Time for foreign telecom equipment makers to up investment in India

Indian economy can further improve its growth if foreign equipment makers such as Alcatel-Lucent, Cisco, Ericsson, Huawei, LG, Motorola, Nokia Siemens Networks, Nokia, Samsung, Sony Ericsson and ZTE increase their investment in manufacturing their products in the country.


The year 2011-12 will be the best period for overseas telecom equipment makers to step up investments as the domestic demand for telecom equipment, according to an Ovum report, will grow to around Rs 170,000 crore in 2019-2020 which represents 7.9 percent of the global demand.


Only about 12-13 percent of the demand for telecom equipment is being met by domestic production. Indian companies which are present in the manufacturing space are not financially strong to leverage the potential of the telecom market. Big business houses such as Birla, Reliance and Tatas never tried to step into the telecom manufacturing space.


Indian telecom industry is expected to have a cumulative capex spend of about $121 billion in the next 5 years. As compared to this, the global capital expenditure of all telecom operators was $277 billion in 2010 and the industry generated over $1.8 trillion in revenues through wireline and wireless services.


Despite the government suggesting that Indian made telecom products should be given preference for rolling out telecom services in the country, none of the foreign equipment makers started increasing their investments in a significant way.


According to government data, FDI in telecom equipment was Rs 33,957 crore till 2007-08 and was Rs 5,085 core in the year 2009-10 alone. The total FDI inflows in telecom sector since April 2000 to January 2011 was Rs 46,746 crore.


Though Sachin Pilot, minister of telecommunications and IT, recently welcomed Samsung’s $70 million investment in its mobile manufacturing facility in Noida, near Delhi, the government needs to become more active.


Production of wireless equipment in India will encourage domestic wireless operators such as BSNL, MTNL, Bharti Airtel, Vodafone, Reliance Communications, Aircel, Idea Cellular, Tata Teleservices to increase their capex plans and source products more cost effectively.


According to Ovum, the Indian demand for telecom active equipment and handset was Rs 58,781 crore in 2009-10 and constituted about 6.5 percent of the global demand for telecom equipment. Indian


India will have enough potential to consumer telecom equipment. India is likely to consume 3G equipment worth Rs 10,127 crore and LTE and WiMAX about Rs 12,659 crore in 2015-16. By the year 2020, the combined demand is likely to be Rs 26,456 crore.


Though India does not have a strong component industry to support local production of equipments, the telecom industry is looking forward for active participation of foreign equipment makers to step up their investments.


By Baburajan K
[email protected]