By Ibrahim Ahmad & Krishna Mukherjee
‘Reinventing’ is the mantra to stay afloat in any business and Ericsson, one of the oldest MNCs in India, believes in the same. From mere telecom gear maker to connected cars, Ericsson today has a diverse range of offerings.
In India, it works with all the top telcos and wants to offer ‘bang for the buck’ kind of solutions. As the India share for the company grew from 3% to 4% in 2013-14 fiscal, the company exudes immense confidence in the market and says ‘growth is good in any business.’
In a chit-chat with Voice&Data, Chris Houghton, Head of India Region, Ericsson, talks about spectrum being the lifeline of telecommunications, the company’s manufacturing plants, among other things.
Voice&Data: One of the most heartening things has been that India’s revenue share for Ericsson globally has gone up from 3% to 4%. From Ericsson’ perspective, it’s an important achievement but 3% does not really sound that exciting. So, what’s the big deal about growing from 3% to 4%?
Chris Houghton: The important thing for us is growth. Rankings. And rankings in countries can change with time. I know I am not making a big thing about what rank company we are, but the important thing is to do a good job, to get recognized by our customers who want us to supply the best networks. Fortunately, the economic environment seems to be getting better, the regulatory environment is looking forward. Growth is good in any business and particularly after what the Indian telecom sector has gone through, it’s nice to be a part of it.
Voice&Data: Our estimates have been that in the last 2013-14 fiscal, the telecom equipment market grew by about 10-11% but your growth was close to 25%. How did you manage it?
Chris Houghton: I think it’s all hard work by lots of people to be honest. We now see the mobile broadband and mobile Internet taking off in India. We have a great experience on mobile broadband whichever country it is, whether Korea, Japan, or US. We have been to these countries and we have seen how to handle things during the data boom and the start of 3G..
We try to bring our knowledge and global expertise and that is how we win our customers. There are several new areas we have taken up including OSS/BSS, and we are seeing good traction there. IP is also one of those areas, and the response has been good. Of course, another strong area is services, where we have lots of people and some big service contracts. We continue our investment in those areas, and in tools and processes.
We try to bring as much value as we can and as we enter into a data world from voice, we need different skills. Not only from the mobile broadband side but from the services side as well so, it’s all about the experience the end-user enjoys. I think we invested in these key areas, developed skills, brought global knowledge and we really have our top focus on that.
Voice&Data: Which were some of the feather in the cap kind of deals that you think were critical to Ericsson’s success in the last 12-18 months?
Chris Houghton: We have got quite a few deals. The recent one was in Delhi where we did 2G modernization and 3G roll out for Idea and I think that’s a nice one. It is nice to be in the nation’s capital. You go to any country, being in the nation’s capital is important and I think for us we are in the nation’s capital with all the top three operators which is good and this is true for Ericsson in most of the cases across the world.
Also, the recent RCom deal, where we have managed services pact extended pan-India. That also shows the trust in Ericsson and people working here. We have 19,000 people working in India and these kinds of things also make people feel good. They work in order and know those things. Those are the contracts we are very proud to be in.
Voice&Data: Despite top of the line network equipment, why is the quality of operators so poor even now?
Chris Houghton: I think you also know the answer, but let me tell you that spectrum is important and operators don’t have enough. Whatever the operators are able to do with their network is magic, believe me. The Indian consumer is very keen on having a good price and value for money but they also want very high level of services.
They won’t take any rubbish service. There is a big pressure on prices. In our world, spectrum is the water through the deserts and without the waters nothing grows and we need to get the spectrum and subscribers don’t have an option now unless more spectrum is made available. Mobile telephony is the greatest idea in the last 20-22 years and has a big demand. In India most people get their internet through mobile devices, handset prices are going to fall and the demand is going to be higher, higher and higher. So, as a nation we need to get that right.
Voice&Data: If the operators are spending so much of money in spectrum, does this mean their investment in equipment and services is likely to be affected and if yes, then how a company like Ericsson will able to help operators to serve a large number of customers?
Chris Houghton: Of course, the money they spent on spectrum, they are not going to spend with us. That’s a real challenge if you look at the proportion they are spending. Yes, they are spending a lot. However, spectrum is no good if it sits on the shelves. It has no asset value, it should generate revenues.
One way of generating revenues is deploying equipment for services on the networks. But of course there’s a challenge and we have to try our own innovations. First of all, we have limited spectrum so we have to squeeze as much as possible. Our people in R&D are continuously working on how much we can squeeze because then you can get more bang for the buck.
Then there are solutions, where we try and bring down the cost of our solutions – for example on a site base station where with some technology innovation we crushed the useless equipment to get the same coverage. I think there will be more and more of those types of things because India is in a unique situation. Everyone can bring down their overall cost and some have to be innovative to handle the unique demand of the markets like India and that’s something we are very very focused on. There is a lot of competition around and we are in a constant state of paranoia.
Voice&Data: You talked about ‘bang for the buck’ kind of solutions and more innovations, so what type of trends are you seeing as far as the telecom technologies are concerned and what type of innovations Ericsson would be actually focusing on?
Chris Houghton: This is a long and continuous process. What we are trying to do is to get maximum out of the existing solutions. For instance, carrier aggregation is one area where we take different spectrum in different carriers and pull them together to get the maximum flexibility. That is one area we are focused on.
The other area we are focusing on is to work on the right size. For instance, having the right type of small cells is important and we don’t want to put too much power where it is not required and over blow things. We want to put things exactly right so we work along those lines so that we use spectrum effectively. We have products like AIR (antenna integrated radio) where we basically put the base stations into the antenna so that you get good energy advantage, and you can improve coverage and can take more subscribers.
So, all those different elements we do. We are looking at things not just for innovation but also for installation, and how we can make things quick and easy to install. In the rest of the world, say in the US, Japan, Korea, you see innovations on LTE side which has not hit India in a big way, but I am sure definitely it will happen here too. The objective is to maximize the end user experience.
Voice&Data: The Indian ecosystem is pretty large in terms of operators and other telecom stakeholders. So, do you have a specific well-defined mechanism where you can talk to them and try to understand their needs and demands and incorporate such things?
Chris Houghton: We are in constant dialogue with our partners and customers and share our strategies as well. Before our PA (power amplifier) radio came to India, our guys from Sweden came here, and they talked to the operators to know their requirements. We do the hear and feel at the backend, and we look at operators’ strategies, what is happening to spectrum and what we need to develop because of that. We are making sure that we talk about our strategies, and try to stimulate a debate. We talk to them and get their feedback to understand their plans. That dialogue is a constant process in this game, if one has to survive.
Voice&Data: You are coming up with your second manufacturing plant in India, what’s unique about this and how are you banking on government’s ‘Make in India’ project with that?
Chris Houghton: We have a factory in Jaipur since 1994 and that has been great for domestic production. Our volume makes sense to produce here, and also in terms of logistics available. We are opening up a new plant in Pune in 2016 and the work has started. There we are looking to use it as an export hub for South East Asia, Middle East, and Africa, that’s what we will like to do.
We are with the government’s ‘Make in India’ plan and we want to work with the government. At the end of the day, I am also representing India for my multinational, and I am backing my country. I want everything to be done here, I want to build in India. We do manufacturing in China and Estonia and in a global company there’s always an alternative to go somewhere else, but we have got to work with the government and make sure that we get all the benefits, generate jobs including high-tech jobs, lots of ancillary. The biggest thing people don’t talk about is that other ancillary companies, who will set up around us, if we establish ourselves here. If we have this as an expo hub then many other companies will supply into our chain and will also set up their plants here.
Voice&Data: How do you see the existing networks evolving primarily from a voice kind of network to data networks, and with these OTT, VAS and content players coming into the picture, what type of telco network roadmap do you see based on your interactions with the telcos?
Chris Houghton: Indian telcos are very smart and they know what is coming, they know what happened in the rest of the world and that data happens fast and it’s happening to them now. The Indian consumers want data, and with the prices of handsets falling it is going to take-off. We know on a global level when we give someone a small phone, things take off.
We have 10 percent smartphones penetration last year, and we predict about 45 percent penetration by 2020. And that is a conservative estimate. Also, we see very competitive 3G and 4G prices, and they are also coming down. The operators know that and are getting ready for the huge demand, and they are balancing their books and how to get their data networks for 3G and 4G built out. I think 4G is the latest technology so it’s more effective in handling huge amount of data, data latency, and high speeds but the problem will be the LTE handsets because of the high prices.
So, the real challenge will be how to price them. You can’t lose the voice customers but the data growth will take off. On the voice side, the networks are robust and revenues healthy, but for data you have to invest ahead of the curve. So, it’s a very very complex game. If you look at the reports from the operators, they are missing the data growth and they have to manage the challenge. They are ready for the transition but then OTT players are taking their revenues streams as well. I think the plan is if you can provide an excellent network service then people will stick to your data packages and it will not prevent you from making money.
Voice&Data: Do you think Reliance Jio’s roll out of 4G services will be a game changer for the industry?
Chris Houghton: I think when a first time user comes on data there is a need for education, basically to tell him what 2G, 3G and 4G actually means. You can experience what you get for the money as a consumer and I think operators are working on those types of things. Those are very important things to discuss. In India, it’s many many different kinds of countries, you have people who are ready to pay a top price for 4G and there are people barely having their first time on 2G data. All happen at the same time. It’s very very challenging and because a lot of people can afford and a lot can’t and most in between – how to plan the network that will please all is a real challenge.
When it comes to RJio, it will change things possibly, like any new entrant coming into a market may change things, but the questions is how much. I don’t know what their plans are, but when in the 2G times they came in, they changed the price of phone calls, and that is a telecom history. Whether they are going to do it again this time, I don’t know. But they are a very well respected, powerful people and they are not here to do a half-hearted job, and want to win. I am sure others will defend their markets like crazy, so one can expect many things to happen out there.
Voice&Data: Operators see OTT competitors as a big threat. What would be your advise to them?
Chris Houghton: I can definitely see their point of concern when they shell out large amount of monies in spectrum and some company from California takes your revenues away. I really understand their view and why they don’t like that. At the same time, progress is progress and we can’t stop those things from being developed, but I don’t think we have found a way out. This is one of the phases of the industry and how we are going to make these things happen is a question. This is a big debate around in many countries and I don’t think we have come to the conclusion where we would like to see a free market. You have to make things fair from a regulatory viewpoint… otherwise, you can dump the growth and that is something you don’t want to do. Remember, the companies built a huge robust 2G network when the tele-density was so low, and today you can make a phone call from anywhere in the country. It would be a shame if because of certain things you can’t roll out data networks because data networks would be a huge transformation for India. So, there should be a place for all players and co-existence seems to be the way forward.
Voice&Data: Mobile telephony is a great success story that India is proud of and the other thing we are far behind is broadband. What’s Ericsson’s view on broadband scenario in India?
Chris Houghton: We would believe most Indian people will access broadband through mobile devices. So that’s the way to go on in the rest of the world as well. LTE networks are also going to play crucial role then you have fiber to the home. Fiber is absolutely needed in the country more needs to be improved with greater reach, that’s a business area for us and of course, we manage such things.
Voice&Data: What would be services share in Ericssons’s India revenue, and what were some of the key learnings from the Indian market with respect to the services side?
Chris Houghton: It is about 50:50 between equipment and services. Initially, the concerns were how can I reduce my cost and do some consolidation. I think, now we see the market is maturing and it’s different because we can’t keep doing that same thing over time, and we need to be competitive. Increasingly, the data networks is about end-user experience rather than the KPIs. The generic view that ‘I have done my KPIs and its okay’ does not hold true any more if the end user is not satisfied, more on data networks. We have to be more focused on end-user experience and that’s where we have really invested in.
In the next phase of managed services it is about making sure that the end user gets the best experience and that’s why we are investing in tools and networks, tools to understand what is happening in the network and how do you balance the load in the network. We are doing a lot of R&D on the services side.
Voice&Data: Does this also mean that you will be vacating space for your friends from China?
Chris Houghton: No no, we are market leader in telecommunication equipment sector. We have been around for 139 years and we want to stick around for the same time again. We have been a start-up that has been fighting from the beginning, a start-up that has been there for a long time. We were making phones, repairing phones, making switches and we have re-invented ourselves time and time again. Now, is the first time we don’t make any phone product. I remember when services was not our business but that’s how it started.
So, you got to reinvent yourself and you need to be confident, and you need to be in a permanent state of paranoia. We had many different competitors some new ones and some that are not around anymore. We have seen huge consolidation on vendors’ side. We respect competition and are never complacent and that is why life is good for business.
Ibrahim Ahmad & Krishna Mukherjee