EQUIPMENT: Two Technologies, Two Operators

A lcatel, the 12.5 billion equip ment vendor which has been operating in

India for over 20 years, but has never really been on a growth spree, has now

chalked out new, aggressive and daring plans to try and get the a share of the

big Indian telecom pie.

The first and the most significant activity of its multi-pronged strategy

will be to get focused on technologies and operators. Everything else will

follow from there. The company is very clear that, like its strategy in any

other country, it will bet on two technologies and two operators. "In

India, Alcatel has decided that GSM and DSL broadband will be its technology

focus", Etienne Fouques, president, mobile communications group at Alcatel,

announced to a select media group from India in his plush office at the Paris

headquarters of Alcatel.

There are plans to take people off from old traditional technologies and in

their place get more people to work for emerging technologies such as GSM and

DSL broadband. In fact, while doing this the people strength of the company will

go up from 600 to over 1000 very soon. While Alcatel has revealed that the two

technologies are going to be GSM and DSL broadband, it does not want share the

names of the two operators it plans to primarily partner with. "BSNL,

because of its focus on GSM as well as its big plans for broadband, will surely

be one service provider Alcatel will like to have on its side," says a

senior industry guru from rival Ericsson.

One look at the GSM expansion plans of BSNL, an operator which not just

Alcatel but all equipment vendors keep in mind when making business plans, is

enough to understand Alcatel’s hopes from India. BSNL plans to spend Rs 7000

crores to buy GSM network equipment to take up its GSM subscriber base to 25

million by 2005 end. On the DSL broadband front, Alcatel wants to carve its

success through efforts to provide broadband Internet at reasonable price so as

to reach about 20 percent of Internet users. It plans to focus on applications

such as video on demand, e-working, and also getting the content in place. The

preferred targets would be enterprise users and users in cities and big towns.

"Such straightjacket focus can exclude Alcatel from opportunities

outside GSM and broadband," opines a senior expert from Lucent, another

Alcatel rival.

"In India, Alcatel has decided that GSM and DSL broadband will be its technology focus" Etienne Fouques, president, Mobile Communications Group, Alcatel

While industry critics may argue that such strict focus in an emerging market

may prove to be a hurdle for growth, the general consensus is that Alcatel is

betting on winners and that such focus will also have its own advantages.

Alcatel, however is being more cautious. "This does not mean that we do not

have the capability to offer other technologies or other operators. Our entire

portfolio of products and services will be available to Indian operators,"

adds Fouques.

The second strategy is to get into a revenue sharing mode with service

providers. This means that Alcatel will puts its fate alongside its clients or

the operators, and get a share of their revenues. The company plans to start

with the GSM operators, where it has a very small market share but which is the

most rapidly growing markets in the telecom sector. According to unconfirmed

reports, Alcatel is already discussing revenue sharing with BSNL and Reliance.

Alcatel is also considering this model for broadband services, as and when those

services get launched by the big players.

In fact, the company says that it is looking beyond just the revenue share,

it is also considering organizing financing for their buyers. While the company

refused to share the details of the model, one industry expert calls Alcatel

daring and defines this type of a model a little risky, considering that Indian

telecom is still undergoing teething issues. Slightly unrelated, but there have

been instances in the past where service providers have told equipment vendors

to wait for payments till revenues started flowing in but ultimately the service

provider wound up and the equipment vendor burnt its fingers badly. Alcatel

itself is a well-known example of such a disaster. "Our strategy will

primarily be to go after established players," says Olivier Picard,

president, Alcatel, who is confident that the company will be able to get over

20 percent market share. A tall order, considering the fact that today they are

almost negligible in GSM networks market. The company claims that in the

emerging countries Alcatel is among the top four GSM-equipment players.

Telecom outsourcing is another opportunity, which Alcatel will want to tap to

really get into a high-growth mode in India. At a time when Ericsson has

actually bagged a huge network management outsourcing deal from Bharti, Alcatel

is also eyeing that route to a quick market capture. Frederic Rose, president of

Alcatels’ integration and services division, says that Alcatel will also be

actively exploring such outsourcing jobs to India. Rose claims that Alcatel has

real-life cases where, by taking up outsourcing jobs, they have brought down not

only the operators’ headcount but also its opex by as much as 20 percent.

"We are one of the worlds biggest telecom outsourcing companies worldwide,

with over 35 percent market share," asserts Rose. "A lot of these

outsourcing contracts are with service providers where there is no Alcatel

equipment," he adds. According to Alcatel sources, talks are going on with

Reliance. Outsourcing might be a little too early for India, especially for

incumbent operators such as BSNL, but surely Alcatel is gearing up for an

opportunity that everyone admits to being huge.

India is one of the most promising telecom markets in the world today. This country will play a major role for Alcatel worldwide Olivier Picard, president, Alcatel

Alcatel’s designs on India do not revolve only around its plan to lure

operators by offering revenue share and financing, identifying preferred

technology and service provider, and outsourcing. There is another front too

which this company plans to attack, in order to enhance its position in the

Indian market vis à vis other telecom majors such as Motorola, Lucent,

Ericsson, and Siemens. One significant strategy is the message that Alcatel’s

top management wants to give to its own people–that it believes India is going

to be the growth engine. "India is one of the most promising telecom

markets in the world today. This country will play a major role for Alcatel

worldwide," adds Picard. The India team size is likely to double in the

coming months and a new development center is being planned in Bangalore. The

top management’s focus and confidence on India is expected to percolate down

the line and enthuse the local team to get more aggressive in the market. "Alcatel’s

top management is convinced that India is not just a big market but also a key

market," believes Ravi Sharma, MD and VP (Indian Subcontinent), Alcatel

India.

To the question, "With these strategies chalked out, what is the likely

growth in Alcatel’s India business this year, compared to last year?"

Ravi Sharma is ready with his answer, "We want to be significant players in

GSM, broadband, and transmission equipment. And in fixed-line switching

equipment, we want to be able to defend our 50 percent market share." The

optimism has already percolated down. Considering that Alcatel already has

service providers such as BSNL, MTNL, Bharti, Tata Teleservices, VSNL, and

Reliance as its customers, it’s now only a question of successfully going back

to them again with the new strategy.

Ibrahim Ahmad in Paris