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Growth Drivers: IT's Softer Ring

Continued from page: 1

Rajneesh De

Wednesday, September 06, 2006

Other Key Areas

The IPTV Focus: IPTV is going to emerge as a major additional revenue stream for Indian telecom service providers. Many of them already started working in this area during 2005-06. BSNL, Bharti TeleVentures, HFCL Infotel, MTNL and Reliance Communications were some of the major companies of India which were already in an advanced stage of adopting IPTV. Bharti is set to deploy IPTV in the next few months. Reliance Infocomm had already conducted IPTV trials in Delhi, Mumbai and Jamnagar during FY 2006 only. However, it could still be BSNL and MTNL that might emerge as the first companies to roll out IPTV. It is expected that by 2010 the total number of subscribers for IPTV would cross 120 mn worldwide. Asia Pacific would have a market share of 47% and India would emerge as a major market.
Linux: Linux found acceptance among telecom operators too, most notably Bharti and BSNL in circles like Andhra Pradesh. Airtel's entire caller ringback server was running on Linux as also the server that received all those SMSes for KBC.
Switches: Telecom service providers drove the demand for managed gigabit switches. Bandwidth intensive applications such as data warehousing, with the growing importance of voice, video traffic on the enterprise network fuelled further rollouts. Other drivers of growth were applications such as streaming video, voice over IP, high-end multimedia, medical imaging, and other bandwidth intensive applications. All these threw up demand for gigabit and fast Ethernet switches in low volumes but incurring high value. And with broadband starting to become mainstream, the road is only on the upward slope. The BSNL order for their NIB 2.2 project was one key example.

BI seemed to be one of the key areas where most of the service providers hedged their bets. It was recognized as a strategic IT investment and companies looked for enterprise BI suites that served the needs of multiple types of users. More and more business users provided the impetus to purchase BI solutions such as those for churn management, marketing automation, segmentation management. No wonder, the telecom industry accounted for 12% of revenues for a BI vendor like SAS with blue-chip clients like Hutch Mumbai, BPL Mobile, and Bharti.


Spend on IT (in Rs crore)
BSNL	440
VSNL	200
Reliance	161
Bharti Airtel	100
Hutch	100
Idea Cellular	54
DQ estimates

Additionally, overall profitability also gained focus for service providers, since in 2005-06 most have gone past the stage of making investments in infrastructure and operations and, therefore, focused on increasing the number of profitable customers who generated higher levels of ARPU. However, only high ARPU levels were not the indicators of profitability as the ARPU numbers had to be looked at in relation to the true costs associated with the customer segment identified across product categories. Going forward, this is going to be the key area of focus for telecom operators in the country as it will only help in enhancing the overall effectiveness of management control systems and deployment of more enterprise applications would play a key role here.

Value Catalysts
The trend was also data services-evaluating and offering various kinds of data services that can be provided to customers as plain vanilla voice was passé. Ongoing increase in SMS, MMS, GPRS, office applications, enhanced e-mail capability was becoming more main stream. Increased VAS services resulted in more innovation around content. VAS moved to contributing over 25 % in revenue to the overall pie.

VAS such as ring tones, callback tones, games and music downloads continued to play a significant role as a service differentiator and as an important revenue stream.

Integration issues related to evolving technology in the content space were high IT adoption catalysts for service providers. They needed to keep pace with the transaction volumes. This industry was moving from postpaid and prepaid to 'anypaid' ie a subscriber can use services which he can pay on a real time basis, near real time basis (end of day) or end of month bill basis. This evolving business model was gradually changing the way the IT systems bill and support the customer products.

Rajneesh De
rajneeshd@cybermedia.co.in

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