Marred by a number of unexpected factors including the failure of the much-hyped 3G and cancellation of all the 122 telecom licenses, the telecom turnkey market has been feeling the blues. In the last two years, the market is not meeting growth expectations due to unmet deals by telecom service providers. Many other factors like policy paralysis, scams, and litigation also have had a negative impact on the industry's growth. So the turnkey vendors have been left with no other choice but to survive under such unfavorable conditions.
The dip in the overall revenue of the market can be attributed to a lack of new orders from equipment vendors. It is because the vendors are the biggest buyers of turnkey equipment and they place large orders only when they are significantly expanding their footprint. And since there were no major expansions by operators, the market did not do well.
But what has further worsened the market is the unexpected failure of 3G and BWA and lower capex by IP-1 companies. The response of 3G services was not encouraging while the BWA services too has not met expectations. Now with 3G spreading, the focus on improving quality of service and the need to cater to new subscribers are making operators strengthen their presence in existing circles.
Managed services deals replacing supply deals have become the new mantra for telecom players. The trend has been firmly established with almost all operators signing the managed services deals. The new operators are also likely to follow the trend.
How they Fared
Smaller players Shyam Telecom saw big momentum during last fiscal. It bagged big size orders from railways, defense, and PSU sectors. ITI, the PSU telecom firm, has bagged orders from government sectors like defense, Indian railways, and state owned telcos. Following the tradition, the company also got few turnkey orders from BSNL and MTNL. In addition, the company is also executing the National Population Register (NPR) Project under the Ministry of Home Affairs as well as the Socio Economic Caste Census Project (SECC) under the Ministry of Rural Development. These projects are being executed along with two other PSUs-BEL and ECIL. The NPR Project envisages manufacturing of National ID cards.
Telecommunications Consultants India (TCIL) bagged few deals in the fiscal. The major deals were National Internet Backbone (NIB) project for BSNL, Quality of service check for Telecom Regulatory Authority of India (Trai) and ship to shore communication for Director General of light house and light shipping. The company is all set to do the project management of `20,000 crore national optical fibre for BSNL with the help of BSNL, Rail tel, and PGCIL by July 2012.
GTL's focus for the last fiscal remained on three areas-network planning and design, network operations, and maintenance and energy management. It also won few pan-India contracts from clients like Huawei, Aircel, Ericsson, Nokia Siemens Networks, and ZTE on network planning, designing, and deployment.
Telecommunications turnkey provisioning business was neither good nor bad for HFCL. The major deal bagged by the company was the network management deal from Reliance 4G foray. HFCL is also betting big time and looking at the Reliance deal for increasing its turnover .
Nutek also managed to secure new deals in turnkey rollouts for defense forces, telecom turnkey manpower outsourcing deals, and turnkey maintenance deals with certain telecom OEMs. During the last fiscal year, apart from its ongoing activities in telecom implementation, technical support services, and O&M of telecom infrastructure, Nutek bagged orders, mainly into O&M segment from the government operator in J&K, 1 from a IP-1 company in J&K and HP, another from a IP-1 company in UP West, and 1 from a Chinese OEM major in the states of Tamil Nadu, Karnataka, West Bengal, etc.
The next big market for telephony in India is the underserved rural market. Rapid growth will come from rural India where operators are adequately reassured of the demand and the potential to pay for services. In light of this, connecting the unconnected has become the prime focus of most players and to serve this huge untapped market will be a key growth enabler and also a potential business opportunity for the operators.
To fulfill this demand, there are certain issues that need to be taken care of, like the availability of power, supporting infrastructure like roads, and uniform regulations.
The outlook for telecom turnkey rollout services continues to remain robust in view of factors like high growth rate of subscribers, on-track capex plans of all major telcos, and additional opportunities from incumbent operators. Infrastructure rollout plans of existing and incumbent operators look very much intact on the back of opportunities provided by continued healthy subscriber addition and an untapped rural market.
However the outlook for the sector looks promising over the 2-3 years timeframe. Fresh auctioning of telecom licenses is slated to happen in the current fiscal year and the services on LTE platform too are on the verge of launch. Also, the possibility of sector consolidation in terms of M&A could not be ruled out and transparent and conducive policy environment is the only hope. On the back of these above mentioned factors, we expect the industry to get back on track, clocking a pretty decent growth rate over the years to come.
Hurdles to Cross
Outlook Remains Robust