3G: Shattered Dreams

The performance of the Indian telecommunications industry for FY 2010-11 is a classic example of how expectations are killed and mauled. The year began with a a lot of hullabaloo over 3G. The consumers-enterprises and end users alike-were ga ga over the changes it was anticipated to bring in the industry. But the bubble burst at the same pace as it was inflated. When the telecom operators coughed out more than one lakh crore rupees after a grilling 300 rounds of bidding, spanning over 50 days, just to get 3G and BWA spectrum, the telecom infrastructure industry was smiling in the corridors expecting a similar booty. However, the then security norms prescribed by the government played the spoilsport. The norms that asked operators to sign a stringent agreement with the equipment suppliers, imposing a number of conditions, including making it mandatory for vendors to submit source codes, discouraged telcos to place orders with equipment suppliers, mostly foreign entities. Business suffered on both sides, buyer and seller; service provider and consumer. The entire telecom industry felt the heat.

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The market generated revenues of `1,17,039 crore in FY 2010-11 compared to the `1,20,069 that it made in FY 2009-10, showing a dip of 2.9%. It looks like a marginal dip, but when you think of the huge expectations that the industry was nurturing on the run up to 3G, the dip seems significant. Industry as well as industry experts expected a big rise in the market.

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The carrier equipment market saw the biggest plunge during the year-12.12%. It could garner revenues of just `58,294 crore during the period compared to the `66,332 crore it made the year before. Broadband infrastructure seemed to be the worst affected of the security fall-out. Plunging a whopping 57%, this industry segment generated revenues of `944 crore in FY2010-11 compared to `2190 crore in FY 2009-10.

All the big players in the industry like Ericsson, Alcatel-Lucent, UTStarcom and the Chinese players like Huawei and ZTE, who mostly use the price game to win orders, saw their revenue nose-dive by more than 50%. Only NSN, in this segment, saw a little growth-9%. The next big hit was witnessed by telecom cable players. Almost all the players surveyed by VOICE&DATA saw a big dip in their revenue numbers. Sterlite, the biggest player in this segment, though topped the chart in that segment, saw its revenue plunging 28%. Wireless Infrastructure, arguably the most important segment in the carrier equipment market was also not immune from the harsh security norms. The segment saw a negative growth of 24%. The wireless infrastructure players who earned `24,440 crore in FY 2009-10, managed revenues of just `18,629 crore in FY 2010-11. Here again, the segment biggies like NSN, Ericsson, Huawei, ZTE and others suffered huge dips in growth. Alcatel-Lucent and Motorola came out the biggest losers with a negative growth of 46% and 44% respectively.

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The enterprise equipment segment, somehow, was able to bear the pressure of the security regulations fallout. Though it grew marginally, a paltry 0.87%, the enterprise users are not complaining, though they are not happy. Audio video conferencing saw good growth, upwards of 42%. Switches, WLAN and structured cabling are the few other segments that saw good growth in FY 2010-11.

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However, the consolation for the Indian telecommunication equipment industry came from the handset business. India bought more than 120 mn mobile phones during the period, averaging 10 mn each month. The year also saw mushrooming of many homegrown mobile phone companies, and the consumers were now fed with more than 200 brands to select from. Showing an impressive 16% growth, the user device segment that includes mobile phones, data cards and tablets, generated `34,772 crore during FY 2010-11 compared to the `29,922 it managed to make the year before. Though Nokia, arguably the market leader in the mobile phone business globally emerged as the #1 player, the performance was not at all impressive. It grew just 0.2% to post revenues of `12,929 crore compared to the `12,900 it made in FY 2009-10. South Korean electronics major Samsung, however, is steadily moving on the growth path. It posted a growth of 21%, making `5,720 crore, up from the `4,700 crore in FY 2009-10. Brands like HTC and BlackBerry, who focus on niche customers, have shown very impressive growth during the period, growing at 99% and 61%, respectively.

As everything has to move forward with a sense of hope, the telecom industry sure hopes for a much better FY 2011-12, banking on the emergence of LTE and its expected rollout of services.

Gyana Ranjan Swain
gyanas@cybermedia.co.in