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Internet to lead to Rs20,000 crore in operating earnings for Indian telcos in three years: study

21 August 2014

The internet can unlock Rs20,000 crore of operating earnings for telcos in next three years in India.

According to a joint study by Google and consulting firm A T Kearney, telecom companies can generate additional cumulative revenues of $8 billion and EBITDA of $2.9 billion over the next three years, as they pursue an array of digital opportunities in tandem with the Indian online market that is set to witness explosive gtrowth.

Nikolai Dobberstein, a partner at A T Kearney, and one of the authors of the report, says ''Indian telcos are poised to leapfrog directly into a digital play, since the shift from data to digital will happen much faster in India, as more digital content and services are adopted by users. By FY17, the Indian telecom industry is expected to reach $35 billion in revenues, with data revenues growing at over 70 per cent per year till then and new digital VAS streams emerging and growing exponentially.''

He says while Indian telcos may have had varying degrees of success with digital content and services in the past, but the outlook for these services, as well as digital customer engagement, which can unlock massive opportunity in e-stores and e-care, "is extremely positive.''

With over 155 million mobile internet users in the country, India will see a major mobile explosion, as the internet user base will more than double to 480 million by 2017.

It is estimated that in next three years, smartphone penetration will grow six times to reach 385 million people and the number of users who transact online will grow to 160 million.

The study outlines that data consumption on mobile phones will triple, and consumers will be buying five times more content. This transformation will happen at an unprecedented pace, and can unlock a world of value-creating opportunities for telcos.

The joint study looked into consumer lifestyle needs and telcomk service providers' internal digitisation capabilities to compile a list of four top-priority areas that could unlock billions of dollars of cumulative value for telcos.

Highlights of the report
E-Store and E-care: Online recharges for pre-paid mobile phones will grow to more than one third of all recharge value, with almost 20 per cent of all users recharging online. And online customer services and online acquisitions offer a massive opportunity to cut costs and create revenue from cross selling and upselling.

Media content and services: This opportunity to lead the nascent Indian market could create more than $6 billion in additional data and content revenues.

Mobile business apps for SMEs: In this untapped market, telcos are in a prime position to drive widespread adoption and capture $1 billion in revenues.

M-payment: M-payments enabled e-stores, paid content and app transactions can all create an additional revenue stream for telcos.

''Indian telcos have the opportunity to significantly expand the pie by catering to unmet demand in online music, video and online recharges. About 73 per cent of mobile data consumers would be willing to spend more time online if more entertainment content were available in an engaging format,'' says Rajan Anandan, VP and managing director of sales and operations, Google India.

''Similarly, 70 per cent of Internet users have not yet tried online recharges but are willing to try because of the inconvenience they face with traditional channels. We believe, Indian telcos have a great opportunity to proactively create tremendous value by driving a digital strategy aligned with consumer needs,'' Anandan adds.

The study outlines that by 2017, data and paid content consumption will double organically to 470 MB data per user per month and $1.6 in content revenue per year. Global markets have seen similar shifts as they matured from voice to messaging and from data to digital.

Markets like Japan and Korea have taken up to 10 years to move from data to digital, but India is poised to leapfrog as the country has already embraced the Internet, as seen by the massive adoption of social networking and the recent e-commerce boom.

However, telecom players need to develop their digital vision and determine their own position on the risk-reward curve of digital plays based on the breadth of digital offerings and intended aggressiveness. India is about to witness unprecedented Internet momentum, and it is time for telcos to get going and become digital, it said.

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