Let’s look at a couple of pointers from the recent past. One, Qualcomm has
committed to invest up to $200 million for a 4 percent equity stake in Reliance
Infocom. It is understood that this deal will permit Reliance Infocom to look at
the manufacturing of CDMA handsets, besides giving fillip to services. Two,
PrairieComm, a technology enabler of integrated chipsets and embedded software
in digital wireless communications marketplace, has announced the setting up of
a development center in India. John Diehl, president and CEO of the company,
says, "Besides the more obvious reasons, the idea is to be closer to the
target customers–Korean, Japanese, and Taiwanese." Three, BSNL issued
advance purchase orders to participating vendors in its cellular tender for 40
lakh lines to be installed in 1,021 cities.
The above three cases indicate the trends that come to the forefront on
account of the anticipated growth of wireless and wireline services in the
country. The first case indicates that manufacturing of terminal equipment for
new technologies could finally come in. The second case, in particular, suggests
there will be companies like PrairieComm, which would not only enable low-cost
chips and processors, but also do the handholding part for parties interested in
manufacturing terminal end equipment–like the consumer electronics companies–for
the new generation services. Manufacturing on the transmission, switching, and
access fronts has been there in the country for long, but on the terminal
equipment front, it has been for landline phones only. Now, a new frontier seems
to be opening up.
The underlying currents indicate that there will be a new manufacturing
opportunity not just to tap the Indian market but the neighboring shores as
well. The buzzword is cost-effectiveness and fostering of consumerism.
The sudden gold rush in the telecom market is there for everyone to see. A
number of stumbling blocks have fallen and many more are expected to come
tumbling down soon. The government too is clear on the importance of the success
of telecom–the piggy-riding instrument for future economic growth. The success
of the cellular industry in the last one-and-a-half years has been a strong
indicator. Divorced from the policy and regulation imbroglios, operators could
concentrate on the business, only to see the subscriber base grow in geometric
progression. And now, the time has come for the next phase of services,
deployment, and growth in the equipment business.
The Story so far...
The total revenue of the carrier equipment industry for the year ended March
2001 was Rs 9,369 crore. The turnkey business grew rapidly. On the equipment
front, almost all the big companies did well. Most of the private companies grew
by more than 30 percent. Traditional equipments like TDM switching, GSM radio,
microwave, SDH, and IS-95 CDMA wireless systems, were hot. And as before, BSNL
and MTNL continued to be the biggest consumers.
Top 5 |
|
Companies | Turnover in 2001-02 (Rs crore) |
ITI | 2,184.97 |
Lucent | 841.3 |
SPCNL* | 625.84 |
HTL | 525 |
HFCL* | 416.38 |
The total switching capacity increased by 21.8 percent. BSNL-equipped
switching capacity was for 399 lakh lines. The total capacity of trunk-automated
exchange (TAX) was 22.06 lakh by December end. On the transmission front, BSNL
added 54,000 rkm of optical fiber cable and 583 lckm of jelly-filled telephone
cables. Despite deciding to move to fiber and use microwave only in some areas,
it added 1,600 rkm of microwave. This is less than the previous year’s
addition of 19,881 rkm and plans to add 7,500 rkm this fiscal. On the access
front, BSNL’s thrust was wireless–for fixed wireless access, it was IS-95
CDMA and CorDECT. It issued a tender for IS-95 CDMA-based WiLL system for rural
telephony, the size of which was worth Rs 1,800 crore. LG bagged half of the
order while the other half was shared between HFCL/Hyundai and Lucent
Technologies. And for broadband 1,050 systems of HDSL were deployed at an
estimated cost of Rs 17 crore. These are just some of the investments that BSNL
made on the infrastructure front.
The private sector too opened up. Cellular operators expanded their networks
and the deployment of new technologies also kicked off. BPL Mobile in Mumbai
(with Motorola technology) and Bharti Cellular in Delhi (with Ericsson) looked
at GPRS. The infrastructure providers in fixed services have to make a mark. But
most of the fixed service providers are deploying broadband networks (for
instance, Tata Teleservices and Hughes Tele.com). Others like HFCL Infotel,
Bharti Telenet and Shyam Telelink are also combining broadband with wireless.
Some ISPs like BSES Telecom, Tata Power, India Online Network, Hathway Cables,
In2Cable, and Zee Interactive, also built broadband networks rolling out their
metro networks. While Tata Power has signed the first DWDM deal in India with
Sycamore and Tejas, the rest have gone for HF networks. And Dishnet is going
strong with its DSL network in Bangalore, Chennai, Delhi and Mumbai.
Investments |
|
Operator-wise (Top 5 Groups) |
|
BSNL | Rs 16,500 crore (in 2001-02) |
MTNL | Rs 2,000 crore (in 2001-02) |
Bharti Group |
Rs 5,000 crore (till 2003-04) |
Reliance Infocomm |
Rs 25,000 crore (next 4-5 years) |
Tata Group |
Rs 10,000 crore (4-5 years) |
Type-wise | |
Optical equipment |
Rs 1,000 crore |
WLL-CDMA | Rs 1,500 crore |
GSM | Rs 3,000 crore |
Cable | Rs 6,500 crore |
Besides broadband, there has been action in long distance. Ducts were laid by
companies like Reliance Infocom, Bharti Telesonic, and others. Bharti Telesonic
finalized SDH/DWDM equipment for its network. And most importantly, the
utilities too went online to build networks. PGCIL floated a tender to buy Rs
110 crore of SDH and DWDM equipment while GAIL floated one to buy equipment
worth Rs 40 crore. And on the international bandwidth front, projects like i2i
cable network, a JV between Singapore Telecom and Bharti Global, and South East
Asian Cable Network (SEACN) by Dishnet DSL, etc, got activated.
All this activity clearly shows that the incumbent operators, utilities, and
new service providers have finally decided to go for major rollouts. And this is
a scenario that tells that traditional equipment vendors too have to realign, as
turnkey providers bring in new technologies to cash upon the multi-billion
dollar opportunity.
The Next Phase ...
The 10th Five Year Plan 2002-07 gives a prelude to the things on the anvil.
As many as 50 million fixed lines, 30 million cellular lines and 20 million
Internet connections have been projected. And the total investment is estimated
to be about $35 billion. BSNL too has set up an ambitious plan. The company
intends to upgrade its entire analog transmission system to digital. It intends
to invest in DWDM, with the anticipated investment to be about $3.5 billion in
the first effective year itself. The investment would be made to go towards
switching, SDH and DWDM equipment, DLC, IS-95 CDMA, GSM, and CorDECT systems,
and optical fiber cables. MTNL too has big plans. It plans to invest close to
$500 million in 2002-03.
The plans of BSNL and MTNL sound solid, if one goes by their list of
activities in the last one year. While BSNL came out with a tender for 2.018
million lines for new technology switches in January 2001, MTNL bought large new
technology exchanges worth Rs 115 crore. Further, BSNL’s thrust is to deploy
SDH equipment. It also made new purchases worth Rs 120 crore, out of which Rs 51
crore was for STM 1 and Rs 69 crore was for STM 4. It came up with two tenders
for SDH equipment–STM 16 equipment of the order of Rs 79 crore, and another
for all STM1/4/16 equipment worth about Rs 46 crore. On the GSM front, BSNL has
come out with a tender worth $500 million for the supply and commissioning of
the cellular networks in four zones.
Major Orders/Tenders |
|
What all this implies is that carrier equipment vendors in the country need
to really gear up to address the markets that are opening up. In earlier times,
government-owned manufacturers used to succeed on account of reservation in the
policy and also because the orders used to be from the erstwhile DoT only.
However, the equation has changed, now that even utilities and private sector
infrastructure providers are coming into picture. The name of the game is
pricing, turnkey solutions and collaborations. BSNL, however, will continue to
be the biggest buyer.
Further, traditionally the US and European companies were having their
stranglehold here. But with the advent of new technologies, new partners are
being scouted. For example, the Chinese are coming in. Look at the BSNL’s
tender for DWDM equipment opened in July this year, for instance. The L1, L2,
L3, and L4 biddings have been with the Chinese companies. ARM and ACD were L1
and L2 bidders respectively and partnered with the Chinese firm ZTE. HECL and
HFCL were the L3 and L4 bidders respectively, who partnered with Huawei.
Although the orders are yet to be conferred, there is considerable significance
to the development. Another change that is clearly visible is that carrier
equipment manufacturers in India have begun to add to their product portfolio
and alliances. ARM, ACD, HECL, HFCL, and UTL are a point in case. Even ITI has
moved up. They are adding new capacities and have also scaled up to address
network management and IT requirements for being successful as turnkey
operators. Another opportunity that is knocking at the doors of Indian companies
is on the export front. Although small right now, the SAARC countries and
African countries have seen some major orders being won. UTL in Bangladesh, ITI
in Africa, for instance, are breaking in.
Opportunities for carrier equipment manufacturers will also come from private
players. ARM is a case in point. From being completely reliant on DoT for
sometime, today it has also expanded into the private sector space. It has
bagged major backbone contracts from Tata Teleservices, Tata Cellular and Bharti.
Similarly on the Internet front, it bagged a major contract from Satyam for
wireless Internet. The success for ARM and other companies lies in piggy-backing
on each of the alliances and delivering a total solution. Further, being present
with newer technologies like carrier IP networks, GPRS systems, DWDM systems,
and other broadband technologies, will give them an edge.