India to be 2nd largest tele mart in 5-yrs: E&Y study

Indian telecom operators could see almost a three-fold jump in revenues "" from $9 billlion in 2002 to $25 billion by 2007, according to a study released by Ernst &Young.

As per the study, the Indian telecom network will become the second largest in the world after China in the next five years.

The report, titled "Redefining Indian Telecom," also said that the teledensity in India would cross 20 per cent in the next five years instead of eight years as projected by the government.

"We estimate the subscriber base to cross the 20 crore mark by 2007 and 25 crore in the next couple of years. This will easily make India the second largest market in the world," Sanjay Mehta, Ernst & Young director, said.

Outlining the key drivers of future growth, the report said that small operators with low economies of scale would not be viable due to the very high cost per minute.

"Eventually only three or four large operators with pan-India operations will remain dominant," it said.

The report predicted that state owned telecom majors, MTNL and BSNL, would eventually merge in the face of stiff competition from integrated private players.

Once mobile operators were allowed to route inter circle calls within their own network, the long distance operators would lose relevance, and therefore such players would integrate with large wireless or wire line players.

"According to us, companies with low cost and pan India business models with diversified product offerings will be the future winners," the E&Y study said.

The report cautioned operators that while the future value for companies would reside in ownership of customers, operators should also pay rigorous attention to retaining revenue.

"The ability to keep operating costs under control will be the key for the much needed flexibility in pricing. Various operators have moved towards infrastructure sharing and outsourcing network O&M activities," it said.

Redefining Indian Telecom findings

• The Indian telecom network will become the second largest in the world after China in five years.
• Teledensity would cross 20 per cent in the next five years. Subscriber base to cross 20 crore mark by 2007.
• Small operators with low economies of scale would not be viable due to the very high cost per minute.