The past year was a challenging one for telecom equipment vendors. While there was some clarity on the regulatory and policy fronts, operator activity in terms of network expansion and new technology roll-outs remained subdued. This resulted in limited business opportunities and slow growth for the majority of global and domestic equipment vendors in India. Going forward, the growing uptake of data services and adequate spectrum availability will drive service providers to make long-term investments in network expansion, which is expected to fuel growth and increase profitability for equipment vendors. tele.net spoke to leading equipment providers about the sector’s performance in the past year, the challenges faced by the segment and the way forward…

How did the telecom equipment industry perform in 2013?

Amit Marwah

The past year was a challenging one for the Indian telecom sector given the uncertainties regarding spectrum auction and limited network expansion by operators. The operators focused on reducing their operational costs by utilising their networks and resources more efficiently.

However, the year also marked some positive developments, particularly on account of higher growth in data uptake across the country (especially for 3G services following tariff corrections). Operators have initiated efforts to adopt new solutions like customer experience management to improve customer retention, and enhance the quality of Wi-Fi services and security solutions. They are now moving towards IP-enabled networks through solutions like IPRAN. In addition, operators are focusing on network modernisation and building future-proof networks through the adoption of single RAN technologies. Nokia Solutions and Networks is working with various operators to help them deploy these technologies.

Sanjay Nayak

The industry’s performance in 2013 was better than that in the previous year owing to some clarity on key regulatory issues. Besides, there was an increase in capex spending by service providers to gear up for the next phase of telecom growth, which will be driven by broadband services.

Zhang Wencheng

The Indian telecom industry has witnessed sluggish growth over the past couple of years on account of the uncertain regulatory environment.

How has the company’s business grown in the past year? What were the key milestones achieved and contracts signed by your company?

Amit Marwah

In 2013, NSN India leveraged its existing customer base, particularly its strong relationships with leading operators in the country. It retained its market share in India, and expanded and renewed several contracts. As of September 2013, the company signed nine contracts with operators in India.

Sanjay Nayak

Tejas Networks has continued to perform well in the transmission segment – both in private and government/PSU businesses. The company has gained a large market share in this segment.

It has also won several deals for projects including deployment of products based on technologies including dense wavelength division multiplexing (DWDM), packet optical networks, packet transport network (PTN), and synchronous digital hierarchy (SDH). The company has made inroads into PTN with its leading-edge products such as TJ1400 and TJ1600. Tejas Networks has won several new contracts in India as well as in the Southeast Asian and Latin American regions. The company has won one of the largest wholesale network build-out deals in Asia.

Zhang Wencheng

Despite several uncertainties in 2013, ZTE added new businesses to its portfolio. Some of its key deals were as follows:

•The company was the first vendor to deploy long term evolution (LTE) in India in collaboration with Bharti Airtel in the Kolkata circle, followed by the Punjab circle.

•It entered into an agreement with Aircel to deploy a 4G LTE network in the Chennai and Tamil Nadu circles and few other business-critical zones.

•It partnered with Bharat Sanchar Nigam Limited (BSNL) to provide 14.5 million GSM lines across the operator’s north, south and east zones. The deal with BSNL was ZTE’s largest contract of the year.

•Further, 2013 was a breakthrough year for ZTE in India as it marked the company’s foray into the smartphone market. With this, the company seeks to build upon its existing business of 35 million mobile terminal users in the country.

What are the key challenges facing telecom vendors in India?

Amit Marwah

Telecom operators have continued to face severe pressure on the opex and capex fronts during 2013, especially in Tier II and Tier III cities. In addition, uncertainties regarding spectrum posed several challenges, leading to investment delays in future technologies.

Sanjay Nayak

One of the biggest challenges has been the regulatory uncertainty and consequent delays in network roll-outs and expansion by service providers. However, there are clear signs of improvement and the company is hopeful that 2014 will bring in growth for the industry, following the conclusion of the auction.

On the technology side, vendors have to develop an innovative product portfolio comprising cost-effective, and diverse voice and data services, ranging from hybrid packet optical transport platform-based networks for 2G/3G operators to all-packet PTN configurations for broadband-centric operators. TejasXTN products are designed to meet these technological requirements and have been well received by the industry.

Another challenge relates to disadvantages that the Indian telecom vendors face vis-à-vis their global counterparts. On the financial side, we see a disability of 20-30 per cent (on account of cost of funding and infrastructure costs, etc.) as compared to our global peers. Although the Indian government has announced a number of supportive policies and programmes for vendors – preferential market access (PMA), the Electronic Modified Special Incentive Package Scheme, etc. – the industry continues to face hurdles and delays in their implementation. Similarly, government schemes for funding research and development (R&D) and product development have long decision-making cycles, which adversely impact time-to-market.

Zhang Wencheng

The Indian market has started deploying 4G services. However, operators and vendors need to address a few issues related to end-to-end equipment maturity, terminal variety and maturity, and transmission networks. Further, uncertain regulatory policies impact sector growth.

What are your expectations from the Indian telecom industry in 2014? What will be the key growth drivers for telecom vendors?

Sanjay Nayak

The company expects significant development in the broadband segment with greater participation from private operators and the government. Government-led projects such as the National Optical Fibre Network will help increase broadband penetration, particularly in rural areas.

Further, 2014 is expected to bring in clarity on various issues including spectrum auction, thereby driving growth in the sector. Broadband will be the key focus area for the telecom industry – both wireline (optic fibre) and wireless (3G and LTE). Given the exponential growth in data traffic, service providers will have to upgrade and build high capacity scalable backhaul networks. This will require more fiberisation (as compared to the use of microwave radios) and high-capacity optical networks.

Zhang Wencheng

In 2013, the sector faced issues related to unclear regulatory policies, low operator expenditure, etc. However, 2014 is expected to bring in more investments from both service providers and telecom equipment manufacturers.

While the mass adoption of 4G will take a few more years, the segment will gain momentum in 2014. Going forward, LTE network coverage will be largely focused on urban areas, where the bulk of traffic and revenues are generated. The key factors driving the mass adoption of LTE will be the huge demand for data and allied services. Further, affordable LTE-enabled devices will hold the key to India’s 4G success.

The year 2014 is also expected to witness unprecedented growth and expansion of optic fibre-based broadband services, which will drive the uptake of fibre-based customer premises equipment. Further, the enterprise segment will continue to witness a shift towards cloud-based services.

ZTE also foresees immense growth opportunities in the broadband access domain in the coming year. To capture this business opportunity, vendors will have to customise and optimise equipment for the Indian market to provide robust and cost-effective solutions with lower total cost of ownership. Growth in the tablet and PC market and the need to stay connected will continue to drive the demand for data cards. Going forward, the industry will shift from voice services to data services as more consumers use smartphones for various data-driven applications.

What is your regulatory wish list for 2014?

Sanjay Nayak

We hope that the government’s key policy decisions to promote domestic telecom products will be implemented in its true spirit in the near future. For example, the PMA policy for equipment procurement should be strictly enforced and used to encourage the installation of indigenous products. Of late, there have been some strategic network tenders, wherein there are restrictive conditions that discourage domestic telecom equipment manufacturers. This is despite the fact that Indian products are at par with their international counterparts on technical, quality and cost parameters.

We also wish that the proposals for encouraging and funding R&D and intellectual property right-driven domestic products (as envisaged under the Telecom R&D Fund under the National Telecom Policy, 2012) are approved by the government at the earliest. Government support is required to provide a level playing field for domestic telecom product companies vis-à-vis their global competitors.

Further, the government should address right-of-way issues to ensure efficient roll-out of fibre, thereby paving the way for scalable, future-proof backhaul networks. In addition, the industry is looking forward to successful conclusion of the upcoming spectrum auction. This would ensure long-term investments by service providers to enhance their networks for the next phase of growth.

What are some of the key technology trends likely to be witnessed in the next few years?

Sanjay Nayak

Going forward, the industry will focus on building backhaul networks. On the transmission side, the key technology trends that are likely to be witnessed in the coming years are:

•Packet optical transport products (POTP)/PTN replacing SDH: As the growth in telecom services is being driven by data, new investments in backhaul and network infrastructure are being channelised into packet technologies. The demand for PTN equipment (which combines packet switching technology with the operations and provisioning model of SDH) is increasing. Also, with the traffic volumes increasing on the network, operators are upgrading their Layer 0 and Layer 1 networks with DWDM and optic transport networks to enhance capacity management. POTP platforms that integrate all these features are being increasingly adopted by service providers.

•Proliferation of DWDM networks: The demand for higher speed ports on access and aggregation networks translates into a need to transport multiple 10G wavelengths in the metro core. In the absence of spare fibre to support this requirement (or rather, an imminent fibre exhaust in many places), multi-channel DWDM technology is emerging as the only viable option. Therefore, expenditure on metro DWDM is accounting for a larger share of an operator’s optical transport budget. However, since a separate transport platform is not cost effective, operators prefer POTP platforms which integrate a DWDM transport layer within the network. The telecom industry will also witness a high demand for 100G wavelengths, both in long-haul and metro networks.

Zhang Wencheng

Fibre-based access technologies will be the future of the telecom industry. Further, multiple scalability options for equipment must be designed to meet region- and demand-based network realisation. Going forward, policies to expedite the roll-out of broadband services will ensure faster development of the broadband ecosystem.

After spectrum refarming, operators will also have to bear the incremental expenses for developing network infrastructure. While this development is not fully feasible for operators, it will open up new vistas for equipment makers.