How to tap the emerging markets?

From India Telecom News on June 18, 2009

There are real opportunities for participating in emerging markets, but things are changing fast. So let’s begin with a look at recent history. In the 1980s and 90s, the US economy – with around 30% of GDP – was the dominant world economy and the main investment arena. By the early 2000s there was talk of emerging BRIC economies, Brazil, Russia, India, and China – not so much displacing the US as adding new dynamism to the global economy.

Among those benefitting from this growth was the broader base of so-called ”emerging markets”. By 2008 some of these emerging markets were growing at 6% to 11%, while the mature, developed markets were growing rather more slowly. Then came the economic crash, and a lot suddenly changed. Some economies, such as India and China, continued to grow at significant, but single figure, rates on the strength of their domestic demand as much as their global presence. Others in the developed world began to contract – notably Singapore for example.

What the forecasters are expecting now is continuing growth in emerging markets – reaching 50% of the world total by 2030. In the more immediate future, growth is expected to creep back next year, but note how the emerging markets dominate the picture for 2010.

No wonder there was so much interest in the opening keynote at NetEvents 2009 APAC Press Summit in Singapore – given by Sunil Joshi, President, Tata Communications Enterprise Business, Emerging Markets, and entitled “The Potential Opportunity of Emerging Markets.”

Sunil Joshi compared emerging markets with a first visit to the gym: you look at all the equipment and potential exercises in some confusion and wonder where to begin. The first thing is to have a clear objective – to grow personally or physically, to tone the body, to get fit , lose weight or whatever. The second thing – and this is vital – is to stick with it. As he put it: ”The potential opportunities are enormous in the emerging markets. But staying in there is equally important.”

he explained that it is vital to understand what makes the emerging markets so different. Firstly the demographics are different, meaning that models that proved successful in mature markets simply didn’t work in emerging markets. The main differentiating factors being:

• growing middle class population
• small premium segments
• local cultural and physiological nuances dictating choices
• low incomes and price sensitive markets

You will find that your local competitors have the advantage of lower cost constructs, as well as being accustomed to working in different conditions than you find in established markets. These include:

• a fragmented distribution and retail infrastructure
• stronger government influence and monopoly conditions
• local partner policies or legal requirements
• early stages of liberalization.

Seldom do you find the necessary resources for business development, such as a skilled workforce. Often expats need to be recruited at high cost.

In fact it is best to divide these market opportunities into 3 categories:

• those already developed, like Japan, Hong Kong, Singapore, where the GDP per capita is still relatively high and we expect growth to continue to be in the range of about 1% to 3% in the years ahead.
• the semi-developed like Russia, Malaysia and Thailand
• and those recently emerging like India, China, Mexico, where the GDP per capita is relatively low and the GDP growth is expected to be relatively high in the years ahead.

In terms of the growing middle class opportunity, you’ll find that the compounded annual growth rate in China, India and Indonesia from the year 2008 to 2012 is expected to show double-digit growth. If personal income is growing that fast, it will drive increased demand. Taking China as an example, you find the high to middle income groups expect to see significant growth up to 2025. The disposable income created will generate a lot more desire for goods and services locally and globally. We still find food, beverages and tobacco being the largest consumption within India, but the fastest growth from 2005 to 2025 actually lies in the communications industry.

Another difference: urbanisation in emerging markets isn’t as high as in the developed world. Between 1982 to 2017, the Indian population is expected to move dramatically from rural into urban areas. The number of large cities in India increased from 23 in ‘91 to 40 in 2001 and more have grown since.

Age distribution also plays an important role. How young a population does each nation have? Although China only has about 39% of its population aged 24 years or less, for India it is 52% aged 24 years or less – compared with the U.S. and the U.K., where the figure is around 37% and 38% of the population. Youth is a significant driver of growth in areas such as gaming, social networking and music. Retail sales become dominated by global youth brands and, of course, education is a very important growth element.

If we look at, say, India and China’s oil, gas and coal consumption, it has grown dramatically from 1965 to 2007 with China now using about 45% of the global consumption of coal. How do you leverage green initiatives to keep the economy growing, but also protect the world’s climate and the environment?

Those are the main factors distinguishing emerging markets from the established ones. So what is happening now, how is the rest of the world responding to these opportunities?

We now see a lot of investment into emerging markets. But equally important, there are also outward investments by emerging market corporates creating new business models, paradigm shifts in the industry, that allow them to compete against world class enterprises. For example, India has invested something like $22 billion over the last 10 years in various industries, and Russia and U.S. being the biggest areas of growth or investment – for example, Lenovo acquiring the IBM PC business. Toyota went into the US and gained a dominant position. There is an exciting two-way movement, both coming into emerging markets and from emerging markets reaching out.

There is a rapid take-up of technology in emerging markets, their populations are very quick to adapt to new technologies. Philippines is now the texting capital of the world and its population is doing things with text messages way beyond their counterparts in the US.

We look to India too for innovative business models. Currently, India has one of the lowest calling tariffs in the world – the mobile rate is 1 cent per minute, the domestic long distance is 1 cent per minute and international long distance is about 10 cents a minute. Compare that with some of the costs in the mature economies. While the costs are lower, the companies remain profitable and are investing heavily, with a view to further growth across emerging and global markets.

Vietnam, as the world’s gaming hub, has played a very interesting role in the growth of telecommunications as well as gaming in the APAC region. However, broadband penetration is one area that still lags in the emerging markets, and it presents a very interesting opportunity.

So how do we go about entering into these markets? There we are gazing at all the unfamiliar gym equipment and wondering where to start…

We need first to study the opportunities and develop a framework to assess which markets to go for and grow our business.

Begin by considering the three broad areas suggested earlier in relation to your strategic objectives – macroeconomic trends, telecom related issues in terms of local competition, and the regulatory aspect. For example, for the macroeconomic climate you look at political stability; for the regulatory aspect, you look at how easy licensing will be and the hurdles to entry; in telecoms, consider the demand and supply; and so on.

”At TATA looked at world emerging markets and identified about 60 countries that had the right potential. We filtered it using the above criteria down to a list of 30 priority targets. In the last year and a bit we gained presence or access to 24 out of those 30 and we’re well on our way to getting to the remaining six.” according to Sunil Joshi.

Sunil Joshi’s final point was to re-emphasise the importance of local knowledge and of having people on the ground. Whether it is investments in South Africa or India, China, or the Middle East, you need people who actually understand the nuances of the culture, government and marketplace.

”Even in this economically challenging environment, TATA has grown 20% on the top line, and our EBITDA growth was 53% year-on-year. That gives us the confidence that our strategy around emerging markets, and connecting mature or developed economies with emerging markets, is working. And we are obviously putting a lot more investments behind this strategy.” says Sunil Joshi, President, Tata Communications Enterprise Business, Emerging Markets in interview with Duncan Clark, Chairman, BDA Research at NetEvents 2009 APAC Press Summit in Singapore.

Tata Comm, Qtel Announce Strategic Alliance

Wednesday, June 10, 2009:  Tata Communications and Qtel have entered into a strategic alliance that will strengthen both companies’ network reach in the region and internationally. Under the terms of the agreement, both the companies will align their infrastructures and work together to provide secure, scalable and flexible connectivity solutions including Ethernet, MPLS (Multi Protocol Label Switching) and a wide variety of managed services to their global customers.

Eng. Khalid Al Mansouri, executive director, business solutions, Qtel, said, “This is a landmark agreement which will help to position Qtel at the heart of one of the most robust communication networks in the world today.”

“Joining hands with Qtel is a winning proposition for Tata Communications as it lends an invaluable perspective to our mission of delivering seamless connectivity and flagship communications services to customers with diverse and widespread network needs,” added Vinod Kumar, President and chief operating officer, Tata Communications.

Over time, the agreement will enable Tata Communications to deliver Layer 2 Ethernet over SDH, Ethernet over MPLS and a range of configurations including Dedicated Multipoint Ethernet services to its international network of customers through Qtel.

In return, Qtel customers will have access to a range of new MEF (Metro Ethernet Forum) certified services, delivered via Tata Communications’ major networks of submarine cables and its Tier-1 IP network that spans across five continents.

Related story at

• http://indiatelecomnews.com/?p=236
• http://economictimes.indiatimes.com/Tata-Communications-signs-pact-with-Qatars-Qtel-Text/articleshow/4632852.cms

“Our business is a bit broader than just providing network or pipes”, says Sunil Joshi

From India Telecom News on June 10, 2009

Sunil Joshi, President, Tata Communications Enterprise Business, Emerging Markets says: “Our business is not a single line of business. We have multiple lines of business to de-risk ourselves in how we engage. We have a voice business which, by virtue of that, we are the world’s largest wholesaler of voice. “

“And about 24 billion minutes of voice run on our backbone. Now what that gives us is steady cash flow to run and operate our business and invest in other areas of growth. Our global data and mobility services business is the next largest business, which is a growth business for us. That has grown 29% year-on-year. ”

The voice business grew 12% year-on-year. This is the last 12 months, the fiscal year ending 31st of March, 2009. Our EBITDA in the last year has grown 53% year-on-year.

So there are two things. You are right about the cost pressures because the deregulation drives prices down. And our legacy organisation was such that they enjoyed the benefit of a really regulated market. But in a competitive world, it does have impact to the prices, which does end up going to the consumer or the business that leverages that service. Then it’s for us to optimise our infrastructure, whether, it’s our IT, our engineering, our procurement. And we’re spending a lot of time in making sure that our costs are managed, while the price points are also seeing pressure to come down in the marketplace. This is within India, specifically.

We also have some growth engines, what we call start-ups, if you like. So our investment in NeoTel in South Africa, we have increased our stake last year from 26% to 56% in NeoTel. NeoTel is the second largest telecommunications company in South Africa. And that’s part of our emerging market strategy. A lot of our enterprise customers are looking at the African continent to now look at also growth, while they’re looking at Asia and some of the other economies.

So to back that up, we are also investing in what we call the [Seacon] cable. Seacon cable is expected to come up in the next month or so. And that will enable connectivity from Mumbai, right across the east coast of Africa, to South Africa. We’ve also announced an investment in [WACS], which is the West Africa Cable System. And that will take the connectivity of South Africa on the west coast of Africa into Europe, thereby connecting what is the other new emerging geography. And you’ll find that that enables us to connect enterprises and carrier customers and continue to drive our revenue [through].

The few other small organisations, like the broadband unit that we have, [TCISL], which is predominantly focused on retail broadband and the growth. And we have about 315,000 subscribers on the retail broadband [shop] and growing. We have investments in other small organisations, an in-house subsidiary called [TCTSL]. It’s Transformation Services Limited. So what that does is, it supports telecommunications organisations and outsources that with the [BSS] infrastructure.

So our business is a bit broader than just providing network or pipes. And with that infrastructure providing value-added services and managed services, it allows us to continue to move up the value chain for our customers. Sorry about the long answer to that.

Emerging markets to steer global growth, says Sunil Joshi

On India Telecom News on June 9, 2009

Sunil Joshi, president of Tata Communications’ enterprise business for emerging markets, speaking at NetEvents 2009 Asia-Pacific Press Summit in Singapore said that his strategy is heavily focused on emerging markets. “And we would like to consider ourselves as emerging market specialists.”

We looked at the world and the emerging markets and we identified about 60 countries that had the potential, around the world, to look at for our engagement. We filtered it through the same mechanism, down to a list of 30 that are of priority for us. Of those 30, in the last year and a bit, we have gained presence or access to 24 out of the 30 and we’re well on progress of getting to the other six that we have outlined. But what does help us is a very structured way of engaging in emerging markets. The key thing for emerging markets is understanding local knowledge and having people on the ground. So whether it is investments in South Africa or it’s in India or it’s China, or Middle East, it’s about having [people] on the ground who actually understand the nuances of the market.

Our commitment to emerging markets — and please, this is not a communications sell, this is our intent to share with you how we have looked at the world and the emerging markets, those that we have chosen to apply our focus and our investments in. We announced a year ago our JV with China Intercom. And we’re well on the path of executing that as the processes go through.

We are building cable systems into Asia, which is up and running, which connects Singapore through Japan and connects Hong Kong, Vietnam and the Philippines on its way through our partners. Pipe will connect Guam to Sydney and also be able to connect onto the West Coast of the U.S. We have the Eurasia cable, the [IMAWE] cable, which will connect Mumbai through Middle East into Europe, and therefore into the Atlantic belt, thereby providing capability for emerging markets to be connected to various other emerging markets and mature markets. The Sub-Saharan Africa, the investment NeoTel, where we have 56% equity stake and thereby being able to participate in the growth of South Africa, as a strong geography for engagement. And the [Seacon] cable that connects Mumbai into South Africa, with various connections towards the east coast of Africa, thereby enabling us to help enterprises, businesses grow into geographies, but equally important, making investments in those geographies to grow the local economies as well.

This is just a simple example of the various cable systems that connect the world. Our business is all about connecting people and businesses, to be able to communicate. And if we are able to do that with the core infrastructure that we have built globally, and execute upon our emerging markets strategy and our vision, we’ll be doing okay.

Establishing [pops], which is our own capability in these emerging markets is important. Many of these emerging markets, we’ve established our own presence. However, there are some that we haven’t. And we then reach out to partners. So therefore, the ability to be flexible and have partnership arrangements with other telecommunications organisations to make it seamless for our customers to be able to get access to various geographies around the world and help them grow.

Newbusiness models.

Have people in the audience heard and experienced telepresence? Yes, some have? It’s obviously the next paradigm of collaboration. And telepresence in its conventional model, as it taught, could be procured and applied within your own enterprise and within the enterprise, it’s a closed group. However, we were the first service provider in the world to launch public rooms. Public rooms means you can go in and rent a telepresence room by the hour, which allows you not to have the necessity to buy, but to leverage the experience and the value of a telepresence for collaboration around the world. Obviously we’re building more rooms as we go. And then, at some point, when you’re ready, you can choose to, by yourself or continue to leverage a technology that will enable you to collaborate across the world without having the need to travel.

The next step of our telepresence journey is a global meeting exchange, which then connects various telecommunications companies together, regardless of telepresence on another service provider’s network, telepresence on our network, and for them to be able to talk, thereby protecting your investment and creating new business models to help customers grow in the geographies without having the necessary for a huge investment.

So in conclusion, the strong execution is really key for emerging markets. And we think that strong partnerships are really important, to be able to enter and gain entry into some of the markets that we’re not fully conversant with. The business model innovation becomes important. Many organisations out of the emerging markets have created paradigm shifts on how business models were previously construed, created not the need for a heavy capital-intensive investment, but maybe operationalising the investment, creating a pay-as-you-go model. And those are not normal models.

Business intelligence, of course information is key. Being able to assimilate the information regarding markets that you’re not familiar with, having partners that can give you that information, but also making the best out of the information you get. And obviously, leveraging research and consulting capability and the global infrastructure.

Our strategy is heavily focused on emerging markets. And we would like to consider ourselves as emerging market specialists. But more so, we’d like to have our customers consider us as emerging market specialists, as we have entered and most of our investments are being made into connecting and making sure that the emerging markets are connected to the rest of the world. So having points of presence or having investments in entities in the form of JVs or in terms of equity participation has enabled us to broaden our footprint and really give proof points to the market that this is a crucial area for growth, not just for us, but for almost every business that we’re looking at.

Tata Comm Wins Award For Telepresence Managed Service

From www.efytimes.com

Friday, June 05, 2009:  European CEO has named Tata Communications as ‘Telepresence Managed Service Provider of the Year 2009′. The CEO recognised that since launching their managed telepresence service in July 2008, Tata Communications has been leading the industry with their innovative and comprehensive strategy.

Tata Communications is the first provider to open public telepresence rooms, with a global network of public telepresence rooms which customers can access on a pay-per-use basis. Starting with four public rooms in India, their coverage has expanded to ten rooms: Mumbai, Bengaluru (2 rooms), Delhi, Hyderabad, Chennai, London, Boston, Manila and also Santa Clara, California (Cisco location). Tata Communications plans to expand their global network of rooms by the end of 2009.Tata Communications will be also launching its global meeting exchange services later this year. This will enable meetings between any two telepresence rooms subscribed to the service, regardless of the network service provider.

Claude Sassoulas, head, Europe, Tata Communications, said, “This is a validation from European CEO on behalf of their judging panel that we have a ground-breaking service that is a comprehensive solution for their business requirement.”

Related stories at

• http://indiatelecomnews.com/?p=239

Tata Comm’s Prateek Pashine Joins WiMAX Forum Board

On www.efytimes.com on 29 May 2009

Friday, May 29, 2009: The WiMAX Forum has added Tata Communications as a new member to its board of directors. Prateek Pashine, chief operating officer, retail broadband unit, Tata Communications, will serve as the representative to the WiMAX Forum board.

“Electing Tata to the board demonstrates the WiMAX Forum’s commitment to the Indian market and signifies the company’s importance to the WiMAX ecosystem worldwide,” said Ron Resnick, president and chairman, WiMAX Forum. “As one of the leading global Internet and voice operators, Tata Communications has demonstrated its confidence that WiMAX is the leading 4G technology, and they have articulated their plans to bring broadband services to consumers in India through WiMAX.”

“The strong representation by global operators to the WiMAX Forum board shows how evolved the WiMAX ecosystem has become,” added Pashine. “Various researches have predicted that India will play an important role in the development of the Global WiMAX ecosystem, and we will bring that perspective to the forefront within the Forum. Markets like India have unique product and business model needs which we expect would lead the way for other markets and operators around the world.”

“I believe that India can soon be the largest market for WiMAX worldwide. Our goal is to develop a profitable business model and offer a range of affordable devices and services to our customers. As a member of the WiMax Forum board, Tata Communications can encourage accelerated development of low cost WiMAX technologies products,” added Pashine.

Prateek Pashine, COO, retail broadband unit, Tata Communications has been with the Tata Group since 1995. He is also currently the chair of the Wireless Broadband Alliance which is a global body involved in the expansion of roaming data services.

Currently, Tata Communications is an active member of the WiMAX Forum India Chapter (WFIC) and holds leadership positions in three of the chapter’s four working groups.The WiMAX Forum’s membership base represents a WiMAX ecosystem which supports the more than 472 WiMAX network deployments in 139 countries.

Tata Com’s net up over 5-fold at Rs 302.3 cr in Q4

Press Trust Of India on Hindustan Times on 26 May 2009

Tata Communications on Tuesday posted an over five-fold rise in its net profit at Rs 302.37 crore in the fourth quarter ended March 31, 2009, over the same period last year.

The company had a net profit of Rs 56.03 crore during the same quarter last year, the communication service provider said in a filing to the Bombay Stock Exchange.

Revenue from telecom services rose to Rs 886.93 crore in the quarter under review from Rs 855.53 crore in the same period previous year.

For the year ended March 31, 2009, net profit rose to Rs 515.95 crore from Rs 304.90 crore in the previous year.

Revenue from telecom services increased to Rs 3,749.43 crore in the year under review from Rs 3,312.39 crore last fiscal.

The company’s consolidated net profit rose to Rs 315.80 crore in 12-month period ended March 31, 2009, from Rs 10.30 crore in the previous year.

Consolidated revenue from telecom services rose to Rs 9,963.17 crore in the year under review from Rs 8,297.41 crore last fiscal.

The board of directors recommended a dividend of Rs 4.50 per equity share of Rs 10 each for the financial year 2008-09. Shares of the company closed at Rs 545.70, down 6.64 per cent from the previous close on the BSE.

Same story at http://www.financialexpress.com/news/tata-coms-net-up-over-5fold-in-q4/466314/

Tata Communications Partners with RTComm

Published on 5/6/2009 12:04:36 PM

Tata Communications announced on Wednesday that the company is partnering with RTComm to provide joint data services between carriers in Russia and the rest of the world. The agreement enables Tata Communications to leverage its position of strength in the worldwide telecommunications sphere, utilizing the localized expertise in the Russian market through RTComm’s established national leadership, the company said in a statement.

Through a Memorandum of Understanding (MoU), Tata Communications and RTComm will work together to deliver scalable, secure carrier and enterprise class data solutions, to their respective customers. This partnership enables RTComm, one of the leading companies in the Russian telecommunications market, to deliver global network services to its local customers, while Tata Communications will increase its global footprint with services into this emerging market through RTComm’s local network.

“RTComm realized it was necessary to partner with a global provider that would allow us to offer our customers coverage outside of Russia, access to superior services and increased scalability,” said Valeryi Lokhin, general director, RTComm. “We continually strive to partner with well-established telecoms providers. Tata Communications not only holds a global leadership position, but also shares a similar ethos in the provision of innovative, world-class services.”

With over 1000 customers throughout Russia , RTComm has the most developed IP network in Russia with 130 access points throughout the country. Tata Communications delivers unmatched global data and network services, which are both scalable and flexible in all international markets. RTComm’s commitment to constantly develop and offer new services in accordance with market trends is the foundation of this strategic agreement with Tata Communications, which offers a global reach and pioneering technology.

“RTComm’s local reach, understanding and innovation match our commitment to deliver market appropriate services globally, making them the ideal partner for Tata Communications,” said Claude Sassoulas, managing director of EMEA for Tata Communications. “This collaboration further expands on our plan to offer increased connectivity into emerging regions across the world.”