3G will be a game changer, say PE investors in survey

A survey done by Venture Intelligence, a research firm focused on private equity, and merger and acquisition deals activity, shows that almost 70 per cent of the private equity (PE) and venture capital (VC) investors surveyed felt that Indian telecom operators would be able to profitably serve the next 100 million mobile consumers from rural areas.
A majority of investors are also believe that the introduction of 3G (third generation network, a technology which will allow rich media services to be offered on mobiles) services can be a game changer for various players in Indian telecom. The survey respondents comprised of fund managers from over 50 PE and VC firms who have invested $5 billion in telecom and related companies over the past five years.
Speaking to Telecom Yatra, Arun Natrajan, chief executive officer, Venture Intelligence, points out that the PE and VC investors will be now keen in investing in telecom companies providing 3G services. He added the increasing investment on upgrading towers and software for rolling out 3G will make operators look for further investments.
Natrajan further stated that in recent months, intense and rising competition levels, declining ARPUs (average revenue per user), high costs of 3G licenses and the impending introduction of Mobile Number Portability (MNP, which will allow subscribers to change their mobile operators while keeping their number), have placed significant challenges before the industry.
52 per cent of the respondents said that 3G services will be a game changer. Not surprisingly, 54 per cent said that the existing 2G companies would not be able to gain further market share.
3G is especially good news for investors as it presents an opportunity to enhance revenues for value added services (VAS, including new types of services such as gaming) and other data services quite significantly. For operators, 3G will help increase ARPUs especially in the metros and large towns. 3G services can also enable mobile users who do not have prior exposure to computers to access Internet-based services.
Thus, investors are particularly interested in investing in VAS companies, telecom software developers and other companies that provide services to operators.
On the other hand, investors who disagree that 3G will be a game changer cite the high costs and lack of compelling applications as the main reasons that will slow down adoption of 3G based services. Chennai-based Venture Intelligence was launched in 2002 and provides information and analysis on private equity, venture capital and M&As in India.