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Here’s what makes India a bright spot for telecom vendors amid global gloom

jpgIndia has emerged as a bright spot for global telecom gear vendors such as Ericsson, Nokia and Huawei at a time when most other markets are facing a downturn.

Total capital expenditure by mobile operators in the country is expected to increase 10-12% annually over the next few years, according to consulting firm Analysys Mason. This is in contrast to the expected weakness in the overall global market, with demand for 4G mobile broadband equipment peaking in the previous financial year and upgrades to next-generation 5G equipment still years away.

Analysts expect the global telecom equipment market to regain the size of 119 billion (about $124 billion) it reached in the financial year to March 2016 only by 2021.

“4G globally has reached a level of maturity, and the outlook view from all the companies has been pretty much common that we will have slower pace. India is in a different space,” Paolo Colella, Ericsson’s India head told ET in an interview. “India still needs a very large amount of infrastructure deployment and modernisation.”

Global equipment vendors, which had been under pressure even in India in the July-September quarter due to slow spending on networks by telecom carriers, are now seeing their respective businesses coming back on track. This follows the successful spectrum auctions that helped carriers finalise their network strategies and led to roll-out of new 4G networks along with modernisation of existing 2G and 3G networks, backhaul and fibre across the country.

Colella said in the next few years, both the mobile and broadband ecosystem will remain healthy in the country. Nokia’s India head Sanjay Malik said India is currently in the early stages of 4G deployments, with a huge population which still needs to be connected. “The growth will still happen on the 4G network side, and typical telco business,” he said. He said Indian telcos now know what needs be done in the next couple of years, as the spectrum scarcity problem has now transformed into a situation of spectrum abundance.

Huawei’s Chandan Kumar, director, marketing and integrated solutions, said that with more spectrum having been made available, operators are focusing on quality of broadband services and HD voice as a product differentiator.

“There is still immense need for end-to-end transformation of existing operators’ network as the legacy systems are not designed to handle such high data rates and emerging services,” Kumar said.

Telecom vendors will have good business opportunities in India keeping these requirements in mind, he said.

The industry expects growth in data, catalysed by the disruptive entry of Mukesh Ambani-led Reliance Jio Infocomm, availability of cheaper 3G/4G devices, content and user awareness to reach substantial levels in the future, leading to growth of networks driven by increased capital investment.
According to Analysys Mason, telecom carriers in India will require additional 140,000-150,000 base stations, besides needing to upgrade and modernise their existing base stations. Moreover, proportionate expansion of backhaul and core will happen, providing gear vendors with more revenue opportunities.

Rohan Dhamija, partner and head for India and South Asia at Analysys Mason, said growth on the back of network expansion is expected to continue for the next five-six years as mobile broadband users and data usage per subscriber continue to increase. Both Ericsson and Nokia also expect the ongoing consolidation drive in India to improve the health of the industry, paving the way for long-term investments by telecom carriers, which will be beneficial for the gear vendors.

“If the industry players are healthy in the longer term, it would help us get a sustainable and profitable growth,” Nokia’s Malik said.
Colella concurred, saying, “As the market consolidates, there will be many opportunities. We will always focus on doing the best for ourselves.”

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