India's Mad About Mobile
In a note to clients, Prudential Equity Group LLC 's Inder Singh writes that Indian mobile operators are likely to accelerate spending over the coming months to tackle network congestion problems.
With the number of mobile subscribers in India growing by around 5 million every month, operators are behind the curve in upgrading their networks to absorb all the additional traffic. The Telecom Regulatory Authority of India (TRAI) has been pushing operators to improve network quality, and last month issued a report on the "alarming" level of congestion between operators.
The report, covering January to May, found that in some areas more than 80 percent of calls between networks are affected by poor quality or dropped completely, way above the regulator's benchmark of 0.5 percent.
Singh notes that state-owned operator Bharat Sanchar Nigam Ltd. (BSNL) is expected to award its $4.5 billion expansion contract by mid-October, split between two vendors. He predicts the big winner will be Ericsson, with Nokia and Siemens Communications Group jointly competing with Motorola Inc. (NYSE: MOT) for the smaller piece. (See BSNL Sizes Up Five Bidders and Nokia, Siemens Create Networks Giant.)
Ericsson is also set to benefit from its relationship with Bharti Airtel Ltd. (Mumbai: BHARTIARTL), which recently awarded it a $1 billion network expansion deal following previous managed services contracts. (See Ericsson in $1B Bharti Expansion, Ericsson Networks Bharti, and Ericsson Expands Bharti.) That win highlights the growing importance of managed services deals in securing future equipment business from carriers. (See Nokia Touts Managed Services.)
Singh writes: "We believe that this will be followed by additional GSM expansion contracts from Bharti, and the most likely beneficiary will be Ericsson, because of its close relationship, and Nokia, which partly manages the operator's network." (See Nokia Wins $125M Bharti Deal and Nokia Expands Bharti.)
Nokia has a similar relationship with Hutchison Essar , managing 80 percent of that carrier's network. (See Indian Operator Outsources to Finland.) Singh writes: "The operator has undergone rapid expansion in the past year, doubling its subscriber base to 18M, and is signaling aggressive expansion plans to take advantage of the Indian growth opportunity."
Singh also notes that as operators are in expansion mode, they may use it as an opportunity to kit themselves out for an eventual upgrade to 3G. Around 40 percent of BSNL's 45.5 million line order is set aside for 3G-ready equipment.
— Nicole Willing, Reporter, Light Reading