VOICE SWITCHING: New Buyers Get Active

The traditional TDM voice switch, the future of which has been a subject of
intense debate over the last few years, still ‘stands strong’.

In India, where the network infrastructure build-up got accelerated in the
last 10 years or so, the addition of switching capacity by Bharat Sanchar Nigam
Ltd–as DoT first and DTS subsequently–has been really impressive in the
first few years of reforms. That has slowed down in the last two years. So much
so that in 2002—03, in the first nine months till 31 December 2002, the data
for which was available, the addition was just about 2.4 million lines, as
compared to

7.5 million in the preceding 12 months.

The
total local switching capacity by the end of December 2002 was 49.8 million
lines. Expectedly, there has been no tender for switching by BSNL in the entire
fiscal 2002—03.

However, deployments by private operators and the boom in mobile telephony
saved the day for switch manufacturers.

Keeping pace with the changes in the market place, Voice&Data has also
estimated the market size this time, including the switching component of the
wireless orders–both GSM and CDMA. There is no formula to do that. It is
probably apt to share the methodology that we have followed. Three factors have
been taken into account to calculate the percentage share of switching in the
overall wireless equipment contracts–the type of technology (GSM or CDMA), the
operator’s network design, and of course, the network rollout.

Some equipment companies have shared data with us, and some have shared the
contracts and implementations. We have also taken some data from the service
providers’ side. Based on all this input, the total voice switching market in
2002—03 has been estimated at Rs 1,588 crore. Lucent, with almost all major
orders from private basic service providers, except Bharti, and its share of
BSNL’s GSM as well as fixed line orders, emerged a clear leader with a revenue
of Rs 605 crore and accounted for a market share of 38 percent. Alcatel, based
largely on its supply to BSNL fixed line and Tata Teleservices/VSNL, emerged as
No 2 with an estimated revenue of Rs 396 crore. Siemens, with BSNL’s fixed
line orders, Bharti’s local and trunk orders, and a part of BSNL’s GSM
switching order, emerged No. 3.

In fact, the addition of subscribers–and thus the switching capacity–on
the mobile side had its effect on the switching market. Switching companies that
do not have a presence in the mobile equipment market place (MSC), have all but
lost out. While ITI’s share has gone down considerably, Fujitsu, and NEC have
almost vanished from the market. Only Ericsson has a different story. Though it
did score on the GSM front, it did not execute anything for BSNL or private
fixed operators (except TAX for Reliance) in wireline. And it is not active in
CDMA. However, as GSM networks keep on expanding, it will bounce back. That is
something one cannot say for the rest.

V&D estimates CyberMedia Research

And that includes C-DOT manufacturers. BSNL, it seems, has also almost
stopped procurement of C-DOT switches. Till 2000—01, C-DOT switches were
procured regularly. In fact, in 2000—01, about 4.6 million C-DOT lines were
procured, about ten percent more than the previous year. The government had
promised to continue with the procurement.

Lucent was the only company that did well on all fronts–wireline for BSNL,
wireline for private operators, GSM, and CDMA.

Operator Strategies

Both BSNL and MTNL followed a similar procurement plan. While for wireline,
they continued to buy switches on a standalone basis, for GSM they followed the
private operators’ strategies and went for bundled solutions.

V&D estimates CyberMedia Research

Bharti, for its fixed line network, followed a BSNL-like procurement policy
and bought switching separately for its wireline network, albeit at a slightly
higher price. Siemens, Bharti’s favourite, supplied the 250,000 odd lines that
have been deployed.

The TAX contract of Bharti Telesonic was also placed on Siemens. Bharti’s
fixed business did not deploy any CDMA lines. Bharti also followed a BSNL-like
RLU-based network approach.

Both Tata Telservices and Reliance Infocomm followed similar procurement
policies and went for CDMA equipment for wireless. Both the operators chose
Lucent. For wireline, instead of a RLU/RSU approach, both the companies went for
multi-access aggregators. Lucent supplied to Tata Teleservices. Reliance chose
UTStarcom. These parts of the equipment, however, have not been included in our
estimates.

The Pricing

For wireline, the switching prices have remained more or less static. BSNL,
which last procured 2,045k lines in January 2002 at a rate of Rs 2,694 per line,
placed a repeat order of 500k lines at a rate of Rs 2,454 per line. MTNL, on the
other hand, bought 480k lines at the rate of Rs 2,857 per line and has completed
tendering for another 294k lines (see table) at a rate of Rs 2,850 per line.

Bharti paid about Rs 2,900 per line to Siemens.

With BSNL procurement falling on the wireline front and with almost exit of
companies like Fujitsu and NEC, and the rest of the players not really dependent
on BSNL, unlike earlier days, Voice&Data expects the per line price to go up
this year, when BSNL procures next. While Ericsson, Lucent, and Siemens can
sustain that, it remains to be seen what Alcatel does. Alcatel has been almost
out of the GSM or CDMA space. GSM, in which it has a deal with Koshika, was a
wrong step and since then it has never been able to come back. Alcatel’s
switching future will also, to some extent, depend on how it enters this market–directly
or in partnership.

The Future

Whether traditional TDM switches would be affected by IP or any other
similar technology is still an open debate. However, it is not going to make
much difference in the next couple of years. What will decide a company’s
success is its performance in the mobile market.

Shyamanuja Das