New GSM players will ring in $8 bn biz for telecom equipment makers

New GSM players will ring in $8 bn biz for telecom equipment makers
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First Published: Tue, Jan 15 2008. 11 52 PM IST
Updated: Tue, Jan 15 2008. 11 52 PM IST
New Delhi: Telecom equipment makers such as Telefon AB LM Ericsson and Nokia Siemens Networks will be chasing contracts worth almost $8 billion (Rs31,440 crore) in India over the next two-three years, as firms that use CDMA technology, including Reliance Communications Ltd (RCom) and Tata Teleservices Ltd, as well as new entrants such as Unitech Ltd and S Tel Ltd roll out services based on rival GSM technology.
The Indian market for wireless telecom equipment, including switches and networking gears, could almost double from around Rs16,677 crore in 2007 (according to researcher IDC India), to Rs32,000 crore, as the new entrants establish their networks and compete with Bharti Airtel Ltd and Vodafone Essar Ltd for a share of what is likely to be 500 million mobile customers by 2010.
GSM is a more popular platform for offering phone services in India, which is now the world’s fastest growing market for mobile phones and adds almost eight million subscribers every month.
Of this market, GSM serves some 75% of the 230 million existing mobile customers, with six million GSM users added every month.
With at least three new companies expected to roll out GSM networks, industry observers say it will create new business of at least 80-94 million phone lines, translating into almost $8 billion, at the rate of $80 for each line.
Romal Shetty, who heads research firm KPMG’s telecommunications practice, say new GSM phone firms could increase the current market by at least 20-30% in the short term, if these new entrants decide to procure equipment for a national GSM network. “Even if these new entrants decide to do more sharing of infrastructure such as telecom towers, they will still have to buy the switches, which account for a bulk of capital expenditure,” he said in a phone interview on Monday. According to him, a single switch could cost anywhere between Rs200 crore and Rs300 crore, depending upon its capacity.
As reported by Mint in November, RCom, for one, has already started negotiating with equipment makers to procure networking equipment and switches worth $5.6 billion for rolling out a countrywide network running on GSM technology.
“Barring RCom, which would be looking to establish a network that could serve almost 30 million subscribers in the first year of launch, we do not expect other GSM aspirants to place orders for anything more than 10-12 million phone lines over the next two years,” said a senior executive at one of the telecom equipment makers who did not wish to be identified.
According to the Telecom Equipment Manufacturing Association, India’s market for telecom switches and other networking equipment is worth Rs45,000 crore annually. This excludes the telecom handset business, which is worth Rs23,452 crore, according to IDC India. In a June statement, IDC said the wireless infrastructure category alone clocked Rs16,677 crore in revenues during 2007.
Meanwhile, vendors such as Huawei Technologies Co. Ltd, which are aiming to gain more share of the Indian telecom market, are expected to compete aggressively with Ericsson and Nokia Siemens.
“Having already bagged customers such as Tata and RCom, Huawei will give a tough fight, especially on the pricing front,” said Shetty at KPMG. “With the entry of the new players and onward expansion of existing players, this will grow by at least by 30% for the next five years,” said a Huawei India spokesperson.
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First Published: Tue, Jan 15 2008. 11 52 PM IST
More Topics: GSM | Telecom Players | Equipments | Towers | CDMA |