The Fisherman Legend and the Telecom Potential of India!

Last updated on: January 5, 2007 at 9:09 pm by Desh Kapoor

The Fisherman Legend and the Telecom Potential of India! 2007-01-05T21:09:39-06:00 Desh Kapoor

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The telecom market in India is exploding! The analytic criteria that are used for analysis in the developed economies do not mean a thing in the emerging markets. Here is the “Fisherman Legend” that illustrates the irrelevance of the analytical techniques for developed economies in a place like India

A Mumbai fisherman used to sell his catch by going from house to house, visiting a circle of regular customers. Now, as he’s approaching shore, the fisherman calls his customers from his cell phone to see if they would like seafood for dinner. The cost of a cell phone amounts to a huge proportion of the fisherman’s income, analogous to what an American might spend on a car. But it’s worth it, because it boosts his income by letting him spend more time fishing and less time touring the neighborhood.

So why is a company like Vodafone so interested in a country like India? Well, its main market is Europe – Western Europe – which is in most cases a saturated market! There are only so many cell phones a person can tag along. Today the executives carry two – one for the official work and other personal. That is about the limit to your cell phones if you are to remain sane! So India is a good hedge for such companies as Vodafone!

Mobile handset makers such as Finland’s Nokia (NOK) have already discovered the potential of emerging markets such as India. Now, Vodafone (VOD) says it is “at an early stage” of negotiations to buy Hutchison Essar, India’s fourth-largest mobile provider, which is majority-owned by Hong Kong-based Hutchison Whampoa. Vodafone is preparing a $13.5 billion bid, according to the Financial Times.

Even though $13.5 billion is a lot of money, Vodafone needs the growth. The company has holdings in some fast-growing countries, such as Romania and Turkey, and owns a 10% stake in Indian mobile-phone company Bharti Airtel. But Vodafone is still heavily dependent on Western Europe. “Their growth stories are pretty limited,” says Falk Müller-Veerse, managing partner at Cartagena Capital, a Munich boutique investment bank specializing in mobile telecommunications. “Europe isn’t that exciting—the markets are fairly saturated and price levels are continuing to drop.”

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