The time has come for Asian countries to get together

IT minister

India is a major player in the international software industry and could well benefit from such a regional alliance.

Mr Mahajan also said the Indian government is considering a major step to open the telecoms market to foreign competition by abolishing the 49% limit on foreign ownership of telecoms firms.

Asian alliance

His proposal for a regional summit comes at a time when many smaller south-east Asian nations are suffering economic pain because of their over-reliance on the US as a market for their hi-tech exports.

India's IT industry

Export revenue 2001/2, $7.7bln, up 30% Domestic spending 2001/2 $1.6bn, up 25%

Taiwan, Singapore, Thailand and Malaysia have all been hurt by the collapse of the US market for IT goods.

Mr Mahajan said "the idea is we should have some common policy or mechanism in IT and telecoms so Asia will be benefited".

"The time has come for Asian countries to get together."

India's software exports have continued to grow, though the pace has slackened. The sector boasts international names such as Wipro and Nasdaq-listed Infosys Technologies.

Surging growth

However, domestic IT spending is expanding at 25% a year as Indian firms turn to networked office systems and upgrade their telecommunications, according to Gartner Dataquest.

In a recent survey, it found information technology spending will hit $5.8bn by mid-decade, from $1.3bn in 2000.

Phone famine

Indian firms' big-player status in the software industry contrasts sharply with the country's underdeveloped telephone system.

Telephone density is one of the lowest in the world, at 2.6 lines per 100 people, well below the global average of 14.5 lines, and more than 250,000 villages are without a phone.

The communications minister said the government will "do everything" to reach its target of 100 million phone lines by 2004.

"It may seem it will take a miracle to reach this level but it is possible," Mr Mahajan told the India Economic Summit in the capital, New Delhi.

The Indian software giant Wipro has reported a jump of 97% in its consolidated net profit for the April-June quarter, compared with last year.

The earnings of India's third largest software exporter surged to 2.14bn rupees (Rs), equivalent to $45.5m, and net sales rose 28% to Rs7.8bn.

Wipro also announced it has won a $70m contract from a telecom subsidiary of the UK-based Lattice Group.

The Lattice order will be spread over a three-year period, but Wipro expects the project to generate $30m in the second half (October-March) of the current financial year.

Analysts say the Lattice order should help Wipro compensate for its loss of business from core clients such as Alcatel, Lucent Technologies and Nortel Networks.

New business

The higher earnings came as the company adding 25 new customers this quarter and raised billing rates 20% for new customers.

Wipro's offshore billing rates for this quarter were 3.5% higher while the online rates registered a jump of 2.6%.

Wipro shares, which jumped nearly 5% soon after the profits statement, closed 1.2% higher at Rs1,380 on Friday.

Wipro chairman Azim Premji, India's richest man, told journalists that the company expects to grow faster than the industry average this year.

Nasscom, the top body of Indian software and services exporters, has projected 40% growth in Indian software exports despite a global slowdown in technology-related spending.

Vivek Paul, Wipro vice-chairman, said the company has been able to maintain its profitability in the face of a global slowdown because the management has remained focused on productivity.

"The company is committed to reduce costs and to improve margins," Mr Paul told journalists.

Weathering the storm

Wipro's results have come in the wake of a decent showing from other Indian software companies such as Infosys Technologies, Satyam Computers and Digital Equipment.

The results of the top-rung Indian IT companies indicate that, despite a global slowdown in technology spending, the Indian software services story looks intact.

The Nasdaq-listed Infosys Technologies, India's second largest software exporter, earlier this month reported a better than expected 50% jump in profits and 69% growth in revenues for the quarter ending 30 June.

Satyam registered a growth of nearly 100% when compared with the same quarter last year while profits of Digital Equipment rose over 200% in the same period.

Indian advantage

According to Samir Arora, equities head of the Singapore-based mutual fund Alliance, top Indian software companies will continue to grow at 30% or more on an annualised basis both because of the quality of their work and the cost advantage they have over their counterparts in the west.

Sushil Chowksey of Rosyblue Securities also feels that the first-quarter results of top software companies - except those in the education business which have come out with dismal numbers - has vindicated those who believed in the Indian software story.

"The numbers show the 100% plus growth rates of Indian companies in the boom days of 1999-2000 was no flash in the pan," Mr Chowksey said.

He said diversification of Indian companies into new markets such as Japan and Europe, rather than concentration on the US, had also helped them ride out the tough times.

Year-on-year exports are still growing by 52% to 86bn rupees ($1.8bn) according to the National Association of Software and Service Companies (Nasscom).

But this growth rate is well below the 65% increase recorded in the first three months of the year.

"Irrespective of the slowdown, leading (top 20) Indian software and service companies have continued to grow at over 50%, which is very positive by any industry's standard," the association said in a statement.

When asked about increasing competition for Indian software companies from other countries in Asia, Nasscom chairman Phiroz Vandrevala identified China as the main contender.

Good outlook

"Although the growth in percentage has dipped a bit, the industry continues to grow at a steady pace," Mr Vandrevala said, adding that the results were good given the worldwide software slump.

But he warned that Indian software companies would have to speed up product delivery to improve their competitiveness in the global market.

"The threat from China comes from the size of its domestic market, which is huge," he said.

Nasscom has begun collecting data on the Chinese IT industry and would continue to build and protect Indian brand awareness through an aggressive marketing campaign in Britain and the US.

Forecasting a revival in the global market by the fourth quarter, Mr Vandrevala said the industry was "well on target" to export 400bn rupees of software in the current fiscal year.

US fears

Companies like Infosys Technologies, Satyam Computer Services, Wipro and Tata Consultancy Services of the Tata Group, which account for more than 80% of the sector's export revenues, were identified as the driving forces behind the industry.

But the economic slowdown in the US has dented the outlook for India's software companies over fears that their clients would cut technology spending.

About 62% of Indian software exports go to the US, which accounts for 14% of India's total exports and represent two percent of its GDP.

Nasscom expects smaller companies to be amongst the casualties of the slowdown.