India's government security agencies have imposed a set of restrictions on overseas technology imports that have squeezed the telecom sector since February this year, with the Chinese vendors the worst affected: While the country's network operators have, albeit very slowly, been given clearance to trade with overseas suppliers such as Ericsson and Nokia Networks , the likes of Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) have been hit the hardest. (See BSNL Blocks Huawei, ZTE Bids, Huawei Confident of Indian Import Resolution, Huawei Seeks Talks Over Indian Lockdown, and ZTE Embarks on Indian Charm Offensive.)
The restrictions were tough enough to send Ericsson revenues from India tumbling in the April-June quarter to a level not registered for years, noted the vendor's CEO Hans Vestberg on today's earnings conference call.
Table 1: Ericsson's Shrinking India Revenues
|Q2 2009||Q2 2010||Y/Y change||Q1 2010||Q/Q change|
|Revenues from India in millions of US$||$502 million||$190 million||-63%||$312 million||-41%|
Revenues didn't disappear totally, of course. But while Global Services delivered close to its usual quarterly contribution of around 700 million Swedish kronor (US$95 million), thanks to recurring sales from long-term services contracts, network infrastructure revenues tanked.
Things should improve, though. Vestberg noted that toward the end of the second quarter, one of India's operators (the country has 15 mobile carriers currently) was given clearance to do business with Ericsson, while a few more were given permission this month.
The vendor's CFO Jan Frykhammer, who entertained us earlier this year with his joke choice of England as prospective World Cup winners added during a telephone chat with Light Reading that "once we have clearance, theoretically, that should mean a normal supply chain again." (See Caution Clouds Ericsson's Outlook.)
However, "there is a new development nearly every day... we have recently received new requirements for security processes. It's changing nearly every day. What it will be like long-term is still uncertain," added Frykhammer.
The CFO wouldn't say which Indian operators have been given the green light to do business with the Swedish giant, but with 3G orders expected to start being dished out soon by those that landed spectrum in the recent auction, Ericsson will look to have the channels as open as possible to its existing 2G infrastructure customers such as Vodafone India and Bharti Airtel Ltd. (Mumbai: BHARTIARTL), the country's largest mobile operator. (See India's 3G Auction Ends, Raises $14.6B, Ericsson Scores Bharti Deal, and Ericsson Upgrades Vodafone Essar.)
— Ray Le Maistre, International Managing Editor, Light Reading