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Indian SMBs to Invest USD 8.73 bln on Telecom Equipment and Services in 2006

Buoyed by the country’s booming economy, Indian small and medium businesses (SMBs) are on track to spend over USD 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 SMBs embrace the fast-globalising 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," says Neha Jalan, Kolkata-based Analyst at AMI-Partners.

"Their primary methods of communication with both clients and suppliers/vendors are via telephone calls and in-person visits," said Jalan.

The study said that local telephony remained the primary driver of telecom spending among India’s SMBs, accounting for 55 percent of all telecom spending. The majority of SMBs 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 SMBs 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 said cell phone 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.

Nine-in-ten 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. As medium businesses boast of a more mobile workforce and multiple locations, this is unsurprising. 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.


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