Deutsche Telekom (DT), the largest telecom carrier in Germany, is entering the Indian Internet market in the near future. The European telecom giant recently acquired 17% stake in the Indian telecom operator Devas Multimedia for approximately $75 million. In collaboration with Devas, Deutsche Telekom will offer high capacity radio network based Internet services in the metropolitan areas of India starting from 2010.

The company’s expansion initiative into the lucrative Indian telecom market is the result of limited growth opportunity in the mature core European and U.S. markets. Deutsche Telekom’s focus recently shifted to the under-penetrated emerging economies in Asia and Africa given the significant
potential for growth in these nascent markets.

Deutsche Telekom continues to face a weak economy with further erosion in German fixed-line telephony business due to intense competition. The company is trying to offset declining fixed-line revenue with growth across broadband Internet and wireless.

The Indian telecom market is among the fastest-growing in the world. The country harbors the second largest wireless subscriber base, which currently exceeds 400 million and is expected to reach 450 million at the end of 2009.

While growth in wireless remains encouraging, high-speed Internet penetration in India continues to be one of the lowest in the world. Current adoption rate in urban areas is as low as 3%. This is mainly attributable to poor network infrastructure, limitation of wireline Internet, slow service deployments and low PC adoption.

Although the low market penetration in India offers significant opportunity to Deutsche Telekom, the company will face intense competition from the local Internet service providers. Currently, the Indian Internet market is crowded with a number of incumbent operators with the most prominent players being Reliance Communications, Tata Indicom, BSNL, MTNL and Bharti Airtel. Apart from these local operators, leading international carriers such as Vodafone (VOD) and France Telecom (FTE) are gearing up for their respective service launches.

Deutsche Telekom is expected to be challenged in promoting its premium service brands in the Indian Internet market given the presence of competitive low-cost popular brands of the local service providers. However, the company’s higher bandwidth network is expected to provide it a fair advantage over competition.

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