Indian SMBs to invest $8.73 bn on Telecom & Services in 2006

Buoyed by the country's booming economy, Indian small and medium businesses
(SMBs) are on track to spend over $8.73 billion on telecom equipment and
services this year. Expenditures on telecom services accounted for the bulk of
all telecom investment, comprising 95 percent of total spending, according to
the latest study by New York-based AMI-Partners.

As India's small and medium businesses (with employee sizes between one and
999) embrace the fast-globalizing economy, interaction with business partners
has become an important focal point for these businesses. “Indian SMBs
invariably prefer a highly personal touch in their interactions with business
partners. Their primary methods of communication with both clients and
suppliers/vendors are via telephone calls and in-person visits,” said Neha
Jalan, Analyst, AMI-Partners.

Local telephony remained the primary driver of telecom spending among India's
small businesses, accounting for 55 percent of all telecom spending. Majority of
India's small businesses are consumer-centric, though sales to other small
businesses also account for a significant proportion of their revenues. These
businesses prefer to partner with other local small businesses, and telephone
conversations remain their primary means of communication with business
partners.

Despite the widespread usage of cellular phones, landlines are essential to
small and medium businesses in India — they average 2.21 telephone lines per
SB, and close to 20 lines per medium business. “The state-run communications
service provider BSNL is the undisputed market leader among Indian SMBs, two
thirds of whom have BSNL connections,” noted Jalan.

“However, lately, private vendors such as Bharti, Tata Tele­services and
Reliance Telecom have been expanding their territorial reach and making inroads
in this lucrative market,” Jalan added.

“Cellphone usage has surged significantly in the past year as a result of
the falling tariffs brought about by increased competition and the resulting
price wars,” remarked Jalan. Nine out of 10 SMBs already deploy mobile
telephony and usage of cellular phones is expected to approach saturation in the
next twelve months. Mobile telephony is an important method of communication for
Indian SMBs, ranking third in their communication preferences — just after
fixed telephony and in-person visits.

Cellular service expenditures form a significant proportion of medium
businesses' telecom service spending — accounting for close to a third. Less
than a tenth of medium businesses also access the Internet via their mobile
devices and this service is anticipated to grow in the near future. Medium
businesses' technology adoption is largely driven by the challenges of
increased competition and globalization, and as customer satisfaction assumes
greater importance, Indian MBs embrace the benefits of mobile telephony in order
to be constantly accessible.

DQC news Bureau