indian companies in the list are HCL Technologies, Hexaware, WNS Global, Zensar, VCustomer and Mphasis (Table 5.3). According to Nasscom s Everest India BPO study, the Indian BPO industry could potentially grow five-fold to $50 billion in size and will employ around 20 lakh people by Indian BPOs Target of Acquisitions The Indian outsourcing sector is amongst the worst hit by the rising rupee with most of the companies showing a slump in growth and profitability since the beginning of Valuations too have fallen. However, the situation not only reflects the deteriorated revenue growth expectations of investors, but also makes the domestic BPO space ripe for heightened merger and acquisitions (M&As) activity, driven by private equity (PE) players, who are continuously hunting for possible acquisitions. Recently, PE fund Nalanda India has picked up a 5.25 per cent stake in the US-listed BPO firm WNS Holdings. Other Highlights of the BPO Sector Visually Handicapped Employed in Call Centres Under the project called Dristhi, Tata Teleservices, the promoters of Tata Indicom, has employed 20 visually challenged young men and women at its Mumbai call centre. The call centre works from the premises of the National Association of the Blind (NAB) in Worli, Mumbai. The call centre, which started with ten executives, doubled its staff to 20 within a year. Tata Indicom sends its customer data to the call centre in an excel file which contains details like names, addresses and phone numbers. These are then converted into voice-based data. Inspired by the success of the experiment in Mumbai, the company has now decided to expand the Dristhi project to cities like Ahmedabad and Delhi. 33

7 The US-based Sutherland Global Services, one of the world s largest privately held BPO service provider with significant presence in India, has planned to make India as the global hub for its activities. Of the total size of 22,000 employees, around 12,000 are working in three cities in India, namely, Chennai, Kochi and Mumbai. The company is setting up a SEZ project by investing Rs 200 crore in the new 10,000-seat campus near Chennai. India s third largest software exporter, Wipro, has started offering legal process outsourcing (LPO) services as part of the knowledge process outsourcing (KPO) services business. The focus of the LPO will be to offer services such as patents and contract management rather than paralegal services and litigation support, where the clientele are mostly law firms. The company aims at providing end-to-end services catering to the existing global customers. The LPO currently employs about 80 people. Reliance BPO, the business unit of Reliance Anil Dhirubhai Ambani Group (ADAG), is setting up three centres in Kolkata, Hyderabad and Chennai. Each of these centres will have a headcount of 1,500. Largest Domestic Acquisition In the largest deal in the domestic information technology (IT) space, Mindtree Consulting is set to acquire outsourcing product development (OPD) and testing company, Aztecsoft, for around Rs 400 crore. Mindtree will be buying the 34 per cent stake held by private equities, Canaan Partners and e4e, followed by an open offer under the Takeover Code. The acquisition is expected to instigate consolidation of mid-sized IT firms in India, as the overall earnings of the info tech companies are under pressure on account of rupee appreciation, concern of slowdown in the US, wage inflation, increased taxation and rising competition from MNCs. Aztecsoft has over 2,200 employees and four delivery centres in India. The combined entity will have revenues of $250 million (Rs 1,000 crore). Software Piracy The Indian software industry lost about $2 billion of revenue due to piracy involved in the software business. A study by the Business Software Alliance (BSA), an international association representing the global software industry, showed that though computer software piracy rates in India declined, the country still has registered losses to the tune of $2 billion in 34

8 2007 in monetary terms, compared to $1.28 billion in Piracy of software on personal computer (PC) in India has come down to 69 points for 2007, toeing the global trend in which piracy rates have dropped in most countries. Hiring Americans The US operations of the top Indian IT companies, like TCS, Infosys, Wipro, Satyam and HCL Technologies, are likely to take a hit, with the US intensely considering introducing a 50:50 law, under which Indian info tech companies will have to employ 50 per cent Americans in their US operations. According to industry sources, a final decision on the new proposal is largely dependent on the US presidential polls. With the implementation of the proposed 50:50 law, Indian IT companies would have to incur extra expenditure on salaries for foreign staff. At present, it is not mandatory for Indian info-tech companies to hire any fixed number of American employees in the US. Recently, the US Democrat senator Dick Durbin and Republican senator Chuck Grassley had questioned top Indian IT companies about their recruitment process for the professional workers. Faced with pressure from US senators, the Indian companies are now scouting for local talent in the US in the field of consulting services and sales and marketing. Thus, the percentage of local employees in the total staff strength has increased significantly to per cent from 2-3 per cent a few years back. Indian companies are also increasingly recruiting graduates from US universities for application development and management, which is back-end work for consulting. TCS has recently announced plans to employ 1,000 people and Wipro is recruiting about 500 graduates each for three new centres in the US. Indian companies have been avoiding employing locals, as the cost incurred is three times higher than the cost of an employee recruited from India. 35