NTT allowed to add to Indian networks

NTT has announced that it has been granted a National Long Distance license in India through its subsidiary NTT Communications India Network Services. It hopes to begin services before the end of December 2015. Creating its own network infrastructure in a country that has at times been seen to have a tangled bundle of telecommunications infrastructure might take longer.

NTT is already well established in India with Netmagic solutions. The subsidiary operates nine data centres in the country, five in Mumbai, two in Bengaluru and the remaining two in Noida and Bangalore. The new license will enable it to offer additional services such as IP-VPN and other connectivity services.

This will allow it to offer a complete service to both Indian national and multinational enterprises connecting them to its own data centres without the requirement for clients to have separate contracts with other telecoms providers. One of the key target markets for NTT in India is automobile dealers and retailers.

What will NTT Communications do next?

Whether NTT will lay its own fibre optic cables or merely rent fibre optic from other providers is not yet known. The Economic Times reported that NTT would be investing 20 billion Yen, RS1000 crore over the next three years. Although they thought  acquisition seemed it could have been one of the ways that it could obtain the network. What will be interesting is how it decides to connect up the data centres to its major clients. Investing in a metro ring within Mumbai would be the obvious solution as it has the greatest presence there but this would be costly.

The Netmagic solutions data centres are all carrier neutral but only Bharti Airtel and TCL (Tata Communications Limited) are already connected to 8 of them according to the Netmagic website. It will be interesting to see which fibres NTT utilise and they are likely to offer redundancy to clients through one of the other carriers available from their sites depending on requirements.

NTT will be offering the network services alongside the managed hosting and cloud service delivered by Netmagic solutions, strengthening its playbook in India. Sharad Sanghi, the Managing Director and CEO of Netmagic, commented: “NTT Com – Netmagic will now offer world-class ICT solutions comprising secure, high-quality private-network services, including IP-VPN connecting data centers and the cloud to customers’ domestic sales or production bases. Netmagic, which launched its largest data center in Mumbai recently, is committed to constantly upgrading its product roadmap for data centers and cloud offerings.”

Conclusion

This is an important step by NTT as it attempts to break into what is a becoming a lucrative market that is estimated to reach US $20 billion by 2020, from US$ 685 million in 2014. This agreement will enable NTT to grow its infrastructure in the country and start to compete on a more equal basis with the Indian multinationals such as Tata. It will also be key for those multinational clients that are looking for a single partner in all regions as NTT extend their reach deeper into India.

With Netmagic they already have India’s largest pure-play Managed IT Hosting Services Provider and with this announcement the chances of an acquisition have probably increased. This will probably mean an investment greater than the sum announced by President and Chief Executive Tetsuya Shoji in the Economic Times. Although Shoji stated that there were no good fits for acquisition in the market place yet, that does not mean that they aren’t keeping a close eye on some companies, or look to invest in a company that might become one.

Shoji is unlikely to share such a strategy publicly until it has been enacted anyway. The license approval is the first step on what will undoubtedly be further significant investment in India by NTT as it seeks to grow market share there.