'Cautiousness & Consciousness' have become the catchwords for both investors and the government as India approaches the next General Elections, which are scheduled from April 16 to May 13 amid a worldwide economic recession.

India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year.

Recognising that good governance and infrastructure are a vital pre-requisite to keep ‘India Shining’ at Gross Domestic Product (GDP) growth of more than 7%, infrastructure development has been accorded key priority for the 11^th Five-Year-Plan for the years 2007-2012 and the 12^th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.

The interim budget for the financial year 2009-10 announced by the Finance Minister also sets the ground for how the ruling United Progressive Alliance (UPA) will approach the General Elections, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014 (see Volume 4 Issue 3; Interim Budget: Continuity Of Growth).

India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively added 15 million new subscribers in the month of January, which is more than twice the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.

The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.

The string of investments in Indian telecom companies last year, including, Tata Teleservices Ltd, the telecom services arm of India’s largest private sector diversified Tata Group by NTT DoCoMo, Inc., the largest Japanese mobile telecom service provider of $2.7 billion; Unitech Telecom, the telecom arm of India’s second largest real estate developer Unitech Ltd by Norwegian telecom firm Telenor ASA, world’s seventh largest telecom service provider at $1.36 billion; and Swan Telecom, a start-up GSM telecom service company of a Mumbai-based real estate developer Dynamix Balwas Group by Dubai-based Emirates Telecommunications Corp (Etisalat) at $900 million; as well as South Africa’s largest telecom company MTN Group’s attempts to enter the Indian market – are an indication of the fact that there is ample room to enter this market, at least inorganically.

Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.

Prospects of the Indian Media and Entertainment (M&E) sector estimated to grow to about twice its current size of $11.6 billion by 2013 prompted global media and entertainment companies such as The Walt Disney Company, The Warner Group, Viacom, Inc., Sony Pictures Entertainment, Inc., The Financial Times and the Dow Jones & Co. to enter the market that has grown at a sustained pace of about 15% annually during the last five years by either acquiring a stake or partnering with an Indian counterpart.

Among the most recent expansion plans in India, News Corporation, the world's largest media conglomerate by market capitalization, had announced that it will strengthen its presence in the country by investing more than $100 million to launch six new regional television channels last year.

The potential for growth in India’s M&E sector is underscored by the low penetration base. For instance, the print media with low penetration rate of 38% and the cable & satellite penetration in the country of just about 50% offers a large market that remains to be tapped. See our Special Report  highlighting the major trends in the sector.

Bundeep Singh Rangar
Chairman, IndusView
Bundeep.Rangar@IndusView.com
www.indusview.com