Telecom part cos to ring in $10 b this yr

MUMBAI: Telecom equipment makers are raking in the moolah, thanks to the scorching growth of mobile telephony in India. While equipment firms are expected to make more than $10 billion in India this year on the back of sky-rocketing demand for new connections, industry experts warn that vendors must set up manufacturing base in India and bring down prices to retain the cutting edge in the competitive sector.

Vendors will also have to re-work their strategies, including an expansion of their offerings. “Every vendor is now trying to make value addition to his offerings. They have to come up with newer ways to take away as many pain points of operators as possible,” Arpita Pal Agrawal, associate director, PricewaterhouseCoopers, told ET.

Managed services is one such area, she added. Nokia and Ericsson are providing managed networks services to Bharti Airtel and Hutchsion Essar. “When vendors provide such services, they will offer them to more than one operator. Eventually, there will be economies of scale and a win-win situation for both operators and vendors,” she added.

According to KPMG director (telecom) Romal Shetty, “With increasing saturation in the west, equipment makers are looking at India. But they need to bring scale of economies and drive costs down because Indian operators are cost conscious.”

Already, equipment prices have fallen by around 50% in India in the past few years. In BSNL’s mega tender for 45.5 million lines, Ericsson emerged as the lowest bidder by quoting about $107 per line. This is nearly 50% lower than the rate at which BSNL’s previous GSM tender was awarded in 2001 at an average price of $150 per line. Ericsson, Nokia, Motorola, ZTE and Huawei are among those fighting for a share of the multi-billion dollar pie, which is growing as fast as the subscriber base. Lower prices being offered by Chinese vendors like ZTE and Huawei show that there is scope for further reduction in prices.

As a step towards it, equipment giants need to upgrade from assembly in India to local manufacturing, which will reduce costs. Currently, only Ericsson among the global giants has a facility in Jaipur for manufacturing GSM base stations and mobile switching equipment.