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While the growth is bottoming out in most of the dominant sectors of the economy the telecom sector is still growing with an average addition of 8 to 9 m new connections per month. Telecom industry in India has evolved from a tele-density of less than 4% in the mid-nineties, to today’s tele-density of over 27%, to become the third largest in the world behind only China and USA.
Hyper Growth through the recession
The Indian telecom industry is growing at a phenomenal pace. The total subscriber base has shown, a CAGR of 35% over the last 10 years. The exhibit below shows how cellular growth has outpaced fixed line in the recent years.
Exhibit 1: Growth of the telecom industry
Source: TRAI, COAI
The cellular subscriber base has increased exponentially, whereas the fixed line subscriber figure has fallen since 2005.
New players entering the cellular market has fuelled competition and brought down tariffs which in turn has made telecom services affordable to both rural and urban masses. Established players, introduction of value added services and conducive regulatory environment and above all a huge untapped potential need means a steady growth for the telecom industry through the recession.
Outsourcing in the Telecom Sector
Today, outsourcing by telecom companies in India has gained acceptance and is in fact one of the few relatively matured (domestic) sectors in terms of outsourcing services.
Bharti set the ball rolling in the domestic market by outsourcing their network management in 2004. However, most of the other operators took a wait and watch approach. But over the last two years, other telecom operators like Idea Cellular, Vodafone, BSNL, etc have started to outsource more aggressively.
Today, telecom operators are more open and willing to outsource most of their processes. The much touted ‘Bharti-IBM’ deal has shown that areas such as information technology management, CRM, data centre, disaster recovery and even the IT help desk can be outsourced to provide competitive advantage.
The exhibit below lists some of the significant outsourcing deals in the telecom vertical.
Exhibit 2: Outsourcing deals in telecom
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Date
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Telecom operator
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Vendor
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Deal Description
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Apr 2008
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BSNL
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Convergys
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Convergys will support BSNL's 18 m wireline subscribers. BSNL will replace its legacy billing systems with the Convergys' Infinys [R] rating and billing solution.
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Jan 2008
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Aircel
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Wipro
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Wipro will support IT infrastructure for Aircel in India. The 9 year deal is estimated at $450 m to $600 m.
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Sep 2007
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BSNL
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TCS
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TCS will develop a billing system for BSNL The deal covers the North and West of India, includes deploying operational support systems and business support systems components such as CRM, billing, mediation and directory enquiry. The 9 year deal is valued at $140 m.
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July 2007
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Vodafone
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IBM
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IBM will manage all of Vodafone Essar's IT operations with the exception of network service platforms.
It also includes maintaining billing, data centers and financial systems.
The tenure of the contract is 5 years and is estimated value of the deal is $600 m to $800 m
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Mar 2007
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Idea Cellular
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IBM
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IBM will integrate Idea's business processes, IT and IT infrastructure. About 70-75% of the Idea's total headcount will be moved to IBM.
IBM will also provide technology to handle billing and credit collection, manage frauds and customer relationships.
This 10-year deal is estimated to be valued at $600 m to $800 m.
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Source: ValueNotes Research
Indian telecom operators have largely outsourced CRM (customer care and billing solutions) and other support services, especially IT and HR services. With the redefinition of core and non-core processes, companies are now outsourcing operation support systems.
Market Size
The BPO opportunity can be assessed in terms of market potential of the sector and the industry readiness or willingness to outsource. The telecom sector is high on both the parameters. Telecom industry revenues and subscriber base are growing at 25% and 45% per annum respectively.
Exhibit 3: Market Size (Rs b)
Source: ValueNotes Research
According to a research by ValueNotes, outsourcing of services in this sector is poised for high growth and expected to reach Rs. 27.7 b by FY12.
While the key client markets as a whole are likely to shrink significantly, telecom market while expanding is also a great opportunity for service providers in the near future.
This report: "Opportunities in the Indian Domestic BPO Market " by ValueNotes provides an in-depth analysis of the buyer as well as the vendor landscape.
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