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In FY 2003–04, the Indian telecom turnkey market was estimated to be around Rs 2,272 crore ($505 million) witnessing a negative growth of around 2.4 percent. In the last to last fiscal the telecom turnkey market was a shade higher at Rs 2,327 crore ($517 million). Last fiscal was not good for the industry as there were no major projects but for small expansion orders given by service providers. Most service providers were in a wait and watch mode as they were not sure how WLL(M) vs the GSM case would move before it took a u-turn. The case ended with the introduction of the unified access service license in December 2003. And things have started moving at a fast pace in 2004.

In the last fiscal, there were a lot of expansion orders but not too many large orders. All the major service providers like BSNL, Bharti, Tata and Reliance opted for expansions but there were hardly any greenfield operations. With a unified license regime coming into place, Bharti is looking at another eight circles. Some of the orders for new circles like J&K and UP (E) have gone to Ericsson whereas Bihar and Orissa have gone to Nokia. Meanwhile, Tata Teleservices is also planning expansions into another 11 circles. All these circles are greenfield operations.

BSNL gave expansion deals in all the four regions to respective vendors except Lucent. And as for the southern region, Motorola has an order for around one million lines. For the eastern and northern region Ericsson has got the expansion order.

MTNL awarded 400,000 lines each for Delhi and Mumbai to Motorola for which the work is still going on. Motorola was also awarded CDMA contract worth US $43 million in March 2003 by Tata Teleservices (Maharashtra) Limited. Tata also awarded CDMA expansion order in the states of Delhi, Gujarat, Maharashtra, and Mumbai to Motorola whereas Ericsson has received expansion orders worth $150 million in Tamil Nadu and Karnataka.

The Players
In FY 2003–04, there has been a shift in the Top 5 club. ITI is firmly seated in the No. 1 position with revenues of Rs 895 crore. Though ITI has not done well on the manufacturing front, the company has strengthened its lead in the service segment with a growth of 11 percent.

TCIL has grown by around 8.8 percent netting revenues of Rs 642 crore. The company which has a strong presence outside India, has also bagged a few projects in the country.

GTL has moved to the No. 3 slot by overtaking HFCL. The company has shown an excellent growth of around 20 percent and had a turnover of Rs 230 crore. It is doing pretty well and looks well set to move up the value chain as it has a good mix of rapport with vendors, better geographical reach, and trained employees for wireless and wireline projects.

HFCL showed a negative growth of around 24 percent with revenues of Rs 220 crore. The company has shown a negative growth as the company has been focusing more on OFC deployment and less on wireless. This year the company is focusing more on wireless deployment.

Smaller players like Nutek and Commtel have also done exceptionally well. Nutek was a major surprise in the Top 5 Club as it toppled players like UTL and Supreme Telecom. The company has grown by around 60 percent and a sizeable amount of its revenue comes from manpower outsourcing. The company is also expanding its geographical reach by bagging projects or supplying manpower outside India in countries like Iraq, South Africa, Nigeria, and Bahrain. Commtel has also done well on Supreme Telecom expense and is presently a value-added reseller of Nokia. The company has grown by 100 percent and netted revenues of Rs 12 crore. Arya Communications has a strong relationship with Motorola whereas Mack Telecom has strong relationship with Nortel and Motorola.

Supreme Telecom and Shyam Telecom were a major surprise. Supreme had expanded its network in a big way but due to collection problem the company was unable to manage its operations and manpower leading to non-completion of work. Offices in many cities were shut, cutting manpower. Presently, the company is taking selective projects and incomplete projects where companies investment are sunk to recover money. Even Shyam Telecom is out of the turnkey business and the focus is more on basic and cellular services.

This space also saw new players like Dishnet DSL and ADC Cellworks. Dishnet DSL has opened a new division called Telecom Support Group for managing the rollout of Tata Teleservices in all the new circles and is looking at all project management activities. ADA Cellworks is presently working for Nokia where the company is doing network planning and optimization for Bharti Cellular. It is primarily dealing with coverage, capacity, and quality of the network in terms of changeover and expansion. With reduction in infrastructure prices, lot of small players have jumped into the fray and lot of vendors take help from these players in terms of installation, commissioning, and manpower outsourcing.

The Trends
Presently, two models are active in the turnkey space-direct and vendor. In direct model, service providers procure equipment from vendors and do their own installation and commissioning whereas in the vendor model, the vendor supplies the equipment and also does installation and commissioning for the vendor.

Future Outlook
In this fiscal, things are looking positive for telecom turnkey players as there are plenty of big orders that are finalized and some would be finalized in couple of months. Recently, BSNL finalized a deal for 11 million lines for three regions-north, south, and east. Nortel was the L1 bidder for all the circles but it seems according to tender conditions, Nortel will get South and East regions whereas Nokia will settle for East. The total GSM expansion order for BSNL is in the range of Rs 3,700 crore of which Nortel will get Rs 2,355 crore whereas Nokia will get around Rs 1,345 crore. For another one million lines Alcatel has won an order from ITI, for the supply and installation of GSM lines to BSNL for the western region. The contract is valued at 65 million Euros and includes Gujarat, Maharashtra, MP, and Chattisgarh circles. ITI-Alcatel will also get another 3 million lines deal for the west circle, which has been reserved for ITI. Even Tata Teleservices is in the process of finalizing equipment for 11 new circles. It seems Reliance Infocomm does not want to be left behind and is also planning for expansion orders in the CDMA space.

On the other hand Bharti has opted for a different model called the Network Outsourcing Model and has signed with Ericsson in February 2004 for north and south regions. It includes circles like Delhi, Haryana, Punjab, Himachal Pradesh, UP(W), UP (E), Rajasthan, J&K, Andhra Pradesh, Tamil Nadu, Chennai, Karanataka, and Kerala. The three year service agreement encompasses management, maintenance, quality assurance, and capacity expansion in 1,650 towns and cities and is valued at US $400 million for a three year period. As part of the agreement Bharti is also transfering around 250 employees to Ericsson. Bharti has also signed network outsourcing deal with Nokia for circles like Mumbai, Maharashtra & Goa, and Gujarat, and new circles of Bihar and Orissa. The deal is valued at $275 million for a three-year period. The company is also transferring around 100 employees to Nokia.

Even good opportunities are coming from Middle East and developed countries and turnkey providers are well set get to do a good business from outside India. One can see lot of activity in broadband in terms of fiber to the building, opening up good opportunities for turnkey players in the country. With all this, markets can hope to grow by around 20 to 25 percent in this fiscal.

Pravin Prashant