Facing a New Crisis?

It is a known fact that the Indian telecom equipment market is an extremely competitive one. The recent turn of events indicate that it may not remain a lucrative segment for too long. (See .)

This is evident in the recent Bharat Sanchar Nigam Ltd. (BSNL) tender where the lowest bid was just around US $60 per line.

Huawei Technologies Co. Ltd. and ZTE Corp. were the lowest bidders for BSNL's 14.3-GSM-line tenders. While ZTE's bidding price was INR 43 billion ($0.87 billion), Huawei's bid was at INR 62 billion ($ 1.2 billion), according to industry sources. The bids of Ericsson AB and Nokia Siemens Networks were much higher at INR 110 billion (US $2.2 billion) and INR 120 billion ($2.4 billion).

The difference between the bids of the Chinese and European vendors was huge. The industry speculates that the vendors are unlikely to record a profit at these rates.

"It is not unusual for Chinese vendors to bid at really low prices because they have the support of the [Chinese] government. It seems to me that the European vendors opted out of this because their margins are under pressure. There are a lot of opportunities for the European vendors as well and they will continue to do well in the Indian market," says Rahul Gupta, Senior Manager - Emerging Markets at Strategy Analytics.

The fact is that European vendors cannot afford to bid at such low rates and hence might stand to lose the market. In spite of that, they have been getting orders. For instance, Nokia Siemens and Ericsson have recently procured the Bharti's managed services deal. At the same time, the European vendors will find it challenging to procure government orders where the lowest bidders are preferred.

The oncoming Long Term Evolution Time Division Duplex (LTE-TDD) market will be the real test for the vendors. Though price will be a crucial factor as always, expertise in the new technology will also play a critical role in the decision of the operators. (See , IndiaWatch: Bharti Identifies LTE Vendors?, Ericsson Lands India's First LTE TDD Deal, and Vendors Suffer From LTE Delays.)

Gagandeep Kaur, Editor, Light Reading India