When telecom operators identified the rural markets as their next destination in India for increasing their top line, the anticipation did not vouch for the kind of exponential growth it has seen. The wireless infrastructure segment grew to Rs 23,770 crore in FY 2007-08 from Rs 16,677 crore in FY 2006-07, clocking a 42.5% rise.

Registering a 67.6% increase last fiscal, Ericsson retained the top slot with Rs 7,815 crore as compared to the Rs 4,664 crore in FY 2006-07. Nokia Siemens Networks came close at Rs 7,555 crore, a jump of 51.4% from last fiscal's Rs 4,990 crore.

Revenues of Alcatel-Lucent, which registered a 105.1% growth, touched Rs 4,000 crore in FY 2007-08 compared to Rs 1,950 crore in the previous fiscal. ZTE and Huawei have improved their revenues through the wireless infrastructure segment by clocking Rs 1,500 crore and Rs 1,400 crore respectively in FY 2007-08, compared to Rs 1,320 crore and Rs 445 crore respectively in the last fiscal.

Growth Drivers
A number of factors have contributed to the growth of the wireless infrastructure segment in the country. Firstly, the second largest subscriber base, growing middle class population, and almost 50% of this being under the age of 25, and being full of vitality, constituted the basis for rapid growth. Secondly, a series of government policies and regulations optimized India's telecommunication investment environment. Thirdly, full operation of market competition attracted many domestic and overseas investors to divide the telecommunication market, both for operators and telecommunication equipment manufacturers. Finally, India's developed software industry provides the possibility for overseas manufacturers to directly invest and establish R&D centers and production bases in the country.

Ericsson's growth in the wireless infrastructure space came mainly from its clients-Idea Cellular, Bharat Sanchar Nigam, and Bharti Airtel. Ericsson is the sole supplier to Idea Cellular's GSM network in Mumbai, besides its managed services partnership. As per the four-year agreement, Ericsson will supply radio access, microwave transmission, and core network equipment, including Ericsson's Mobile Softswitch Solution. With this, Idea Cellular, which is aiming at taking on its rivals such as Bharti Airtel, Reliance Communications, and Vodafone in Mumbai, is well positioned for future network development, and is addressing increasing customer demands for mobile services in a sustainable and cost-efficient manner.

The Mobile Softswitch Solution, which sets the stage for Idea Cellular to evolve towards an all-IP network, supports cost-effective network operations for mobile voice services.

 Ericsson's $1.3 bn turnkey contract with Bharat Sanchar Nigam to supply GSM and WCDMA/HSPA equipment, and related telecom services, has also substantially contributed to its revenue growth.

As per the agreement, Ericsson is responsible for expanding and upgrading BSNL's existing GSM network and introduction of WCDMA/HSPA functionality.

Ericsson will supply GSM and WCDMA/HSPA radio access network, transmission equipment, and a complete GSM/WCDMA common core network including the Ericsson Mobile Softswitch Solution, service-aware Packet Core, IMS, and a multi-service IP Packet Backbone Network.

In its largest deal in India, Ericsson bagged a $2 bn network expansion deal from Bharti Airtel. The deal is likely to assist Bharti Airtel offer cost-effective products and services to its customers, and help expand its reach in rural India.

As per the deal, Ericsson will design, plan, deploy, optimize, and manage Bharti Airtel's GSM network across 15 circles in India, as well as pave its pan-India pre-paid platform across 23 circles.

Bharti and Ericsson are also looking at forming a focus group to work on energy optimization by introducing energy-efficient equipment and alternate energy sources.

Besides bagging several big orders, Ericsson contributed to the country's need for biofuels. Idea Cellular, Ericsson, and the GSM Association's Development Fund announced that four mobile base stations powered by locally produced biofuels have extended Idea's commercial mobile network in rural India.

Exploring alternative power solutions, such as biofuels, is key to the development of cost-effective ways to extend mobile networks to 20% of the world's population without coverage today.

Nokia Siemens Networks, in its first year of operations after the merger, bagged a slew of coveted orders. The major clients of Nokia Siemens include Bharti Airtel, Idea Cellular, Aircel, and Vodafone.

Under a $500 mn GSM network expansion contract, Nokia Siemens Networks will expand Idea Cellular's GSM/GPRS/EDGE networks to cover six circles of Delhi, Haryana, UP East, UP West, Andhra Pradesh, and Kerala. The two-year contract includes supply and services of GSM equipment, intelligent network, value added services and circuit, and packet core equipment.

This apart, Nokia Siemens Networks won a Rs 300 crore contract from Aircel to build and operate a greenfield GSM network in Kolkata.

The two-year deal includes supply of the latest state-of-the-art equipment like Flexi base stations, mini-ultra base stations, 3GPP-based mobile softswitching solution, including MSC servers and media gateways PDH and SDH. The network will be supported by the multi-technology, multi-vendor NetAct network and service management system, and will be ready for commercial operations by December 2007.

As per a multi-platform network contract worth $900 mn with Bharti Airtel, Nokia Siemens will expand Bharti Airtel's GSM network in eight circles; its national long distance and international long distance network with 1.8 mn next generation network ports and its international calling card prepaid service capacity by 4.5 mn new users.

The two-year GSM expansion will cover eight existing circles of Mumbai, Maharashtra and Goa, Gujarat, Madhya Pradesh and Chhattisgarh, Bihar and Jharkhand, Orissa, Kolkata and West Bengal.

Its $150 mn contract with Idea Cellular was to build and provide managed services for a greenfield GSM network in Bihar. The three-year contract includes supply of GSM/GPRS and short message service center equipment, network implementation, roll out project management services for third party products, and managed services.

Bharti Airtel offered its multi-million dollar all India contract for single interactive voice response to Nokia Siemens Networks for deploying a single interactive voice response (IVR) platform across all 23 circles. The three-year turnkey contract includes designing, planning, systems integration, and optimization services to enhance the overall customer experience. The new IVR solution will enable Airtel to deliver services such as voice SMS, televoting, call management services (reach-me service/missed call advisor), caller ring back tone (CRBT), and voice portal among others on a faster time-to-market basis, reduce Opex costs due to optimized network utilization, and increase security by creation of a layered architecture toward interactive voice applications.

This apart, Nokia Siemens Networks bagged a major contract from Idea Cellular to deploy and integrate a device management solution in Idea's all telecom circles in India. The solution is likely to enable Idea.

There were two significant deals for Alcatel-Lucent last year. First, it bagged a contract for 2 mn GSM lines with ITI for MTNL's network expansion in Mumbai, and another, a contract with ITI for the supply of 2 mn GSM lines to BSNL. Apart from this, Alcatel-Lucent also got GSM and CDMA contract from Reliance Communications.

For ZTE, major orders came from expansion and network transfer requirement from Tata Teleservices, BSNL, Reliance Communications, and Spice.

Some of the major wins for Huawei were from private sector operators like Bharti Airtel, Reliance Communications, and Tata Teleservices. In the CDMA space, it did business with both Reliance Communications and Tata Teleservices. It also bagged Reliance's GSM project and MTNL's UMTS roll out.

Tata Teleservices has selected Huawei's all-IP based CDMA core networks solution and radio access equipment to replace its existing network in Delhi, Kolkata, and other major cities, thus, enabling its transformation toward 3G.

Huawei has also helped MTNL deploy its MPLS (multi protocol label switching) backbone network thus, providing a variety of quality carrier-class services including the Internet, VoIP, and IPTV.

Yet another order came from Reliance Communications for $200 mn for an all-IP next generation network expansion. Under the agreement, Huawei will supply and provide services for CDMA and GSM base stations, including BSC (base station controller) and switches, and help create first-class all-IP next generation network infrastructure.

Hurdles to Cross
The fierce competition in the telecommunication industry brought tremendous pressure on profits. For long-term planning, wireless infrastructure players have two weapons, market differentiation and cost reduction, to deal with it. With satisfying customized demand, market differentiation can increase customer value. Cost reduction puts forward demands on reasonable distribution of resources.

Apart from spectrum, main concerns for operators include sharp drop in mobile tariffs, heavy competition, increased emphasis on turnkey projects leading to responsibility being imposed for tasks which are not in the core competency of the company, reduced profitability, and increasing needs of customers for customized solutions putting additional pressure on profitability and internal resources.

Outlook
 In 2008-09, more wireless licenses of different systems are expected to be issued to anxious operators. In GSM systems, LTE oriented SDR, network sharing, and spectrum enhancement technology will be important functions developed in wireless infrastructure equipment.

India is among the fastest growing telecom markets in the world, and operators face a resource constraint environment concerning spectrum and people. As they have to grow to a large extent, for many operators managed services are the best way to cope with growth, efficiency, operational performance, and have a predictable costs while freeing resources to focus on their core, customer-facing activities.

Baburajan K
baburajank@cybermedia.co.in