Vodafone Idea Awards $1.3B 4G Contracts – Reports
India's Vodafone Idea, formed from the merger of Vodafone India and Idea Cellular, has awarded deals worth $1.3-1.4 billion to various telecom gear makers, with China's Huawei and ZTE gaining at the expense of Europe's Ericsson and Nokia, according to media reports.
Huawei Technologies Co. Ltd. is believed to have won contracts for seven circles (or service areas), including the Delhi and Chennai metros, while ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) picked up work in five. Nokia Corp. (NYSE: NOK) and Ericsson AB (Nasdaq: ERIC), meanwhile, were awarded nine and eight circles respectively, with Nokia landing jobs in Mumbai and Kolkata. While the European vendors still have more circles than Huawei and ZTE, their share of business has fallen from 80% to 65% as the Chinese have advanced.
Pricing might have helped. The Chinese vendors are known to offer competitive rates, while the Indian telecom market is famous for cut-throat competition. Selecting Huawei and ZTE should help Vodafone India to keep its costs under control. Another likelihood is that China's vendors were prepared to offer flexible payment terms to Vodafone India. Before the deal happened, Idea Cellular Ltd. had worked extensively with the Chinese vendors, but Vodafone India had leaned towards the European vendors.
The contracts, which come as the Chinese suppliers face a backlash in other parts of the world, are for the expansion of 4G networks to boost coverage as well as network capacity. With mobile broadband usage now rocketing in India, Vodafone Idea recently flagged plans to boost 4G network capacity by 50% in the next four months. It boasts around 178,000 4G cell sites in India today.
In the meantime, Vodafone Idea is also in the process of integrating the former Vodafone and Idea networks to lower the cost of network management. So-called "synergies" between those networks should help the merged entity to record savings of up to 140 billion Indian rupees ($1.98 billion) by 2021, it has claimed. Vodafone Idea is also believed to have sent out notices to shut down cell site tenancies and thereby avoid any duplication of coverage. It also intends to refarm 2G and 3G spectrum for use with 4G services.
Speeding up the pace of network integration will be key if Vodafone Idea is to protect its market share from rival operators Bharti Airtel and Reliance Jio. Indeed, some Vodafone Idea customers already appear to have switched service to Airtel and Jio as Vodafone India has wrestled with merger issues.
Clearly, the wave of consolidation in the last two years has reduced the size of the Indian market for equipment vendors. Nevertheless, the small number of private sector giants that still remain, as well as state-backed BSNL and MTNL, are under pressure to modernize their infrastructure as data usage continues to soar.
— Gagandeep Kaur, contributing editor, special to Light Reading