Explosive Growth

When telecom operators identified the rural markets as their next destination

in India for increasing their top line, the anticipation did not vouch for the

kind of exponential growth it has seen. The wireless infrastructure segment grew

to Rs 23,770 crore in FY 2007-08 from Rs 16,677 crore in FY 2006-07, clocking a

42.5% rise.

Registering a 67.6% increase last fiscal, Ericsson retained the top slot with

Rs 7,815 crore as compared to the Rs 4,664 crore in FY 2006-07. Nokia Siemens

Networks came close at Rs 7,555 crore, a jump of 51.4% from last fiscal's Rs

4,990 crore.

Revenues of Alcatel-Lucent, which registered a 105.1% growth, touched Rs

4,000 crore in FY 2007-08 compared to Rs 1,950 crore in the previous fiscal. ZTE

and Huawei have improved their revenues through the wireless infrastructure

segment by clocking Rs 1,500 crore and Rs 1,400 crore respectively in FY

2007-08, compared to Rs 1,320 crore and Rs 445 crore respectively in the last

fiscal.

Growth Drivers



A number of factors have contributed to the growth of the wireless

infrastructure segment in the country. Firstly, the second largest subscriber

base, growing middle class population, and almost 50% of this being under the

age of 25, and being full of vitality, constituted the basis for rapid growth.

Secondly, a series of government policies and regulations optimized India's

telecommunication investment environment. Thirdly, full operation of market

competition attracted many domestic and overseas investors to divide the

telecommunication market, both for operators and telecommunication equipment

manufacturers. Finally, India's developed software industry provides the

possibility for overseas manufacturers to directly invest and establish R&D

centers and production bases in the country.

Ericsson's growth in the wireless infrastructure space came mainly from its

clients-Idea Cellular, Bharat Sanchar Nigam, and Bharti Airtel. Ericsson is the

sole supplier to Idea Cellular's GSM network in Mumbai, besides its managed

services partnership. As per the four-year agreement, Ericsson will supply radio

access, microwave transmission, and core network equipment, including Ericsson's

Mobile Softswitch Solution. With this, Idea Cellular, which is aiming at taking

on its rivals such as Bharti Airtel, Reliance Communications, and Vodafone in

Mumbai, is well positioned for future network development, and is addressing

increasing customer demands for mobile services in a sustainable and

cost-efficient manner.

The Mobile Softswitch Solution, which sets the stage for Idea Cellular to

evolve towards an all-IP network, supports cost-effective network operations for

mobile voice services.

 Ericsson's $1.3 bn turnkey contract with Bharat Sanchar Nigam to supply GSM

and WCDMA/HSPA equipment, and related telecom services, has also substantially

contributed to its revenue growth.

As per the agreement, Ericsson is responsible for expanding and upgrading

BSNL's existing GSM network and introduction of WCDMA/HSPA functionality.

Ericsson will supply GSM and WCDMA/HSPA radio access network, transmission

equipment, and a complete GSM/WCDMA common core network including the Ericsson

Mobile Softswitch Solution, service-aware Packet Core, IMS, and a multi-service

IP Packet Backbone Network.

In its largest deal in India, Ericsson bagged a $2 bn network expansion deal

from Bharti Airtel. The deal is likely to assist Bharti Airtel offer

cost-effective products and services to its customers, and help expand its reach

in rural India.

As per the deal, Ericsson will design, plan, deploy, optimize, and manage

Bharti Airtel's GSM network across 15 circles in India, as well as pave its

pan-India pre-paid platform across 23 circles.

Bharti and Ericsson are also looking at forming a focus group to work on

energy optimization by introducing energy-efficient equipment and alternate

energy sources.

Besides bagging several big orders, Ericsson contributed to the country's

need for biofuels. Idea Cellular, Ericsson, and the GSM Association's

Development Fund announced that four mobile base stations powered by locally

produced biofuels have extended Idea's commercial mobile network in rural India.

Exploring alternative power solutions, such as biofuels, is key to the

development of cost-effective ways to extend mobile networks to 20% of the

world's population without coverage today.

Nokia Siemens Networks, in its first year of operations after the merger,

bagged a slew of coveted orders. The major clients of Nokia Siemens include

Bharti Airtel, Idea Cellular, Aircel, and Vodafone.

Under a $500 mn GSM network expansion contract, Nokia Siemens Networks will

expand Idea Cellular's GSM/GPRS/EDGE networks to cover six circles of Delhi,

Haryana, UP East, UP West, Andhra Pradesh, and Kerala. The two-year contract

includes supply and services of GSM equipment, intelligent network, value added

services and circuit, and packet core equipment.

This apart, Nokia Siemens Networks won a Rs 300 crore contract from Aircel to

build and operate a greenfield GSM network in Kolkata.

The two-year deal includes supply of the latest state-of-the-art equipment

like Flexi base stations, mini-ultra base stations, 3GPP-based mobile

softswitching solution, including MSC servers and media gateways PDH and SDH.

The network will be supported by the multi-technology, multi-vendor NetAct

network and service management system, and will be ready for commercial

operations by December 2007.

As per a multi-platform network contract worth $900 mn with Bharti Airtel,

Nokia Siemens will expand Bharti Airtel's GSM network in eight circles; its

national long distance and international long distance network with 1.8 mn next

generation network ports and its international calling card prepaid service

capacity by 4.5 mn new users.

The two-year GSM expansion will cover eight existing circles of Mumbai,

Maharashtra and Goa, Gujarat, Madhya Pradesh and Chhattisgarh, Bihar and

Jharkhand, Orissa, Kolkata and West Bengal.

Its $150 mn contract with Idea Cellular was to build and provide managed

services for a greenfield GSM network in Bihar. The three-year contract includes

supply of GSM/GPRS and short message service center equipment, network

implementation, roll out project management services for third party products,

and managed services.

Bharti Airtel offered its multi-million dollar all India contract for single

interactive voice response to Nokia Siemens Networks for deploying a single

interactive voice response (IVR) platform across all 23 circles. The three-year

turnkey contract includes designing, planning, systems integration, and

optimization services to enhance the overall customer experience. The new IVR

solution will enable Airtel to deliver services such as voice SMS, televoting,

call management services (reach-me service/missed call advisor), caller ring

back tone (CRBT), and voice portal among others on a faster time-to-market

basis, reduce Opex costs due to optimized network utilization, and increase

security by creation of a layered architecture toward interactive voice

applications.

This apart, Nokia Siemens Networks bagged a major contract from Idea Cellular

to deploy and integrate a device management solution in Idea's all telecom

circles in India. The solution is likely to enable Idea.

There were two significant deals for Alcatel-Lucent last year. First, it

bagged a contract for 2 mn GSM lines with ITI for MTNL's network expansion in

Mumbai, and another, a contract with ITI for the supply of 2 mn GSM lines to

BSNL. Apart from this, Alcatel-Lucent also got GSM and CDMA contract from

Reliance Communications.

For ZTE, major orders came from expansion and network transfer requirement

from Tata Teleservices, BSNL, Reliance Communications, and Spice.

Some of the major wins for Huawei were from private sector operators like

Bharti Airtel, Reliance Communications, and Tata Teleservices. In the CDMA

space, it did business with both Reliance Communications and Tata Teleservices.

It also bagged Reliance's GSM project and MTNL's UMTS roll out.

Tata Teleservices has selected Huawei's all-IP based CDMA core networks

solution and radio access equipment to replace its existing network in Delhi,

Kolkata, and other major cities, thus, enabling its transformation toward 3G.

Huawei has also helped MTNL deploy its MPLS (multi protocol label switching)

backbone network thus, providing a variety of quality carrier-class services

including the Internet, VoIP, and IPTV.

Yet another order came from Reliance Communications for $200 mn for an all-IP

next generation network expansion. Under the agreement, Huawei will supply and

provide services for CDMA and GSM base stations, including BSC (base station

controller) and switches, and help create first-class all-IP next generation

network infrastructure.

Hurdles to Cross



The fierce competition in the telecommunication industry brought tremendous

pressure on profits. For long-term planning, wireless infrastructure players

have two weapons, market differentiation and cost reduction, to deal with it.

With satisfying customized demand, market differentiation can increase customer

value. Cost reduction puts forward demands on reasonable distribution of

resources.

Apart from spectrum, main concerns for operators include sharp drop in mobile

tariffs, heavy competition, increased emphasis on turnkey projects leading to

responsibility being imposed for tasks which are not in the core competency of

the company, reduced profitability, and increasing needs of customers for

customized solutions putting additional pressure on profitability and internal

resources.

Outlook



 In 2008-09, more wireless licenses of different systems are expected to be

issued to anxious operators. In GSM systems, LTE oriented SDR, network sharing,

and spectrum enhancement technology will be important functions developed in

wireless infrastructure equipment.

India is among the fastest growing telecom markets in the world, and

operators face a resource constraint environment concerning spectrum and people.

As they have to grow to a large extent, for many operators managed services are

the best way to cope with growth, efficiency, operational performance, and have

a predictable costs while freeing resources to focus on their core,

customer-facing activities.

Baburajan K



baburajank@cybermedia.co.in