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Wireless networks both on the CDMA and GSM side were on an expansion mode last year. The overall market of the wireless equipment in FY2004-05 was estimated to be around Rs 11,277 crore-a 68 percent year-on-year growth. The subscriber base crossed 53 million as on March 31, 2005, from about 33 million as on 31 March 2004. In October, the wireless services overtook wirelines in terms of numbers. And Bharti becomes the first operator to have an all-India footprint to offer services across all the 23 circles, with its introduction of GSM services in Jammu and Kashmir and the Northeast.

It was not Bharti alone that was expanding. Tata Teleservices placed expansion as well as capacity orders, and Reliance added more lines in the CDMA space. BSNL realized that demand was higher than the lines being put up and placed additional orders. Similarly, Hutch, Idea, and Spice were also in an expansion mode.

Railways also placed orders in the last financial year for its GSM-R project. Four tenders have already been awarded and the letter of intent for another two northern zones has been given to Siemens. Nortel bagged the first tender for the eastern region and Siemens got the north-east, north-central, and east-central. For Siemens, the three tenders are of Rs 57 crore and the LoI is for a Rs 100 crore project.

All the vendors cashed in on the boom and recorded good growth. Ericsson emerged as the top equipment vendor of the FY 2004-05 with a market share of almost 28.1 percent and revenue of Rs 3,165 crore. Nokia was at the number two slot with Rs 2,771 from BSNL, Hutch, and Bharti projects, and expansions in Idea and BPL circles. But the biggest surprise was that of Nortel. It bagged the major 7 million lines tender from BSNL and occupied fourth position.

Though Ericsson lost BSNL's 11-million lines expansion tender to Nokia (4 million) and Nortel (7 million), a $400-million deal from Dishnet compensated for the loss. Similarly, Ericsson managed to do good business from its existing contract with Bharti, Hutch, and Idea. The Bharti-managed network deal has entered its second year. With EDGE, GPRS, and other data services making their entry on the networks, the initial 3-year, $400 million deal is all set to rise in value and volume terms as well.

Motorola also had a good year. Even after losing out BSNL and Bharti contracts, it still managed to get the Tata Teleservices deal in June 2004. This year, they also executed the $307-million deal that included BSNL, MTNL, and Tata Teleservices. However, Motorola could not dent Lucent's dominance in Reliance. But it is expecting some Reliance deal this year.

For both Motorola and Ericsson, Siemens has been supplying bits and pieces for the small regional tenders floated by BSNL divisions periodically. On BSNL's CDMA network, ZTE has been implementing a Rs 200-crore project for 1 million lines. There is another for 4.5 lakh lines, which is scheduled to be commissioned this year. ZTE also supplied GSM infrastructure to BPL and Spice Telecom. For BPL, it has also supplied caller ring back tunes (CRBT) solutions. And it has, along with CellNext, bid for CRBT solutions for BSNL. There is another 1.1 million line CDMA tender for BSNL for which bids have been received and would be opened somewhere in June 2005.

Nokia, on the other hand, had slices of business from Hutch, Bharti, BPL, and Idea and witnessed good growth rate in the ongoing long-term projects. For Hutch, Nokia has implemented expansion as well as new infrastructure orders to the tune of almost Rs 330 crore in 9 circles. For Idea, the projects were in tune of Rs 105.6 crore for three circles of Andhra Prdesh, Delhi, and Haryana. Nokia has also been working with BPL in Mumbai, Maharashtra, Tamil Nadu, and Kerala. These projects are in addition to the Rs 1,210 crore for the ongoing Bharti project in five circles.

Miles to Go
The simple arithmetic of the number of subscribers being added indicates a massive demand for expansion in the number of lines by all the major operators. Estimates peg a market size of almost $25 billion to $35 billion in the next three years. Now, as mentioned earlier, all eyes are on the 40 million lines tender from BSNL. BSNL is planning to invest almost Rs 75,000 crore in the next three years on its network expansion. Similarly, MTNL is planning a tender for 4 million lines. For sure, these tenders would decide which way the market moves, but a lot of business is also expected from the next phase of expansion of the private operators in the rural areas.

Reliance and Bharti have already made announced their aggressive plans to enter the B- and C-class cities. Reliance Infocomm plans to cover 4 lakh villages by December 2005. This would involve 8,500 BTSs towers. The total plan outlay till date for the company is Rs 24,000 crore of which they have already invested about 15,000 crore. Though internal problems of the Ambani brothers appears to have affected the expansion plans to a certain extent, still Reliance has not come out with any revision of its plans. Though Lucent is the main contender for this project, Motorola would be trying hard make inroads into the Lucent bastion.

Bharti is also expanding and has set a target of 10,000 base stations to increase its pan-India coverage by the end of this financial year. Here, the operator would be relying mainly on Ericsson and Nokia, and, to a certain extent, Siemens to achieve the target. Bharti is expected to announce the rural expansion from July this year. On the other hand, operators like Hutch, Idea, Dishnet, Spice who don't have a pan-India presence, would also be looking at expansions and improving their networks.

In the financial year 2004-05, Chinese vendors like ZTE and Huawei were not very active in the wireless equipment side. But they would offer a good competition to others this year as they would be a strong contender on the PSU side. These Chinese companies have been making inroads into the European market and also emerged strong on the 3G platforms. With equipment costs dropping almost 30 percent in the last couple of years, it would be an interesting battle for the market share.

Turf heats up
It is clear that competition would increase in the days to come and the operators have to come out with innovative marketing ideas to reduce the churn. Reducing capex is an area of concern for the operators. And outsourcing network management services appears to be a win-win proposition. In this arrangement, the operator just concentrates on designing new plans and services and the network management part is looked after by the vendors. Though Bharti started this trend, it has not really picked up. Apart from Nokia and Ericsson, no other vendor has bagged any contract for such network management nor has any operator come out in support for any such deals. But some of them are understood to be in talks for such outsourcing deals that are expected to be closed this year. This year, we might also see multi-vendor network management services also gaining momentum.

Not Much On QoS
Contrary to the perception of an improvement in the quality of service due to managed services, we have not seen much action on this front. Though the roll out of GPRS and EDGE on existing as well as new networks were fast, the low adoption rate has taken away its shine. This might be due to the evolutionary stage of the telecom industry and the focus being more on the extending coverage area rather than on the services side.

ONto the Next Phase
The migration path to next generation networks and incorporation of new services are the talk at any telecom forum. Vendors have been particularly very active in marketing 3G. On the operator side, pilots for 3G networks have also been initiated. However, spectrum allocation and handset pricing need to be resolved before the roll out starts happening. While MTNL would be incorporating the 3G part in the next tenders, BSNL has been conducting trials on at least 10 BTSs.

For the GSM operators, the next networks would be in UMTS and WCDMA. CDMA operators, on their part would be evaluating EVDO kind of technologies. This year, convergence of IP with multimedia application over the mobile networks would be a value proposition and vendors have to gear up for the challenge. Similarly, services would be the differentiating factor and new application would be incorporated on the networks. Data-enabled networks and wireless broadband areas are also the key focus areas for the operators this year and vendors have to align themselves accordingly. In the past, selling data over mobile networks has not worked here. It needs expertise and marketing skills-different from that of voice. The opportunity is huge but the market would be challenging.

The next two years would be crucial for the wireless stakeholders. In the first phase of wireless revolution in India, many vendors like Nortel, Huawei, and ZTE had lost out. The buzz for the big tenders has been there for some time now and all vendors had enough time to formulate their strategies. However, the next phase of expansions would give a fair chance to these companies to fight it out.

Pravin Prashant & Anurag Prasad