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3G, rural telecom market attract PE, VC players

Posted: 02 Dec 2009     Print Version  Bookmark and Share

Keywords:India investment  3G  telecom market  venture capital 

A survey by Venture Intelligence of fund managers from over 50 private equity (PE) and venture capital (VC) firms indicates that almost 70 per cent of PE and VC investors are of the opinion that the Indian telecom operators would be able to find and profitably serve the next 10 crore mobile consumers from rural areas. Majority of them are also willing to bet that the 3G services can be a game changer for various players in Indian telecom.

While the appetite for investments into mobile operators is still high, PE AND VC investors who have invested over Rs.24,401.71 crore ($5 billion) in telecom services and related companies over the past five years, are also actively scanning for "downstream" opportunities including mobile VAS, telecom software and other service providers to telcos. Investors are also bullish on the expansion of India telecom operators into other developing markets. Their experience in the highly competitive India market, combined with their low costs and ability to continuously innovate, will stand Indian operators in good stead while expanding into markets like Africa, the investors feel.

The survey results are published in the newly released report from Venture Intelligence titled, Private Equity Pulse on Telecom. "In recent months, intense and rising competition levels, declining ARPUs, high costs of 3G licences and the impending introduction of Number Portability, have placed significant challenges before the industry," said Arun Natarajan, CEO of Venture Intelligence. "At the same time, as the report reveals, investors feel the introduction of 3G and the increased emphasis by mobile operators on locally-relevant applications to enhance their ARPUs, will present investors with several interesting opportunities," he added.

In a special article for the report, an expert from KPMG points out the various opportunities and challenges ahead for PE investments across various segments within telecom. KPMG feels that while the industry continues to provide attractive returns that PE investors seek, the landscape is likely to remain dynamic and somewhat uncertain over the foreseeable future from market, regulatory and industry perspective.

Experts from Deloitte insist in their article that 3G has great potential to alter the dynamics of the Indian telecom market. Besides the expected adoption in the metros, the poor infrastructure on the fixed line side means that an increasing number of consumers are going to rely on their mobile phones for data driven services, leading to a massive uptake as and when the infrastructure becomes available.

Mobile Value Added Services (VAS) companies, which have thus far been struggling in the shadows of the largely voice-focused mobile operators, are looking forward keenly to the advent of 3G which promises an opportunity to enhance their revenues including via new types of services.

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