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Rental Model : Value for Money

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VoicenData Bureau
New Update

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.

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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."

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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

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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.

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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."

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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.

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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.

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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

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