Indian telecom services market zips into fast lane
hindustantimes.com
Hindustan Times
New Delhi, July 17
Bigger Picture
Siddharth Zarabi
Amidst the global telecom meltdown, the Indian telecom services market continues to remain on an upswing. The evidence is not just in the growth of connections, both fixed and global system for mobile, but in the fact that equipment worth over $2 billion (Rs 9,800 crore) is being purchased. This figure does not include purchases made earlier for launch of new mobile phone services by companies like Hutchison and expansions by existing players.
The beneficiaries will mostly include multinational giants like Nortel, Alcatel, Motorola, Siemens and the like. For them, the explosive growth of the Indian telecom services market is nothing less than manna from heaven. "India is emerging as a ray of hope amidst the debris of the European and US telecom crash," said an industry executive.
The lion’s share of new purchases is expected from Reliance Infocom, which is in the market with a shopping list for equipment worth around $ 1.2 billion for launching WLL-based limited mobile services across India.
Source say the Reliance contract has gone to four equipment majors -- Motorola, Lucent, Nortel and Ericsson. Korean majors LG and Samsung are also learnt to have signed an MoU for CDMA handsets with the company. However, the former may not make the grade for the infrastructure order, added source.
Companies like the Tata Teleservices-Hughes combine and Bharti are also purchasing equipment for expanding coverage and commissioning services in new circles. For Tata-Hughes, the investment may be around Rs 1,500 crore over the next few years.
According to source, the equipment business may grow larger if demands from other players like Escotel, Shyam and HFCL fructifies. While Escotel has taken new mobile phone licences, Shyam and HFCL are upgrading their coverage to include uncovered areas in their licence areas.
Perhaps the most important feature of the trend is that the traditional big daddy of telecom purchases — Bharat Sanchar Nigam Ltd — will be dislodged from its position by the private sector. This will be in part due to the huge orders it placed last year which will meet its requirements in the immediate term.
As a result of this, while MNCs will reap huge business, the Rs 10,000 crore domestic telecom manufacturing industry may not even get to sell a screw. "BSNL is our mainstay and with no major business expected from them this year, the scenario looks bleak," said a Telecom Equipment Manufacturer Association (TEMA) official.
One of the reasons why domestic manufacturers do not get orders from private operators is the lack of vendor financing. "Indigenous companies cannot offer long term credit to operators, while that is standard practice of international companies," the TEMA official added. However, operators contend that it made better sense to give orders to MNCs as local companies sometimes do not make the grade, a charge contested hotly by the latter.
Another reason for the spurt is that unlike the US or Europe, where networks and connectivity is widespread, the demand for telecom services in India is still huge. "US is seeing excess capacity, while our teledensity is very poor. Therefore a lot of untapped potential exists, which both MNCs and local companies can exploit," said a leading operator.
Crunch time
* Companies feel the need for Telecom Finance Corporation
* DoT may give support by asking BSNL to place orders
* Payments for such orders to be deferred
* Supreme Court case on WLL holds key |
