The rising interest rate regime and credit non-availability are two primary concerns that have affected performance of the Indian industry in recent times. The growth rate of GDP in India is likely to slide down from 9 percent last year to 7 percent this financial year and maybe to 6 percent next year.

In the case of telecom sector, overseas investments have started to dry up due to poor sentiment and liquidity hassles. Even as private equity (PE) investments in India are witnessing a slowdown, sectors such as telecom, infrastructure, power, and healthcare are recording a robust flow of 30 percent in terms of deal size. It is felt that India has responded correctly and speedily to the economic meltdown. Indian enterprises have insights on the meltdown and have been taking appropriate measures. The telecom industry is expected to continue booming with the much-awaited 3G allocation in early 2009 and the ever-increasing number of broadband users. The telecom sector is expected to show a robust volume growth with a rise in the subscriber base. Profit margins are likely to be affected because of rising costs and falling ARPUs.

However, the two sectors in focus, telecom and networking, are gripped by fear and uncertainty. Companies such as Infosys, Cisco, HP, NIIT, and CSC, are encouraging their employees to suggest ways to overcome the global economic crisis. Virtual meetings, emails, blogs, video messaging, and open house sessions keep employees posted of the overall situation and encourage them to post their ideas. This has helped instill a sense of confidence in the employees, making them feel one with the company. Several companies are now looking at innovative ideas to cut costs like travel and recreation instead of compromising on employee salaries or learning and development. Telecommuting (work-from-home) and convergence of various media for communication are being adopted by several enterprises. This will act as a boon for the networking sector, while being a cost saver.

The next few pages have stalwarts from the Indian telecom and networking sector sharing their views on the impact of the continued economic slowdown on this sector.

In the telecom sector, we are seeing consolidation of services as bandwidth prices move in to commodity and competitive pressures get coupled with economic slowdown. They are quickly migrating from offering traditional bandwidth/IP VPN services. They have started offering value added managed services like Network Management, augmenting remote/roaming connectivity, and security services, especially in the area of managed security services, where carriers are moving toward virtualized security services, changing the whole cost equation by eliminating the cost of customer premises equipment and providing monitoring and management services to enhance the security value beyond what many enterprises are accustomed to. By leveraging our carriers, telcos are offering strong and flexible securities that can scale to the current and future needs of its customers, thereby increasing the profitability of their managed security service. With the current slowdown, this is a unique value proposition for telcos and
customers!

The Indian telecom sector presents a huge opportunity for financial investors and foreign telecom operators. The reason for this is that India, despite being the fastest growing and second largest telecom market in the world, still has a very low teledensity level, approximately 29 percent, which means a huge market is still waiting to be tapped. Over the next two years, the telecom subscriber base is expected to grow by about 250-300 million. As service providers rush to capture a greater share of this market, the sector will witness an investment worth USD 25-30 billion (Rs. 12,500 - Rs.15, 000 crore). This will be the single largest investment in the telecom sector over a two year period anywhere in the world. Telecom service providers are ramping up investments, expanding into new regions, trying out new technologies, and acquiring overseas assets.

With the DoT awarding licenses to six new players and soon going for the 3G and WiMAX spectrum auction, the telecom sector is likely to receive a further fillip. All this has translated into massive requirement of funds. Going forward, it must be kept in mind that the growing trend of outsourcing has caused a fundamental change in the telecom operators' business models as many companies no longer need external funding and will transfer the capex components of total expenditure to equipment vendors. However, the current global economic slowdown may have a ripple effect in India but foreign players are still bullish on the market as its fundamentals are strong and hence be willing to acquire stake in the Indian companies. All in all, Indian telecom sector offers lucrative investment opportunities for financial investors. With almost all telecom services providers having major expansion plans and all business segments slated to expand substantially, investors in the telecom sector will be looking to cash in on the opportunities.
 

Despite the less than ideal economic outlook, we are seeing a resilient telecommunications sector in APAC with governments pushing ahead network infrastructure investments. For example, in India, the Telecom Regulatory Authority of India (TRAI) plans to increase the current 280 million subscribers to 500 million by 2010; this means adding 8-10 million subscribers a month. The country's wireless coverage for 2008 benefited with 130,000 new base stations, and this will be further improved with 170,000 planned for 2009. Moreover, with the 3G licenses expected to be auctioned off at the end of 2008, a new wave of investments can be expected.

For India, with its rural landscape, wireless is the obvious choice of technology for operators and the critical success factors will be to improve coverage while reducing operational cost. For the rural hinterland, the challenges are great, and taking wireless connectivity to the customer premises is only half the battle. At the heart of any well-designed wireless deployment is a reliable, diverse, and robust backhaul network. In the coming months, you will see telecom and networking sectors focus on areas such as network optimization, 3G, site acquisitions, and green networks. We also see a lot of testing and initial adoption of WiMAX in India, Taiwan, and Japan, as well as LTE technology trials and planning across APAC.

With the rise of mobile data services, the need to provide complete access is crucial and a number of carriers are looking to improve their in-building solutions. This will require the ability to provide a seamless end-to-end solution and this is where Andrew sees a huge opportunity for growth. For example, you will see UMTS (3G) services being overlaid in traditional 2G frequency bands and through customized filtering and combining solutions, site-sharing of multiple technologies such as HSDPA, HSUPA, and EV-DO, 1 X, EDGE, WCDMA, iDEN, and GPRS with existing 2G networks is possible. As such, there is an increase in demand for multi-band antennas for site sharing and co-siting (a situation in which an operator wishes to locate equipment on a property, such as a building rooftop, that is already being used by another operator but where the property is not wholly controlled, owned, or leased by that other operator) making sites ready for 3G.

Andrew remains committed to environment protection through research, development, and manufacturing efforts that help customers implement energy-saving and energy-efficient solutions for their networks. With that in mind, we have developed our power amplifier technology to be highly efficient and in the case of back-up power for sites, we use fuel cells (hydrogen refill) instead of batteries (which are not environment-friendly and are difficult to recycle). The eco theme will be strong across all sectors with the drive for cost-savings and network efficiency.

In times of economic slowdown companies across verticals around the globe are looking to reduce costs. Travel costs form one of the most prominent expenses of most organizations in today's world. Cost-cutting effort, like restricting travel, is beneficial to the telecom industry as it is the obvious alternative, bringing convergence to the next level. Connecting over video, using Polycom's solutions, gives companies a competitive edge, helping maximize revenues. Collaboration solutions from Polycom erase the barriers of distance and time, enabling high quality communication, improving productivity, and making an organization more effective, thereby reducing an organization's carbon footprint. Distance can be removed by deploying Polycom collaboration solutions that make meeting across geographies as simple as being in the same room. The implementation of collaborative solutions requires the Indian telecom infrastructure to become more robust and advanced. Therefore, the growth of this sector is almost inevitable.

Despite the global economic slowdown, the growth of Internet users is tremendous. As per data compiled by TRAI, there is robust subscriber addition of 9 million per month, which is also likely to continue, if not increase, for the next two years. Also, India is one of the world's fastest-growing telecom markets, adding over 10 million subscribers in October, most of it for private mobile services. In the next 12 months or so, telecom operators expect to add at least 120 million customers and hope to more than double the subscriber base to 750 million by 2012 (against 300 million currently). This will mean that more networks need to be built and maintained, which is good news for the networking sector.

Telecom equipment manufacturers are also stepping up hiring to meet growing business needs. Since business is shifting toward managed services, telecom companies are deploying unified communication solutions, for which more professionals are needed. India's telepresence market is estimated to grow at a CAGR of 42.6 percent, further increasing its share from 9.4 percent in 2007 to 13.9 percent in 2014, as per Frost & Sullivan estimates. Polycom is the worldwide leader in Unified Communications and Collaborative Solutions - integrating the broadest array of high definition video and wired and wireless voice and content solutions.

The news stories from India as well as from all over the world have one common factor these days'economic downturn. So much so, even the corporate giants like GM, Ford, and Chrysler are on the threshold of financial collapse. In the Indian context, leading corporate firms like Tata Motors, Telco, and Ashok Leyland have cut output due to the downturn and exporters of auto parts, textiles, and outsourcing and BPO companies are all preparing to face bad days ahead. One sector that still hopes to hold and progress is telecom.

Recently 3G services of MTNL were inaugurated and the other public sector organization BSNL is negotiating an addition of 93 million lines, half of which would be offering 3G services. According to the telecom and IT minister, teledensity has increased from 18 percent in 2006 to 32 percent in November this year, a growth of 50 percent annually. Despite the global and Indian meltdown, telecom outlook is very optimistic as some 200 million more lines are expected to be added by 2010 to reach a teledensity of almost 50 percent. This outlook is endorsed by the fact that a European telecom services giant Telenor has announced that it is to buy 60 percent share in the Indian telecom services company Unitech Wireless for as high as USD 1.06 billion (Rs. 5,300 crore). It must be remembered that Unitech is yet to install its equipment and start rolling out services. Even rural teledensity in the country has moved up from six to 13 percent and the next big push is expected in the rural areas where 150 million lines are expected to be added.

With such optimistic outlook, we in ZTE are teaming up with different service providers in both public and private sectors to bring cutting edge telecom technology and equipment to India. Last year, we had clocked a business of USD 700 million (Rs. 3,500 crore). And this financial year, we expect to go up to USD one billion (Rs. 5,000 crore). We expect many service providers to invest in next generation technologies so that their networks would be future proof. We must also note that many new companies have moved into telecom and even got licenses.

The Indian telecom Industry has grown since the beginning of this century in an unprecedented manner. Such growth has caused the world's major telecom companies to vie for a share of this market. Mobile telephony growth has been the primary driver for this market, which has been due to the starved experience of the Indian consumer encountered with telephones serviced then by the Post & Telegraph. It almost seems like a different lifetime.

With the recent economic meltdown and the crash of the share market, the hold on the wallets has tightened, and every rupee has to be stretched. The key challenge in such bad times is to sustain and survive. For the first time, a sense of uncertainty and tentativeness has crept into the telecom and networking industry. The industry has a duty to serve enterprises in these hard times. This is an opportunity in adversity. This is a great time to explore opportunities to optimize resource utilization. The telecom and networking industry has to play a pivotal role as an evangelist for increased use of technology by its customers and save maximum cost for them. Telecommunications will be the partial replacement for travel. Long distance communication over voice/video/data will become a way of life. Any further expansion of offices would be replaced by an opportunity to telecommute, saving space rental, travel, etc. This will provide organizations with an opportunity to reduce overall costs. Vanilla services will become commodities, normal voice calls will undergo price wars that have not been seen in the past. Value added services is the new mantra. Cost to serve is the challenge. Internet usage will grow rapidly, as IP as a core for all communications related to voice, data, and video will be the preferred enabler.

Adoption of technology to innovate will no longer be an option. Enterprises, employees, suppliers, and customers will become a community of interest (CoI); amongst the community, communication cost has to be minimized. Services will emerge for adoption of various practices like work-from-home (telecommuting). These will result in reduction of expenses related to real estate, administration costs, and travel. Convergence of various media for communication is emerging as the biggest enabler for the adoption of new trends and applications. Globally, organizations are moving toward a converged environment. Hosted solutions business and managed services are growing, helping enterprises become more efficient. Globally, enterprises have to learn to streamline their operations to enhance efficiency. Telecom and networking industry will be more important than ever before for achieving efficiency and stretching the spend. Whilst the unit cost for services will come down, overall spend on telecom will increase, thereby expanding the telecom and networking business. It's not all as dark as we paint; however, there are no free lunches and in bad times one has to hustle more to survive. It's the time for the survival of the fittest.

India still has a long way to go in terms of telecommunication and mobile connectivity. There is demand in the market, and the economic slowdown will not hamper telecom and networking sectors. However, there will be focus on stringent cost control and controlling operational expense to sustain the business. Power management and energy efficiency will be the key drivers as this would not only reduce cost but also save the environment. Industry would also look forward for shared alliances and services to share the network infrastructure to reduce operational and capital expense.