Telecom next hot sector for US venture funds

The Indian telecom sector seems to be the next hot destination for American venture capitalists, after information technology and business process outsourcing. Ranjan Biswas, partner, Ernst & Young, said at the TiE Connect - Boston 2004.

"With a 37 per cent growth in the subscriber base in the year 2003-04, revenues from the telecom sector are expected to touch $21 billion by 2008, from the current levels of $8.3 billion."

The delegation comprised representatives of 22 US based venture capitalist firms, including leading companies such as Bessemer Venture Partners, Westbridge Partners, Kodiak Ventures etc.

The teledensity in the country has increased from 2 per cent in 2000 to around 7 per cent currently, and is expected to go up to around 20 per cent in the next four years he added.

'In the last three years, two out of every three telephones was a wireless connection,' Biswas said. Venture capitalists were looking at product development in the wireless communications sector, semi-conductors, optical technology communication and networking technologies.

"Venture capitalists are looking to invest up to $30 million in Indian firms, which have a technology component," Gautam Prakash, managing director, Monsoon Capital "" a US based venture capitalist.

"Broadband was one sector, which the venture capitalists have ignored. There is lot of potential in this segment, as its is highly under-utilised in India. Out of over 4 million internet connections, only 2.5 lakh are on a broadband network," explains, Biswas.

There is need for building more of the 'last mile connectivity, which the small and medium sized entrepreneurs are developing, he added.

Mobile gaming is another area, where the VCs are willing to put in their money. "Developing telecom infrastructure and applications is an area, which will attract a lot of investment," said Hemant Taneja of General Catalyst, a venture capitalist looking to invest in the communications sector.