Rental Model : Value for Money

The Indian telecom industry has grown by leaps and bounds,
with about 480 mn subscribers in mobile subscription alone. The Indian telecom
test & measurement industry has seen a robust growth, and with 3G coming in, and
the kind of investments all telcos have committed, T&M industry is poised for a
very good phase. The challenge in these times is to support the telecom market
with the right price and value for money. Telecom network operators and
equipment manufacturers are looking for various alternatives and combination of
choices at any given time for telecom activities, including testing and
measuring of networks to ensure quality of services as per the standards. They
have combination of choices in front of them, like purchasing T&M equipments,
outsourcing the services, and rental option for their test and measurement
needs. It is their choice to go for any particular option, depending upon their
requirement, size of the company, financial position, etc.

Toshniwal Enterprises Controls is the first Indian company to start T&M
rentals as an organized business for telecom network operators and equipment
manufacturers in India. Rajesh Toshniwal, CEO, Toshniwal Enterprises Controls,
says, "Rental is the sale of right of use, and not a service in the true sense.
When you support your customer with training, building report from instruments,
providing logistics support in movement of tools, etc, you inject service into
it. Rental, worldwide, is not just a financial option, but it also helps
customers in many other ways like technological evaluation, and peak time
support. Short time users who need to do product verification and evaluation can
save lots of money by renting T&M equipments."

Nascent Stage

Rental as an option has been tried out little in India, but not in a
phenomenal way. However, in developed markets like the US, this model has been
one of the main options for customers.

Toshniwal says, "This business model is at a nascent stage in India, but has a
huge potential. Rental of telecom T&M is surely catching up in India, and the
rates of rental is surprisingly more competitive than in any SEA country.
Currently, the issue is that inventory in high-end is very limited, and this
needs to be scaled up."

Jayanth Ramachandran, head, business development, telecom account, and
regional manager, South India (T&M), Rohde & Schwarz, says, "The rental business
in India is at a very low scale, as compared to the total investment on capital
equipment purchase; and definitely it is much lower compared to the developed
nations. The rental values are very high, because instruments are imported after
paying full customs duties, and the cost has to be recovered by the owner in a
period of two to three years."

Rajesh Toshniwal, CEO, Toshniwal Enterprises Controls says, "Our rental rates
in SDH market is one of the lowest in the world. As a company we have all the
options, and are ready to be with customers in these trying times. Margins are
under pressure for transmission manufacturers in these times, and we have been
working with them at very low rentals."

The India-specific scenario would be clear when the critical mass builds up for the rental concept as a viable business model Gautam Awasthi, general manager, marketing, electronic measurement group, Agilent Technologies India	Short time users, who need to do product verification and evaluation, can save lots of money by renting T&M equipment Rajesh Toshniwal, CEO, Toshniwal Enterprises Controls	With increasing pressure on reducing the capital spendings, rental option seems to be catching up with Indian buyers Vasudev Tantry, general manager, Anritsu India

It seems there is a good potential for this business model in India too.
Vasudev Tantry, general manager, Anritsu India says, "With increasing pressure
on reducing the capital spendings, rental option seems to be catching up with
Indian buyers. This business model is ideal for project based requirements. This
model helps protecting customers from technology obsolescence, as it offers more
flexibility. But this is not economical for telecom customers if the requirement
of tester is for a longer period of time." According to GR Manohar
Reddy, managing director, Aishwarya Telecom, mostly contractors are taking T&M
equipments on rental, but not the network operators.

Outsourcing services have been offered successfully by various segments,
including the telecom T&M segment. Toshniwal says, "Our rental model has changed
and redefined many businesses in India, like RF drive test business, point of
interface testing business, BTS testing, optimization of network, TEC
evaluation, etc. Outsourcing this service will help telcos improve QoS, and
prevent customer churn tremendously. We have launched roaming testing services
under the 'flexi rental' program. International roaming-both inbound and
outbound-has never been seamless, and needs urgent attention of all telcos."

Advantage Rental Model

The rental model has its own unique advantages for the telecom industry
customers during the financial crisis, and helps customers in reducing capex.
Rental business is carried out by some companies to their known contacts. It
helps the clients to reduce capex in the initial phase, when ARPU is low. Rental
equipments provide exposure to users on a particular brand or product. Rentals
are effective in serving short term needs of the client, and as the business
picks up they can go for a purchase option.

Viraj Pradhan, communications sales manager, Asia Pacific, Tektronix says,
"If T&M tool is needed only for a one time test and for a short period of time,
rental model becomes the best option. The other advantage is that one does not
need to maintain the unit, and can hire a tool depending upon the needs."
Toshniwal says, "With the whole world moving towards outsourcing model, telecom
industry is no exception. T&M rental should be seen as one way of outsourcing
all T&M tools and testing requirements." Very low cost of project implementation
for short projects, quick TAT, and high productivity are some of the key
advantages of the rental model.

According to Gautam Awasthi, general manager, marketing, electronic
measurement group, Agilent Technologies India, "Advantages or disadvantages of
rental model in the T&M industry is no different from any capital served
equipment rental worldwide. The India-specific scenario would be clear when the
critical mass builds up for the rental concept as a viable business model."

Ramachandran says, "There are absolutely no unforeseen or hidden costs
involved. The total cost of ownership is known upfront. You also get to try the
test equipments before you buy. Also, rental payments are not reflected in the
balance sheet."

However, there are a few disadvantages associated with this concept. This
model is not a very viable option for long and very long projects rental, unless
customers have buy-back option worked out with rental vendors. It gets
prohibitively expensive for long period projects. And customers also do not get
the latest options or features most of the times. Rentals attract tedious
paperwork, and guarantees which are cumbersome. It also carries a certain amount
of risk for the rental company, if legal guidelines are not in place. According
to Pradhan, the key disadvantage is non-availability of tools on time, and the
likelihood that test tools do not have the latest software and hardware.

Vendor Help

Though as of now, only one company is actively into the rental business,
other big T&M players like Agilent Technologies and Tektronix are not averse to
this idea. Awasthi of Agilent Technologies, India says, "In India, rental T&M is
in its nascent stage, and a clear picture or ecosystem will emerge when we see
the demand for this model rising. Agilent Technologies is well primed to serve
such requirements as and when they mature." At present, Agilent offers a vast
array of T&M portfolio from wireless and wireline communication to network
reliability/assurance for telecom customers.

Pradhan says, "We do receive requests for renting T&M equipments from telecom
clients, but they are quite a few in number. We will watch this business model
to see how the customers' needs develop, as Indian telecom market moves into
3G." But players like Anritsu India and Aishwarya Telecom do not have any
specific plans as such for rental model business at present. Rohde & Schwarz, as
a test equipment manufacturer, provides test equipment solutions to T&M rental
companies, who in turn will support their clients.

Toshniwal Enterprises Controls has the broadest range of general purpose and
communication test equipments for renting in India, Southeast Asia and the
Middle East. It is extending this business to electrical T&M rentals, and will
have total solution on the T&M rental model.

Toshniwal, says, "We started the telecom T&M rental model in 2003, and now
have moved to the power segment and the semiconductor market also. Our brand,
'flexi rental', has now become synonymous with rental programs in the country,
and many telcos have shown very keen interest in this. We have been working with
almost every Indian NEMs and MNC NEMs. We have been working with more than fifty
I&C players, and some of them have grown very well, and are working with us very
closely even now."

'Flexi rentals' is the #1 telecom T&M rental program in India, with over
2,000 instruments in eight broad categories and seventy types available on
rental model for customers, addressing the needs of almost all technologies in
telecom. Toshniwal Enterprises Controls is in the process of building up a world
class repair and calibration lab, not only to support its own asset base, but
also to support its customers for total asset management. It works with every
possible stakeholder in the product cycle, right from design house to design
verification house, manufacturer, contract manufacturer, NEMs, I&C vendors,
telcos and maintenance contractor of networks.

The company has also made advance plans and investment at a time 3G services
are going to storm the market in India. Toshniwal says, "We have invested in
many 3G compatible equipments. We have invested heavily in terms of equipment
and manpower for mobile TV. We not only offer multiple solutions on mobile TV,
but also many other T&M solutions to address 3G related challenges." He adds,
"Our mobile broadcast team is working very closely with many stakeholders
simultaneously to address the future challenges. We have worked very closely
with equipment vendors, while implementing 3G for BSNL. Now we are ready for the
time when the remaining operators opt for 3G rollouts. Right from RF drive test
to protocol analyzer, we have many tools ready for 3G services."

Rental model is catching up with the telecom customers gradually. As it gives
value for money for the customers with its unique advantages for various
requirements, this model has a potential to become a regular trend in India in
the telecom segment, like in the developed markets.

Kannan K

kannan@cybermedia.co.in