Light Reading

India's 3G Equipment Market a 'Bloodbath'

Light Reading
News Analysis
Light Reading

Brutal market conditions, coupled with the cautious approach of the mobile operators, are forcing the network equipment vendors in India to slash their prices, and even offer systems for free, in order to retain their customers, according to industry sources.

The Indian government finally auctioned 3G spectrum to India's privately held carriers earlier this year, a move that was expected to generate network upgrade and rollout deals worth billions of dollars. (See India's 3G Auction Ends, Raises $14.6B.)

Some early deals have indeed been awarded, as several 3G license holders have moved quickly to get their services into the market. (See Huawei Bags India 3G Deal and Tata Goes 3G With NSN.)

But the market isn't shaping up to be as lucrative as the vendors had hoped, as an already highly competitive landscape with razor-thin margins appears to have become even tougher for the technology suppliers.

"There is a bloodbath in the industry. The market was always competitive, but now even the premium vendors like Nokia Networks and Ericsson AB (Nasdaq: ERIC) are undercutting and offering freebies to retain the operators as customers," an industry source, who requested anonymity, tells Light Reading Asia.

In addition, the operators have adopted a cautious approach to capex after spending billions on securing their 3G spectra. As a result, they are adopting phased 3G network rollout strategies, a move that is spreading their planned 3G capital expenditure over a longer period.

"We feel that the Indian market size for 3G equipment is not more than $2 billion for this [financial] year," says Neeraj Jain, a director at KPMG International. "The operators are going for a restricted rollout of their 3G networks. Secondly, they have spent so much on the spectrum that they are looking for deals that help them to bring down the rollout cost. For this reason, the capex is going to be much lower than anticipated."

India's 3G infrastructure market in the current financial year, ending March 31, 2011, had previously been valued at about $3 billion: Now, almost overnight, it looks to have shrunk by about a third.

Europeans behind the pricing pressures
In the past, pricing pressure has often been caused by the marketing tactics of the Chinese equipment vendors such as Huawei Technologies Co. Ltd. But -- in India, at least -- the dynamics appear to have changed. In the 3G market, it seems the cut-throat infrastructure offers are being made by the European vendors, while the Chinese vendors highlight their professional services offerings in order to retain and attract carrier business.

"The Chinese players are no longer competing on price. They have realized that a price strategy is not sustainable in the long run, and they are pitching on services," states Nokia Siemens Networks spokeswoman Kanika Atri.

Ericsson declined to comment on the matter.

The suggestion that it's now the European vendors that are squeezing the network deal margins is corroborated by another industry source, who also wished to remain anonymous because of the sensitive nature of the subject: "In the last two deals, Nokia Siemens has actually beaten Huawei in price, so there is a new-found aggression in them -- they are going all out to get the maximum share of this market."

Nokia Siemens Networks recently announced a 3G contract with Tata Teleservices Ltd. that covers rollout in four circles (service areas), a deal that is believed to be worth between $200 million and $250 million, says the source. Tata Teleservices, which won 3G spectrum in nine circles, awarded Huawei the deal for the remaining five circles. (See Huawei Bags India 3G Deal.)

NSN, it should be noted, stated late last year that it intended to become more aggressive in the global market in order to win back lost market share. (See NSN Targets Greater Market Share and NSN CEO: Don't Write Our Obituary.)

Adding to the pressure on the vendors is the shortfall in business that most of them suffered during the first half of the year, when most telecom infrastructure orders were delayed while the Indian government dealt with various security concerns. (See India Clears Way for Chinese Imports, Ericsson CFO: India Bottleneck Easing, and India Holdups Smack NSN's Q2.)

"There is a climate of uncertainty in the market. There have been security concerns, and everybody [is] under pressure to meet their targets. [The vendors will] be offering a lot of freebies or bringing down the prices to capture the maximum share of the market," says Shiv Putcha, a principal analyst at Ovum Ltd.

With the 3G spectrum having been allocated earlier this month, and the purchase order bottleneck cleared, the market is expecting many initial 3G network deals to be announced in the coming few weeks, as most of the operators are looking to launch their initial 3G services by the end of this year or early next year, even if those launches are limited to just a few circles. (See India Gets Its 3G On and India's 3G Players Ready for Swift Launch.)

Market reports suggest that Vodafone India , Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Reliance Communications Ltd. , Idea Cellular Ltd. , and Aircel Ltd. are set to announce 3G equipment contracts by the end of September. (See Reliance Sets Out Its 3G Stall.)

— Gagandeep Kaur, India Editor, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
User Rank: Light Sabre
12/5/2012 | 4:23:50 PM
re: India's 3G Equipment Market a 'Bloodbath'

"In the 3G market [in India], it seems the cut-throat infrastructure offers are being made by the European vendors, while the Chinese vendors highlight their professional services offerings in order to retain and attract carrier business."

This is role-reversal on an epic scale, isn't it.

From The Founder
Light Reading's conference in November will attempt to answer all of the big questions around white box networks. No pressure...
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
LRTV Custom TV
ZTE in Budapest ITU 2015

10|13|15   |   03:26   |   (0) comments

ZTE Chief Architect David Huo discusses the company's progress on the 5G front.
Telecom Innovators Video Showcase
Close-up on ConfD

10|12|15   |   10.21   |   (0) comments

Tail-f's Renée Robinson-Stromberg tells Steve Saunders about the powerful ConfD management interface.
Women in Comms Introduction Videos
Women in Comms: Highlights From Dallas

10|12|15   |   2:23   |   (1) comment

The best soundbites, quotes and words of wisdom from leading women from Intel, AT&T, Verizon and Genband at our recent WiC breakfast in Dallas.
Telecom Innovators Video Showcase
NetNumber Founder on Managing Signaling Control

10|12|15   |   6:36   |   (0) comments

NetNumber Founder and Chief Strategy Officer Doug Ranalli describes the essential complexity of real-world signaling-control and how NetNumber enables carriers to bring signaling-control "under-control". Learn why virtualization alone isn't the answer.
LRTV Documentaries
Verizon Gets Proactive on App Performance

10|12|15   |   04:50   |   (0) comments

SDN is turning traditional service models around to allow Verizon to measure and deliver performance at the application layer. As Shawn Hakl, VP of enterprise networking and managed solutions for Verizon, explains, the carrier had to develop new skill sets and change some of its internal operations, but the payoff was happier enterprise customers.
Telecom Innovators Video Showcase
Tail-f, Cisco & What the Future Holds

10|9|15   |   8:17   |   (0) comments

Steve Saunders meets with Tail-f's Director of Technology, Carl Moberg, in Stockholm to discuss becoming part of Cisco, ETSI MANO, virtualization and the need to combine science and business in order to create opportunities for service providers.
LRTV Interviews
Broadband Forum Embraces SDN & NFV

10|9|15   |   02:42   |   (1) comment

At Gigabit Europe 2015, Robin Mersh and Kevin Foster from the Broadband Forum explain how the industry body is adapting to meet the SDN, NFV and cloud needs of the access network sector.
LRTV Interviews
Top Tips for FTTH Operators

10|8|15   |   02:26   |   (1) comment

At Gigabit Europe 2015, Ventura Team co-founder Richard Jones talks about some of the key business case considerations for FTTH network operators.
LRTV Interviews
M-net Calls for FTTx Unity

10|8|15   |   03:45   |   (0) comments

At the Gigabit Europe event, Jörn Schoof from M-net, the Munich city network operator, calls for industry collaboration on fiber broadband access rollouts.
LRTV Documentaries
The Business Case Challenge for NFV

10|7|15   |   03:47   |   (0) comments

Virtual CPE is one of the early success stories for network functions virtualization, as service providers are finding flexible, programmable CPE solves a lot of logistics problems and reduces their cost. But even here, Masergy Communications faced a business case challenge, says CTO Tim Naramore.
LRTV Interviews
JT Offers Some Gigabit Lessons

10|7|15   |   4:08   |   (1) comment

Barna Kutvolgyi, managing director, Global Consumer, at JT, the incumbent operator on the island of Jersey, talks about how other service providers can learn from his company's gigabit broadband rollout experiences.
LRTV Interviews
AT&T's Chiosi on the Potential of Open Source

10|6|15   |   06:27   |   (0) comments

AT&T Distinguished Network Architect Margaret T. Chiosi talks to Light Reading's Carol Wilson about the potential for open source technology to liberate communications service providers.
Upcoming Live Events
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
December 2, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Network appliances have a strong value proposition in today's networks and will continue to do so in the NFV and SDN-enabled networks of tomorrow.
Hot Topics
Dell Buys EMC for $67B in Biggest Tech Deal Ever
Mari Silbey, Senior Editor, Cable/Video, 10/12/2015
Cord Cutting? 'Fraid so.
Brett Sappington, 10/7/2015
Cisco Makes 'Martian' Connection
Mitch Wagner, West Coast Bureau Chief, Light Reading, 10/9/2015
Dell Kicking EMC's Tires
Brian Santo, Senior editor, Test & Measurement / Components, Light Reading, 10/8/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
With so many new and exciting communications technologies now under development, it's easy to get caught up in the industry's escalating hype cycle. That's why the ...
Last week saw a big day in the 15-year history of Light Reading when Editor-in-Chief Ray Le Maistre and I were invited to interview the Deputy Chairman and Rotating ...
Cats with Phones
"What?! I'm on with Finisar about their stock price tanking" Click Here
Live Digital Audio

Think NFV is just about virtualization? Think again!

Network architects are learning that there's a lot more to the technology than first thought – more complexity, that is; but also, more potential benefits.

On May 29th 1 PM ET, Steve Saunders, founder and CEO of Light Reading, will be drilling into the "pains and gains" of NFV with Saar Gillai, SVP & GM, HP Communications Solutions Business at Hewlett-Packard Co. (NYSE: HPQ) (HP). He has defined a four-step NFV model describing a sequence of technology innovation. It's a must-read doc for any network architect looking to get to grips with their NFV migration strategy. Join us for the interview, and the chance to ask Saar your NFV questions directly!