3G will be the game changer for Wireless Infrastructure

The wireless infrastructure segment grew by 26% in FY 2009-10 against the
previous fiscal's 44% rise. The top two players-Ericsson and Nokia Siemens
Networks retained their positions. In spite of intense pressure, the Chinese
vendors-Huawei and ZTE-moved up the rankings, registering 55.5% and 96.7%
growth, respectively. The security concerns did impact their businesses to some
extent. Alcatel Lucent which saw a negative growth toppled two places down.

The Indian telecom sector is experiencing revolutionary growth and is poised
at a crucial turning point with the 3G wave. The equipment manufacturers will
target the 2G, 3G, bearer network and broadband infrastructure in the country.
Operators in the country are experiencing a dramatic increase in the investments
in mobile voice and data services. Since many operators have started to
experience serious capacity constraints on their current networks, network
expansion has been one of the key investment areas for the leading operators in
the country.

India is heading towards network congestion with a growing population of
smartphones, falling prices and an increase in mobile based applications that
further fuel the demand for mobile data enabled applications. Increased
connectivity and global awareness is leading Indian consumers today to demand
experience that their peers in the other countries are already enjoying.

So where is the next wave in the wireless infrastructure space expected to
come from? Experts believe that over the next eighteen to twenty-four months,
several new services will become available to consumers over the wireless
broadband networks based on 3G and WiMax technologies. The country will see a
ramp up of networks and the infrastructure market will grow at a better pace
than it did in FY 2009-10.

Last fiscal, the industry defied the forces of the slowdown and the Indian
wireless market registered an impressive 44% growth; but FY 2009-10 is not as
scintillating. According to the VOICE&DATA estimates, the wireless
infrastructure market in India will tread slowly as operators set their eyes on
the government's flip-flop on 3G/BWA spectrum auction. However, new players in
the market did light up the market with operators like Uninor placing pan-India
rollout orders.

Big Deals

It was a slow pace year for the segment. The market leader, Nokia Siemens
Networks pocketed some of the key contracts. The vendor was selected as the
Unitech Wireless' exclusive pan-Indian network supplier for high speed data
services. The vendor would be the supplier to roll out and manage its GPRS core
network under a three year contract. NSN added significant number of subscribers
on its networks. Its networks served 110 mn subcribers in India which grew to
170 mn in March this year. Among the new orders, NSN won a contract amounting to
over $300 mn from Aircel to roll out and manage the operator's radio and core
network and services in three Indian states-Haryana, Punjab, and Rajasthan.

For NSN, a big win was Bharti Airtel's contract. Under this $700 mn worth
contract, NSN is expanding and upgrading the operator's 2.5G network to increase
network capacity by 50% in eight circles.

For the Chinese vendors, Huawei and ZTE, security concerns became a huge
roadblock. However, the companies did manage to pocket contracts from service
providers, lower pricing worked well for these vendors. ZTE signed GSM network
infrastructure agreement with Unitech Wireless to provide GSM systems and core
network equipments for a period of five years across the circles of Delhi,
Madhya Pradesh, and Haryana. With this contract, ZTE added a significant win to
the growing list of telecom service providers deploying its GSM solutions in
India. At present, Indian contribution to ZTE's overall revenue stands at about
10%. The company even decided to launch handsets under its brand in India.

The vendor claims to have registered a strong growth in the Indian market. It
claims to have witnessed 50% increase in sales. The company is eyeing a 10-15%
share of the new market. It has ambitious plans for India and aspires to grow by
around 30% every year, and looking ahead for business opportunities from the 3G
and WiMax sector. However, a big blow came to the vendor when the tender floated
by the state owned BSNL for 93 mn GSM connections was scraped after government
referred the matter to a panel led by Sam Pitroda. Cancellation of the BSNL
tender came as a major blow to the Chinese equipment manufacturer, Huawei. The
industry estimated this loss as about 10% of the company's business in India.
Another loser in this deal was Ericsson who was also shortlisted for this
tender.

For Ericsson, most of the orders were repeat orders. The company continued
the build-out of the 2G networks for Bharti, Aircel, Idea, and BSNL. Also, they
closed significant portions of Etisalat and Uninor network build-outs during the
year. With an experience in designing and building-out of the BSNL 3G networks,
the company is confident of being competent to help new operators accelerate
their build-out plans as they acquire 3G licenses.

Huawei Technologies launched Indian WiMax commercial network in Ajmer,
Rajasthan in India. The company struck an agreement with BSNL to offer mobile
WiMax, enabling consumers to access the network from anywhere on any type of
WiMax enabled device. It will also provide high speed data services for the
rural areas of India, giving residents the Internet facility in sparse areas of
the country.

Like its Chinese counterpart-ZTE, Huawei is under the government lens. The
telecom giant stands to lose a whopping $1.5 bn worth of business this year.
According to an internal communications source in Huawei, orders worth $100 mn
have been affected by the DoT ban over the past few months.

While the industry expects that Chinese companies may lose initial 3G rollout
contracts due to the ban, ZTE had reportedly claimed that it has received orders
from various telecom operators to set up 60,000 new software defined radio (SDR)
systems with baseband unit (BBU) and remote radio unit (RRU) enabled sites for
FY 209-10.

More than 90% of these sites will be for wireless communication and rest of
the sites will be mix of next generation network (NGN) and wireline network.
These sites will support 2G, 3G and 4G networks. These sites will easily
facilitate infrastructure sharing, but will depend on the business model of
operators and their interest in infrastructure sharing. With this, the total
number of telecom sites installed by ZTE will touch 1,10,000. The company claims
to have covered close to 1,500 rural blocks in the last one year through 17,000
sites.

Alcatel-Lucent is executing a CDMA network along the line of control (LoC) in
Jammu & Kashmir, India, under a $70 mn contract that it bagged earlier.

Wireless Tomorrow

There is an increase in opportunities for the growth of wireless products
and solutions in India for both consumers and enterprises. Enterprises and other
segments have begun rethinking their wireless strategy as they are realizing
that an integrated approach which allows seamless integration between fixed and
wireless networks would lead to more flexibility and productivity.

In the future, as the wireless technologies like WiMax and Wi-Fi become more
secure and there is a tighter integration between the wired and wireless
networks, the industry will continue to see more growth taking place in the
adoption of wireless and mobility solutions across various platforms and
industry segments.

The wireless industry today is focused on delivering world class solutions
for broadband access. In India, the explosive growth that is set to come with
the increased data usage needs to be harnessed into profitable revenue streams
for operators.

The fate of of the wireless industry will largely be decided by the
widespread rollout of 3G in the country. It is estimated that $4 bn opportunity
will be generated for the telecom vendor industry with the likely rollout of 3G,
WiMax and other next generation communication services in India. Greening of
networks will also attract service providers' attention.

Heena Jhingan

heenaj@cybermedia.co.in