Ericsson AB (Nasdaq: ERIC) and Nokia Networks currently dominate India's telecom managed services market, but the award of 3G managed services deals by the country's leading mobile operators looks set to open the door for Chinese vendors Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) to become significant challengers in this growing and important market.

Ericsson and Nokia Siemens Networks (NSN) are still picking up the majority of the new managed services deals in India, but not all of the major European vendors are maintaining a strong competitive services offering in the face of the Chinese challenge. While Ericsson and NSN continue to win new contracts as India's operators choose their 3G suppliers, Alcatel-Lucent (NYSE: ALU), traditionally a fierce competitor in fixed-line network and 2G mobile managed services, becomes increasingly sidelined in the 3G equipment, and likely the managed services, market.

The game changer for the Chinese players could be Bharti Airtel Ltd. (Mumbai: BHARTIARTL)'s recent 3G equipment deal. India's biggest operator, which has been relying on Ericsson and NSN for its 2G managed services, awarded part of its 3G equipment contract to Huawei, a move that could lead to an accompanying managed services deal. (See Bharti Chooses 3G Suppliers.)

Initially, market chatter suggested that Bharti had handed out its 3G managed services contracts with the equipment deals, as it has been happy with Huawei's managed services efforts in Sri Lanka, but it seems Bharti's 3G managed services deals are still up for grabs. (See Huawei Wins at Bharti.)

That could be because different criteria need to be considered. In the hardware equipment sector, market share can be quickly gained with aggressive pricing, but the same is not true of the managed services market, believes Alok Shende, director and principal analyst at Ascentius Consulting.

"A key difference between gear and managed services markets is that price difference is inconsequential," notes Shende. "Managed services require a lot of sophistication and expertise, and the Chinese players are at a disadvantage" because they lack the experience and know-how of their main European rivals, adds Shende.

"There is a bit of price difference in the managed services market, but it is nominal. Huawei might be number three now [in the India 3G managed services market] but will find it extremely difficult to be number two or number one," says the analyst. (See Huawei Plays Managed Service Catchup.)

Ericsson and NSN dominate India's managed services market, followed by Huawei and ZTE, according to Shende and Neeraj Jain, a director at KPMG International . Three years ago, AlcaLu was also a prominent player, but this is no longer the case. According to market sources, AlcaLu is not in the reckoning in India's 3G managed services market. (See AlcaLu Opens Ops Hub in India, AlcaLu Appoints Services Exec in India, AlcaLu, Bharti Form Joint Venture, and AlcaLu in Line to Win Reliance Deal.)

Despite multiple requests, AlcaLu declined to comment on its managed services strategy for the Indian market.

"Alcatel-Lucent has lost its earlier dominant position in the Indian market. For the last two years, it has been completely missing from the deals. The company hasn't won any deals with the greenfield operators, and is absent from the 3G deals as well," says KPMG's Jain.

The general trend in the 3G managed services market is that operators are sticking with their existing suppliers. "So far, the service providers are going for the incumbent vendors who were already working with them for 2G," says Kanika Atri, chief marketing officer for India at NSN.

For example, Vodafone India was already working with NSN for 2G, and selected it for 3G too. Tata Teleservices Ltd. is a long-time customer of Huawei, which was awarded the 3G contract, while Reliance Communications Ltd. stuck with ZTE for its 3G deal. And apart from the three circles handed to Huawei, Bharti Airtel retained Ericsson and NSN in the circles in which they were already 2G managed services suppliers. (See India's Vodafone Essar Names 3G Suppliers and Huawei Bags India 3G Deal)

As Huawei and ZTE gain experience, though, this might change, as at least one Indian operator believes there is little to go on to choose between the market players. "Basically there is no ranking of the vendors" in terms of which have a superior managed services offering, says J Sugumaran, the CTO at mobile operator S Tel Pvt. Ltd. .

"I have worked with European vendors as well as Chinese vendors where managed services is concerned, and I don’t think there is any big difference," he says, though he adds, tellingly, "You can influence a smaller vendor to work according to your specifications, which is not possible with a big vendor.” S Tel is currently working with ZTE. (See S Tel Launches in India and India's S Tel Eases Toward 3G Launch)

— Gagandeep Kaur, India Editor, Light Reading