EQUIPMENT VENDOR: "Our handset business will soon be as big as the infrastructure business"

After Amit Sherma took over as the chief of Motorola in India ones again, the
company bagged a huge order from Tata Teleservices. A Motorola veteran for
Asia-Pacific Strategy and as the cluster president, he will also look after
Thailand, Indonesia, Philippines, and Vietnam. In this role, he will be
responsible for developing Motorola's growth strategy for key Asian markets,
including ASEAN. In an exclusive interview with VOICE&DATA, Sharma shares
his views and plan for India.

What is your agenda for India, with you in command now?

 The market will grow
very rapidly for the next three years. We had about 100 percent growth this
year, and I believe that more than 50 percent growth over the next few years is
sustainable. There are very few markets in the world growing at that rate. And
we are picking up speed. I see cellular as a very high growth area and it will
be our top priority, although there are challenges. Secondly, there is broadband
as it has got a huge potential but is untapped and is not being focused on.

What is your view on broadband?

Today broadband is being predominantly viewed as DSL Internet. The
biggest opportunity are the 55 million cable TV households, where with very
little incremental investment you can provide high-speed Internet over cable.
The moment that is done, you will see the same kind of boom in broadband and
Internet. Our cellular is doing well, but Internet penetration is still very
low. It is a chicken and egg story.

Can cable operators drive broadband?

They are too disorganized and the quality of their infrastructure is
suspect. There is a structural problem in that the last mile is totally
fragmented. Either the cable operators do not have funds or are unable to get
investors. But for the financially better-off players, if they compare getting
Rs 150 only from a house for providing 50 TV channels versus Rs 1000 from the
same house for providing better-quality TV as well as Internet, the economics
becomes much more compelling. It will therefore be in the their interest to
upgrade the last mile, and they will do it. If there are two or three such
successful ventures, you will see lots of other players getting into it. But
fixing the last mile is not hugely expensive.

You seem to very upbeat on Internet over cable?

Yes, in the next two to three years I think this market is going to
be very active in India. It will be a focus area for us too. In the US, for
instance, we are the biggest equipment supplier to cable operators. In Europe
also we are a major player.

Why not tap the copper that has been laid all over
the country by players such as BSNL?

It is very interesting because incumbents like BSNL have got the
maximum penetration in homes. But DSL Internet over copper has limits in terms
of speed. And, once users taste DSL they want even higher speeds. So, BSNL can
use its reach to the customers and offer a second track, which is cable, to the
users for broadband.

Why are you limiting yourself to broadband over
cable?

Amit Sharma, country president, India, Motorola

We are world leaders in voice, data, and telephony over cable. The
traditional DSL broadband has become a commodity business now, and we have VDSL
technology that gives not just very high speed Internet, but also digital TV. We
also have wireless broadband solutions. The fact is that in India the market is
just beginning to happen, it is too small. But the real issue is what
regulations will TRAI and DoT come up with, and will it help the industry grow
from a one-way entertainment provider to homes, to a two-way service provider
for voice, data, and telephony. That's the point when the industry will
seriously start to grow.

But Motorola also has satellite-based broadband.

Yes, there are many other ways of going broadband including
satellite-based services. We are in discussion with players for satellite-based
broadband equipment. That is a very promising way of covering a country of the
size of India.

What is the news on triple-play?

Without mentioning names, let me tell you that we are getting some
very serious enquiries for that. Service providers are saying that if I have a
fiber optic backbone, why should I not look at several technologies and services
to generate traffic for my network. With unified licensing, India has the unique
opportunity of leapfrogging most of the world. With so many greenfield networks
happening in India, the question now is not whether I should be a wireless
player or a wireline player or should I be a data services player or voice
services player? That is a question not even worth considering now. Service
providers are saying why can't we offer everything. Service providers are very
seriously talking to us about this, and there should be a couple of these
projects in several places in the country, soon.

Are you also looking at CDMA2000 1x DO (data only)?

We certainly are very strong proponents of CDMA 1x, both DO and DV
(data and voice). It is not that one will replace the other. But, the data needs
of a user, for instance in Mumbai, would be better served by a DO network rather
than a DV network. The CDMA 1x DV is efficient for voice but not high-speed
data. We are in talks with some operators for the DO networks.

Motorola is now looking at areas other than telecom.
Can you throw some light on that?

Another area that we would be looking at is automotive electronics
such as emission control systems and braking systems. It is a pretty large
operation for us worldwide. Manufacturers such as Ford are big customers of
ours. With the taking off of the Indian auto industry, and a lot of focus on
indigenisation and greater control on emission control and quality, it is
interesting to be in that market. Besides we are also into automobile telematics
solutions, where let us say a car develops a snag, it will automatically
communicate with the service center, and inform them about the nature of the
problem, and the location of the car.

What is happening on the radio trunking equipment
front?

In India we have been the largest suppliers of that equipment. Now
the new opportunity for us is to upgrade that equipment to next generation of
trunk systems with more security, more features. Defense and police are now
looking at enhancing this technology.

But overall the radio trunking service providers are in a bad shape. Though
there are now thousands of radio taxis transporting call center executives up
and down, and one does see radio trunking applications in many newer areas like
hotels, construction, railways etc, still this market does not seem to grow.
Where do you see the problem, this has been Motorola's forte all along.

Traditionally, this market was driven by defense and paramilitary
applications. But they have their own dedicated networks. Now the commercial
sector is starting to use radio trunking. It is small now but growing rapidly.
The service providers are therefore stuck. But I think security, both in
government as well as the private sector, will be the primary driver of this
technology. The big plants, factories, condominiums, and townships would be some
of the biggest users. It holds a lot of promise in India.

Motorola's handsets and marketing have both
transformed. Any comments?

Absolutely! I predict that in India the handsets business will be as
big as infrastructure business for us, in the next two years.

Are telecom companies like Motorola under threat
from consumer electronics companies like Samsung and LG?

That is a very interesting observation. The phone business is a
consumer electronics business. The key success factors are the same as in
consumer electronics. Telecom companies have leveraged their knowledge of
telecom to develop these products while consumer electronics companies have
leveraged their knowledge of consumer electronics. But in the last one year we
have worked on the consumer-focused approach in terms of segmenting the product
lines and creating new distribution channels. There has been a lot of
Asian-markets focus in our cell phone strategy now. As a result in many
countries where Nokia had overwhelming presence, we have been able to take some
market share.

How do you see the challenge from economy-model
vendors such as Bird and Sagem?

Yes, these are companies that have a tremendous consumer electronics
and white goods base in their home countries, and in many cases they completely
dominate their home markets. And now they have moved into cell phones and into
markets outside their home countries. They should be watched very closely as
they could emerge dominant players just the way the Koreans emerged, when
Japanese players dominated the market.

What is your strategy for the CDMA market? You have
only one CDMA handset against several in the GSM family.

Today the market is 70 and 30 between GSM and CDMA, and we have a large
family in GSM. That is what is providing us growth. On the CDMA side we have
traditionally focused on Japan, Korea, and the US, which are mid- to high-end
markets. Those are feature driven markets as opposed to price driven, which
India is. In GSM we have the complete line, but for CDMA we are pushing at the
highest levels in the company for expanding the family.

Right now we have only one product for price-sensitive market in the CDMA
segment. My focus is to push for GSM-like attention to the mass-market, CDMA
phones. In fact, many other countries such as Indonesia and the Philippines have
similar needs.

Do you also have solutions for enterprises?

Yes. For instance, for one of largest corporations in the world we
customized handsets that enable them to access mails the same way they would in
their office. We are also working on some banking applications where cell phones
also work as a payment device. For another client in Asia, we have developed
special phones with location-based service features. In most cases we partner
with the operator for these solutions.

Are you doing this in India?

It is a little too early for India, but we are talking to a few
players. We are doing a lot of this in countries like China.

Where are softswitches headed?

I believe that whether it is two years or four years, eventually all
networks will become IP-based networks. Even in these IP-based networks the
soft-switch has certain distinct advantages compared to circuit switched, but
for a long time they will both co-exist as there is a lot of circuit-switch
legacy. Till that time, operators will strike a balance between the two. They
will not rip apart their circuit-switched legacy overnight. Also,
internationally the circuit switches are still undergoing development.

How would you rate Motorola's performance, with
more new equipment vendors coming in? It has slid from number two position to
number four.

I do not agree that Motorola was ever number two. We have always been number
one. Or you can say, depending upon how you calculate, Motorola and Ericsson
were both at number one position. Yes, there have been some orders that have
been bagged by other players, but I think a lot of things were sacrificed to get
those orders. We will not take business if we cannot execute it profitably. So
in a quarter here and a quarter there you will see this happening, but overall
that does not affect our position. All I will say is that we have been one of
the leaders in Indian telecom infrastructure market. In the last six months or
so we have bagged some very big deals, and we are sure we will continues to do
well. We have excellent relationships with the operators and that gives us the
advantage of going back to them with new technologies and solutions. We are also
very pleased with the performance and growth of the Indian telecom market.

Today many vendors are managing operators'
networks. How will this influence players such as Motorola?

This is a very fundamental shift where the vendor and the operator
almost become one. But these partnerships will have to be really very strong for
this model to succeed. But I see that more and more operators will turn around
and say they would not like run the network but would want to deal with the
customers-provide him a range of services, do service provisioning, customer
care. We could even have several service providers on a single network.
Ultimately, sharing of networks will lead to a very high efficiency.

Ibrahim Ahmad and Pravin
Prashant