MOTOROLA: Moto gears up for 3G

Motorola
was firing all guns in the FY 2004—05. The company did well in wireless
infrastructure business, both in CDMA as well as GSM. With a strategy clearly
chalked out to gain higher market share in all the segments where Motorola is
doing business, they did particularly well in the infrastructure business.
However, with new models and renewed market strategy the mobile handsets could
not contributed significantly in the India revenue for the company. The overall
revenue of the company jumped almost 40 percent to touch Rs 2,322 crore in FY
2004—05 from Rs 1,649 crore in FY 2003—04.

This year Motorola also announced the launch of Motorola Labs India with the
official opening of an applied research lab in Bangalore. This lab, the 11th for
Motorola, augments company's existing India R&D infrastructure of more
than 1,700 software engineers. Motorola's R&D investment in India has
grown to $85 million, up from approximately $50 million in 2002. This
investment would be raised by 10—20 percent per year in the next couple of
years.

India Head: Amit Sharma, vice president, regional management South & South East Asia global relations and resources management Area of Operation: Mobile phones, Mobile infrastructure, Enterprise solutions Address: Motorola India, Motorola Excellence Centre, 415/1, Mehrauli Gurgaon road, Sector-14 Gurgaon, Haryana 122001  Tel: +91 124 5191501 Fax: +91 124 5083155 WEBSITE: www.motorola.com  V&D estimates CyberMedia Research Highlights - Major expansion and new network deal from Tata Teleservices for 16 circles - Motorola's revenue from handsets business in 2004—05 was Rs 755 crore - Launched sub Rs 2,000 handsets to be distributed through the operators  l New handset marketing strategy to improve market share

On the wireless infrastructure side, Motorola completed the implementation of
orders from BSNL, MTNL, and Tata Teleservices. The combined value of these deals
was $307 million and was announced in early 2004. The BSNL part was for one
million line expansion, and for MTNL it was four lakh, each in Delhi and Mumbai.
The Tata Teleservices part was to expand the CDMA2000 1 X mobile phone network
in Delhi, Gujarat, Maharashtra, and Mumbai for $43 millon.

The biggest break for Motorola in terms of new order again came from Tata
Teleservices. The deal was finalized in June 2004. This project is for the
expansion of Tata's CDMA network in 16 of the circles. Though there has not
been any formal announcement of the deal, VOICE&DATA estimates the project
to be worth over $145 million and for over 5.5 million lines.

Motorola last year carried out trials and implemented EDGE on Hutch networks.
Apart from Hutch, the company has implemented GPRS for Spice and BPL networks.
With 3G being evaluated by most of the GSM vendors, Motorola has been initiating
talks and discussion with Bharti, Hutch, MTNL, and BSNL for migration to the
next generation. On the CDMA side also, they have been exploring business option
with Reliance.

Last year Motorola also launched its low cost handsets and got an order from
the GSM association. In India also the company introduced the below Rs 2,000
phones and has joined hands with the service providers to distribute these
handsets. Otherwise also the company was very aggressive on its handset
marketing and launched handsets across the market segments. Motorola has been
gaining mobile handsets market share globally, trying to catch up with Nokia on
all fronts but it is still a long way in India. With acceptability of Nokia
phones being very high in India, eating in the market share would be difficult.
However, 3G environment may throw some surprises both in infrastructure and
handsets market this year. Thus, for Motorola, the next year would be crucial
for gaining leadership position in India.

"Last year our growth rate was exceptional and exceeded the market rate"

When do you see 3G deployments happening in India?

The compound annual growth rate for subscribers in India has been pegged
around 50 percent for the next three years. When subscribers are growing at such
rate the networks have to grow even faster. In India there is no demand
constraint, rather there has been a capacity constraint and upgrading to 3G is
one option to fill this gap. And all major operators have to start upgrading
their network to meet the demand. But appropriate policies should evolve and
spectrum-related

issues must be resolved urgently. Once the spectrum is allocated it would take
anything between six months to a year to roll out 3G services.

Where did more revenues come from-CDMA or GSM?

For us GSM proved to be more revenue earner. We implemented BSNL expansion
projects plus their 25 percent additional line tender. Similarly MTNL's
expansion was done by us. We have been principle supplier for Hutch, both in
their capacity enhancement and expansion plans.

Do you expect the price drop to continue this year?

In 2004, the equipment prices dropped by almost 30 percent. Such drops are
not normal and would not be sustainable in the long run. But this year big
tenders are in line and everyone would be playing around price to get a share.
Because of the crashing prices, unit sale growth rate this year would exceed the
revenue growth rate.

Do you see managed services becoming a trend?

Motorola has expanded its portfolio and included managed services. We are in
discussion with some operators for managed services. However, it is too early
for managed services to become a trend. The normal practice globally is to allow
your technology partner to manage the network as he understands the network
better.

How would the Indian market grow in the coming years?

India has a long way to go and a huge range to grow. Though consolidation
would happen with less number of operators in the market, but expansion would
also be an on going activity. In the rural areas, niche players would emerge and
there is scope for lot of expansion. So India would witness both consolidation
of the market and expansion of subscriber base happening together for sometime.

What are your plans for manufacturing in India?

If there were a requirement, manufacturing as an option would be reviewed.
The 40 million line BSNL tender would be the key for us to implement this
option, and implementation for manufacturing plans is not a problem. Otherwise
also manufacturing plans would be reviewed time and again. We have our global
partners in India so we have an option of either manufacturing on our own or
with our partners or sub-contract to a third party.