Unnatural Scenario

Despite tremendous growth in the telecom industry, it was not a good year for
telecom turnkey players. Estimated at Rs 3,311 crore, this sector has shown
negative growth. A major player in this space, ITI has been declared a sick
company as per the provisions of SICA 1985. Among the big players, only GTL has
shown positive growth.

The focus on improving the quality of service and the need to cater to new
subscribers is 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 the
operators signing the managed service deals. The new operators are also likely
to follow the trend.

Key Players

The current year has been good for GTL. It has partnered with Ericsson to
offer Managed Network Infrastructure Services to network operators and service
providers in Europe. It also entered into an alliance with Vanu, for conducting
active infrastructure sharing trials in India. In terms of turnkey orders, the
performance was quite impressive. This year, GTL has orders from Idea to roll
out BTS sites at locations across Gujarat, MP, and Maharashtra. The work
includes supply, installation, erection, testing and commissioning, and PMS
services. GTL also got orders from Reliance for BTS construction turnkey works
in seven circles.

Network deployment for telecom infrastructure roll out by Motorola for MTNL
was also bagged by GTL. In the second quarter, GTL got orders valued at Rs 335
crore. It has also bagged deals from Aircel and Idea for network deployment, and
Huawei has awarded an order to GTL for design and network planning at 7,800
sites. The total value of GTL's orders in FY 2007-08 is Rs 1,411 crore.

In the same period, GTL has made two strategic acquisitions to foray into
international markets. The acquisition of ADA Cellworks would help GTL to access
new markets like China, Indonesia, Taiwan, and the US. GTL's second acquisition,
SCS, will allow GTL to expand its business to North America. In FY 2007-08, the
total revenue of GTL from its turnkey business was Rs 1,004 crore, which is
approximately 40% more of its revenue in FY 2006-07. In FY 2006-07, GTL's
revenue was Rs 750 crore.

A small player like Nutek also showed positive growth. The total estimated
revenue for FY 2007-08 was Rs 100 crore, out of which the turnkey services share
was Rs 73.5 crore. The main orders for telecom turnkey were from Nokia for the
BSNL GSM project in J&K, Haryana and UP (East) circles; TTSL in J&K, UP East, UP
West, Rajasthan, West Bengal, Bihar and Jharkhand circles; Idea Cellular in
Mumbai Circle; Reliance Communications for Delhi, UP East, Mumbai and Haryana
circles.

UP (East), and Karnataka circles; Motorola for MTNL, Delhi circle; ZTE for
Aircel, Bihar and BSNL CDMA sites. It also got project management orders from
Sterling Projects for TTSL rollout in Delhi, Haryana, UP (West), UP (East),
Maharashtra, Tamil Nadu.

Telecom for Rajasthan and West Bengal circles; operations and maintenance
activities from Ericsson for BSNL circles in J&K and Haryana; and Aircel J&K
Circle. In FY 2008-09, the company is targeting revenue of around Rs 200 crore,
as it already has orders worth Rs 150 crore for that period.

Another small player in this space is ORG Telecom. Though it has a number of
deals, this year's revenue shows negative at around Rs 290 crore, compared to Rs
324 crore for the previous fiscal.

ORG has orders of TCIL for Rs 6.5 crore; LCR for Ericsson which is a tie up
with Intec for Rs 4.6 crore; Collegiate of education for Rs 2.2 crore; and from
Power Grid Corporation India (PGCIL) and Government of Jharkhand. Besides these
orders, ORG has received turnkey orders for CDMA networks in Tanzania, VSAT
projects in Afghanistan and Nepal, and NIB project as well.

Industry Outlook

The telecom turnkey players are under a lot of stress both from OEMs and
service providers. With margins decreasing, players have to improve logistics,
installation, and commissioning.

It seems that the demand for wireless services in the country has led to
increasing demands in rural and urban pockets of the country. Having provided
good coverage in urban areas, the focus now is on providing maximum rural
coverage.

The telecom turnkey size is expected to grow with the addition of new players
and the need for the operators to have a pan-India presence.

Gyana Ranjan Swain

gyanas@cybermedia.co.in