Emerging markets enter mainstream

The past few weeks have propelled India to the forefront of global telecom headlines, with at least two of the country's telecom operators linked to a potential deal with South Africa's MTN.

Most recently, Reliance Communications, India's second biggest mobile operator, entered talks with MTN, following a breakdown in talks between the South African operator and India's Bharti Airtel.

It is little wonder that these talks have captured the attention of the global telecom community. If a merger takes place between Reliance and MTN, it would create a telecoms behemoth with some 120 million subscribers and a footprint across about 23 countries.

Reliance already has some experience of the African market after acquiring a licence last year to roll out a fixed and mobile network in Uganda, and both companies could stand to benefit from a deal.

But India has also been in the headlines owing to growing interest from Middle East companies eyeing India. Several Middle East operators, including Qtel, Batelco and Etisalat, which has been in talks with India's Spice Communications, have expressed interest in entering the Indian market.

India is attractive to Middle East operators, who are seeing saturation in many of their local mobile markets, for a number of reasons. Firstly, the country is home to some 1.4 billion people, and outside the main cities, mobile penetration rates are relatively low.

Indeed, the country has an overall tele-density rate of just 26.22%.

Furthermore, the market is growing at a breakneck pace and the Indian government has also indicated that it will allow foreign companies to bid for 3G licences.

But there is also a need for caution. Competition in the country is fierce, with some regions home to seven or eight players. The typical business model in India also tends to be based around high volumes of relatively low tariff users, and as with most other countries, ARPU in India is likely to fall further.

Then there are problems associated with rolling out a network. Some parts of the country are notoriously difficult when it comes to rolling out network infrastructure. Some analysts have also highlighted a dearth of available spectrum as a problem that continues to hinder operators' expansion plans.

Despite this, some M&A activity is inevitable between MENA operators and their Indian counterparts, and for operators that are able to forge the right alliance, the benefits are likely to be enormous.

Roger Field is the editor of Communications Middle East & Africa.

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