Indian Operators Gear up for Joint Buying of Telecom Equipments

Indian telecom operators are gearing up to join hands for jointly buying telecom equipments. Though telecom operators in India compete in the market space for supremacy, the joint buying of equipments will be an important aspect to bring down their OPEX.



Any kind of joint procurement will put additional pressure on telecom equipment vendors. Emerging telecom markets such as India, Brazil, China, Africa and Russia can benefit from this. Large operators in many of these markets already have scale to negotiate. Emerging operators may require this kind of statistics.



Recently, Deutsche Telekom and France Telecom, announced  they will set up a venture that will let the two former phone monopolies save $1.9 billion annually by jointly buying telecommunications equipment.



This looks like a game changer. This also highlights the cost pressures which the European operators are facing. However, success will depend on how will either operator ensures that the customizations required for their own networks are handled,” said Shyam Mardikar, chief technology officer of Lebara Group, a leading MVNO in Europe. I believe they will buy a standard product together and then spent some money independently to customize it. If this extra spend is less than their savings, they would do fine.”



Indian operators have not yet followed this kind of initiatives. But capacities, at which India operates, drive the economies of scale in India without any joint bidding for telecom equipment,” Mardikar, who worked with India’s number one telecom operator  Bharti Airtel, before joining the Lebara group in the U.K., added.



Both Deutsche Telekom and  France Telecom will start joint purchases of phones, network equipment, service platforms and other technology infrastructure in the fourth quarter. Paris-based France Telecom will save as much as 900 million euros annually after three years and Bonn-based Deutsche Telekom more than 400 million euros.



Indian telecom market grew in different phases. We shared infrastructure. The government is looking at sharing of spectrum. Many telecom operators tried outsourcing to manage costs. Indian service providers will look at bidding jointly to bring down costs,” said Jagbir Singh, director of Bharti Airtel.



However, operators in India have different financial systems and procurement policies. For instance, Vodafone procures telecom equipments through its global headquarter in the U.K. Bharti Airtel, following its acquisitions in Africa and Bangladesh, may try to buy equipments for all its global operations.



Many operators in India are talking about joint bidding of equipments. If Indian telecom operators source equipments cost effectively, the main benefit will be to the end consumer. Operators can deliver better services to end users if there is reduction in any CAPEX,” Singh told



France and Germany’s largest phone companies are trying to cut costs and increase economies of scale by working together. France Telecom and Deutsche Telekom announced plans to co- operate in different areas as part of a broader push to connect devices such as home appliances to wireless networks.



They agreed in September 2009 to merge their U.K. mobile-phone units, creating that country’s largest mobile-phone operator.



France Telecom and TDC A/S last year called off a deal to create the second-largest mobile-phone operator in Switzerland after regulators rejected the merger of their local units. Deutsche Telekom agreed in March to sell its T-Mobile USA unit to AT&T Inc. for $39 billion to establish itself in the U.S.



The jointly owned and operated entity will have two operational units in Bonn and Paris, and will provide measurable value in terms of experience and economies of scale for the benefit of both groups and their respective customers. The partnership expects significant synergy benefits through best practise sharing, leveraging global scale and harmonized technology processes.



The operational units in Paris and Bonn will be staffed by employees from the respective procurement departments of both groups that already deal with purchasing customer equipment, network technology, service platforms, IT-Infrastructure and procurement engineering. Deutsche Telekom and France Telecom-Orange are currently in talks with unions and its social partners regarding the necessary set-up processes.



The final agreement is expected to be signed in the coming weeks, and remains subject to the necessary board approvals at Deutsche Telekom and France Telecom-Orange. In addition, the creation of the procurement joint venture will be subject to antitrust clearance.



The procurement joint venture is the result of bilateral exploratory talks between Deutsche Telekom and France Telecom-Orange, following the joint announcement in February this year to identify potential areas of cooperation in radio access network sharing in Europe, WiFi roaming, equipment harmonization, Machine-to-Machine (M2M) services and a set of new growth business development areas.



By Baburajan K