Global majors fight for Indian enterprise communications market

The last time a British company had its Board meeting in India was probably when East India Company had made inroads into the country in the 18th century. Almost three centuries later, on March 27, 2008, all the top executives from the UK-based telecom giant British Telecom, including its Chairman, were in New Delhi for their first ever Board meeting outside the home country.
Though the meeting was a hushed affair, the significance of the event was not lost. For BT, India is clearly the focus market for its enterprise and professional advisory solutions.
The presence of a large number of corporates in India has certainly caught the eye of other enterprise services providers as well. Global telecom behemoths AT&T, France Telecom, Cable & Wireless and Verizon are fighting it out for a larger share of the enterprise segment.
So what is making these companies go after the enterprise segment at a time when everyone else is chasing the Indian cellular market?
Analysts reckon that though some of these telecom majors are contemplating a foray into the mobile business as well, it is the enterprise communication services that are more lucrative.
The Indian cellular market is a capital-intensive, low-margin, high-volume game, which may not bring immediate revenues, while on the other hand, the enterprise business is a relatively lower-investment and higher-margins opportunity.
With the Indian economy growing at over 8 per cent a year, most multinationals across the world either are already in the country or are planning a foray. And they are looking for telecom companies who can offer them connectivity with international quality standards. Sanjay Vig, Chief Executive Officer, Orange Business Solution, India, a division of France Telecom, explains, “The economic growth in India is attracting a large number of multinational companies into this market. These companies want the best solutions for not just their connectivity but also for their entire communication needs. One estimate puts the enterprise communication market to cross the $4,000-million mark by 2010 and we are going after that.”In a bid to get a larger share of the enterprise markets all these companies are scaling up their India presence and trying to differentiate their product offerings. Orange, which claims to service 600 multinational companies from its Indian unit, has accelerated its expansion in the country over the last year. “Our network presence has expanded to all metros with support services in key business centres across the country.
The network is supported by 10 points of presence (PoPs) in Bangalore, Mumbai, Delhi (dual PoPs) and Chennai, Hyderabad, Kolkata and Pune. Currently, Orange Business Services directly employs over 1,600 people in India,” Vig says.
Orange has also set up its third global service centre in India, which is not just for the Indian market but to also service its global clientele.Ahead of the pack
But when it comes to scale of operations, BT and AT&T seem to be ahead of the pack. Eyeing revenues of $250 million from India by 2009, BT has expanded its reach within the country to 14 cities. The company, which recently launched its international voice and data services, will hire 6,000 people by next year as it expands its operations in India.“With our increased presence in India we are gearing up to gain access to Tier-II and Tier-III cities. Our greatest challenge in India is to ensure that our services and operations exceed customers’ satisfaction. With leadership position in the Business Process Outsourcing (BPO) sector firmly established, BT is now extending its horizon to Indian multinationals going global, with specific focus on the Banking, Financial Services, Media, Broadcast, Pharmaceuticals, IT and Hospitality sectors. The challenge for BT in India is to stay ahead of the game,” says the BT India Chairman and Managing Director, Arun Seth.
With 14 connecting points in India, the company claims that it has the highest by any global service provider. The expansion is primarily targeted at Indian multinational companies that require global connectivity. At present, BT has more than 300 customers in India, most of whom are foreign multinational companies.AT&T plans
However BT’s aim of realising $250 million revenues from India may not be that easy with arch rival AT&T snapping at its heels. The US-based company is bringing a significant part of a $1-billion investment corpus into India in ramping up its local presence.
To start with, AT&T has already hived off India as a separate region, a status that was until now reserved for high-growth markets such as Japan and China. “With an 85 per cent year-on-year growth, India is clearly the fastest growing market for AT&T. We are setting up three additional nodes, taking the total to 10 and we are also setting up an Internet data centre in the country,” says Sanjiv Bhagat, CEO and Managing Director, AT&T India.Move up the value chain
The stiff competition in the segment is forcing these service providers to climb up the value chain and differentiate it from rivals. Until now, enterprise services meant providing leased lines for Virtual Private Network services, or providing ATM, frame relay and WAN-LAN integration services.
BT, for example, is expanding its professional services division in India. Professional services involve providing advisory services, best practices and best technology suited to the needs of their clients.
“Professional services give BT the edge over its rivals as it enables us to offer the best possible solutions to our clients by understanding their needs. BT offers a wide range of professional services on a consultancy basis to cover every aspect of business communications. We specify and explain the services recommended meeting needs and providing a detailed costing,” says Seth. BT is also now offering network IT services to its corporate customers.
On the other hand, AT&T is foraying into application services such as Web-based video and audio conferencing in a bid to be a one-stop communications solution provider to enterprises. Acquisitions, to boost appeal
As a strategy to keep adding to the value proposition that they would like to bring to their potential customers, these players are looking to acquire small and medium-sized companies that will enhance their product offering.
Both BT and Orange have already acquired companies with presence in India. While Orange picked up GTL’s IT services arm, BT has acquired i2i Enterprises and Singapore-based services firm Frontline, which also has a unit working in Chennai with 2,000 employees.
“This investment strengthens significantly our presence in Network Related Services and in the Asia-Pacific region, two major areas of growth in Orange Business Services strategy to be a leading global communication provider. The acquisition will help Orange further grow its business in India by reinforcing its local presence and to serve better European, American and Asian multinationals that need network-related services in India,” says Vig.
Verizon and Cable & Wireless, meanwhile, are still awaiting licences to kick-start their operations in India. Challenges ahead
But all is not rosy for these companies. One of the main concerns for the telecom giants is the low pricing in India compared to other markets.
“The large number of providers and the diminishing differentiation between them will heighten price competition, which has lessened in recent years. This will further commoditise a market already struggling with low margins. In turn, this will put more strain on service providers, especially those that invest heavily in building managed and IT services capabilities,” says Gartner’s Magic Quadrant for Asia/Pacific network service providers, 2007.
The other significant challenge for these global players will be from Indian telecom companies such as Tata Communications (formerly VSNL), Reliance Communications and Bharti Airtel, who are not only setting up a huge network of under-sea cables but also taking the fight for the enterprise market into BT and AT&T’s own backyard in Europe and the US.
“Asian carriers have improved significantly on their network performance and quality, even though they were late starting Internet Protocol virtual private network (IP VPN) services. This improvement, combined with their superior service and support and increasingly competitive pricing, means they present increasingly good value for money in terms of price-performance, which will allow them to step up the competition,” says the Gartner report.
The foreign players, however, are confident of replicating their global success in the Indian market.
“We have to be competitive if we want to stay in the market and with our global scale and expertise we are confident of sustaining our growth in India,” says AT&T’s Bhagat.