IT Sector Overview
The Indian information technology (IT) sector has been instrumental in driving India’s rapid economic growth. According to a NASSCOM-Deloitte study, the IT/ITES industry's share of the country's GDP has increased to 5.2 percent in 2007, as against 1.2 per cent in 1998.

Jerry Rao Chair, USIBA IT/Telecom Advisory Council

In addition, the IT and BPO industries are positioned to generate revenues totaling US$ 64 billion by the end of FY 2008, thereby achieving an overall growth rate of 33 percent. Exports are expected to exceed US$ 40 billion while the domestic market is estimated to register over US$ 23 billion. At the same time, the Indian IT services market is anticipated to continue on as the fastest growing market in the Asia-Pacific region with a CAGR of 18.6 percent, so says a study by Springboard Research.

A report by the Electronics and Software Export Promotion Council (ESC) estimates that software exports during FY 2008 will reach US$ 45 billion. The Government of India expects the exports turnover to reach US$ 80 billion by 2011, growing at an annual rate of 30 percent per annum.

Multinationals in India
Information technology has been a promising sector for India, generating revenues both for the domestic as well as the global market. India's IT potential has attracted many multinationals looking to cash in on the IT boom. India offers a market with very high returns for multinationals clamoring to invest in their India units. In addition, increases in purchasing power and the rapid expansion of the small- and medium-sized enterprises (SMEs) holds particular promise for global IT giants as they are looking at a 100 percent year-on-year growth in this business market in India.

Domestic Markets
India's domestic market has also become a force to be reckoned with as the existing IT infrastructure has advanced both in terms of technology and depth of penetration. Global IT companies as well as Indian ones have experienced remarkable growth.

The domestic information technology business has become far too attractive to ignore. India Inc's demand for IT services and products has spurred growth in the domestic sector where business transactions worth US$ 50-100 million are now being seen.

International Data Corporation (IDC) reports that the domestic IT and ITeS market will grow at 24 percent in FY 2008 reaching US$ 27.35 billion. IDC projects higher local demand driven by growth in broadband, expansion of Software-as-a-Service (SaaS), service-oriented architecture, virtualization, and networking projects.

Growth
Although worldwide IT budgets are expected to increase by 3.3 percent in FY 2008, slightly higher than FY 2007, Indian companies firms will report stronger-than-average IT budget increases of around 13 percent, according to Gartner. IDC sees the Indian IT and ITeS market to grow at over 16 percent to become a US$ 132 billion industry, significantly, the domestic market alone is expected to become over US$ 50 billion, with a CAGR of about 18.4 percent. At the same time, IT and ITeS exports are estimated to more than double to US$ 78.62 billion in 2012.

Indian Telecom Sector Overview
The Indian telecommunications sector has been growing at an incredible rate, emerging as one of the key sectors responsible for India's economic growth. In April 2008, India surpassed the US to become the second largest wireless network in the world with a subscriber base of over 300 million, according to the Telecom Regulatory Authority of India (TRAI).

The year 2007 saw India achieve several notable telecommunications distinctions:

(1) the world's lowest call rates (2-3 US cents)
(2) the fastest growth in the number of subscribers (15.31 million in 4 months)
(3) the fastest sale of a million mobile phones (in a week)
(4) the world's cheapest mobile handset (US$ 17.2)
(5) the world's most affordable color phone (US$ 27.42), and
(6) the largest sale of mobile handsets (in the third quarter).

Segment-Wise Growth
The wireless segment has emerged as the favored mode of telephone service by Indian consumers as reflected in the rising share of mobile phone connections to total connections. The share of mobile phones has increased from 71.69 percent at the end of March 2006 to 87.29 percent at the end of April 2008. Since 1999, the mobile subscriber base has been growing at a CAGR of around 85 percent. Overall teledensity has also increased to 26.89 percent at the end of April 2008.

The private sector has become the dominant player in the industry. While public sector companies added 53.6 million subscribers during 1998-2007, private companies added 133.58 million subscribers during the same period. This private sector dominance has been even more pronounced in the mobile market, where private operators have added 124.68 million subscribers, while public sector operators added only 31.79 million subscribers.

Investment
The booming domestic telecom market has been attracting greater amounts of investment. During April 2000 to March 2008, cumulative FDI inflows into the Indian telecommunications sector amounted to US$ 3.84 billion, accounting for 6.81 percent of the total FDI inflows into the country.

In fact, the surge in mobile services market is likely to see investment worth about US$ 24 billion by 2010, going by industry estimates. This is no surprise given that the number of mobile subscribers is estimated to increase to 600 million by 2012, according to Standard Chartered Bank, implying a mobile in the hands of every second person in the country.

Manufacturing
India is emerging as a handset superpower as more manufacturers establish operations in the country. Latest figures from the Department of Telecom (DoT) indicate that revenue from the telecom manufacturing sector is set to surpass the US$ 6.5 billion mark in FY 2007-08. The Indian telecom equipment manufacturing sector is clearly on track to become one of the largest in the world by 2010.

Production in telecom equipment increased from US$ 4.25 billion in 2005-06 to US$ 5.64 billion in 2006-07 and is estimated to go as high as US$ 6.31 billion in 2007-08. Consequently, India is projected to record the highest growth seen in the Asia-Pacific region with a handset production of 51 million.

With mobile phone production estimated to grow at a CAGR of 28.3 percent between 2006 to 2011 totaling 107 million handsets by 2010, revenues are likely to grow at a CAGR of 26.6 percent totaling US$ 13.6 billion by 2011.

At the same time, India's surging domestic market is also providing excellent investment opportunities in other segments of the telecom equipment industry. For example, TRAI estimates that the country will need about 350,000 telecom towers by 2010, as against 125,000 in 2007.

Value Added Services Market
India's tremendous success in mobile telephony has also spurred on the mobile value added services (MVAS) market. According to a study by Stanford University and consulting firm BDA, the Indian MVAS is likely to grow at a CAGR of 44 percent to US$ 2.74 billion by 2010. In addition, India's share in Asia-Pacific (excluding Japan) data revenue is estimated to almost double from about 6 percent in 2007 to 11.5 percent by 2011.

Road Ahead
According to a report by Boston Consulting Group, while only one in 20 of the world's first two billion mobile subscribers live in India, as many as one in every four of the next billion subscribers will be an Indian. The DoT estimates the total subscriber base to total 500 million by 2010, out of which 80 million are expected to be from rural areas. The Indian telecom industry's revenue, likewise, is estimated to increase, which according to Ernst & Young is expected to total US$ 35 billion, accounting for 3.6 percent of the total GDP of the country.

With such growth projected, this industry is likely to see continuing significant investments. Total investment is estimated to reach US$ 76.6 billion during the eleventh plan period (2007-12). The private sector will likely continue its domination here, accounting for 67 percent of the total projected investment.

Indian Telecom
Indian Telecom sector offers tremendous growth opportunities to meet the demands of domestic and global markets. India’s 92 million telephone network which constitutes both fixed and mobile telephony is one of the fastest growing telecommunications market in the world. The Government of India’s decision to increase the foreign direct investment (FDI) cap in this sector to 74 per cent has generated interest among global investors.

The areas of demand in telecom services would be in basic services, national long distance, international long distance and mobile phones sector.

India with a population of over 1 billion has relatively low tele–density. There is a demand of 175 million telephone connections by 2010 to meet the government’s goal of achieving tele-density of 15 in urban areas ( from current level of 8.62 per 100) and 4 in rural areas (from current level of 1 per 100). This would require an investment of approximately $68 billion by 2010.

The vast mobile phone subscriber base in India has crossed the number of fixed line connections. According to Cellular Operators Association of India, the subscriber base is expected to touch 100 million by 2010 from the current level of 48 million.

The Mahanagar Telephone Nigam Limited (MTNL), the state-run telecom services provider, in tune with the latest technological developments is setting up India's first 3G networks in Delhi and Mumbai. The network, which will have a capacity of 4 million lines, will require a total investment of US $ 914.9 million.

The Department of Telecom under the Union Ministry of Communications and Information technology has come up with series of investor friendly initiatives to promote the investment of global corporations in the lucrative Indian telecom market.


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