Home India 2007 Building India’s telecom equipment sector

Building India’s telecom equipment sector

by david.nunes
PS Ramesh Issue: India 2007
Article no.: 13
Topic: Building India’s telecom equipment sector
Author: PS Ramesh
Title: President TEMA and Managing Director
Organisation: Measurements and Controls India Ltd, Bangalore
PDF size: 332KB

About author

P S Ramesh is the President of TEMA, Telecom Equipment Manufacturers Association of India, and Managing Director Measurements and Controls India Ltd, Bangalore. Mr Ramesh worked in the Indian Defence Ministry for five years and with ISRO, the Indian Space Research Organization, for three years, involved in design development of tele-command systems. He served as the Managing Director at Measurements and Controls India Ltd (MACIL), a manufacturing company located in Bangalore and Pondicherry, with an in-house R&D in telecom that manufactured and supplied transmission equipment and access products for PDH, SDH, MUX, DLC on SDH, broadband DLC and content delivery networks. Mr Ramesh has a BE (Electronics) with a PG Diploma in Computer Engineering.

Article abstract

India now adds five million phones every 25 days – more phones per month than the population of Finland. Telecom has been driving the growth of India’s economy and no end is in sight. The country is now gearing up to provide wireless and broadband service throughout its interior, where 70 per cent of its population – hungry for telecommunications services – resides. The demand from this market, and for export, is driving tremendous growth in its telecom equipment manufacturing sector.

Full Article

The telecommunication industry has gained tremendous recognition as a key driver for India’s development and growth. Telecom in India had a very satisfactory 2005-06 year. Satellite, Internet, broadband and wireless-based information and communication technologies are changing our life pattern. Telecom services have revolutionized the concept of time and distance. Prices of telecom equipment and services have been falling due to the growing scale of operations and changing technologies. It took India 25 years for us to reach one million telephones. Today, we add five million phones every 25 days, adding more phones in a month than the entire population of Finland. Telecom reforms in India began in the 1980s with the launch of the Mission-Better Communications programme. Private manufacturing of customer premise equipment was allowed in 1984 and the Centre for Development of Telematics, C-DoT, was established to develop indigenous technologies. Private franchises were freely given for public call office, PCOs, that offered local, domestic and international calling services. Two large corporate entities were spun off from the Department of Telecommunications, e.g. Mahangar Telephone Nigam Ltd, MTNL, for Delhi and Mumbai and Videsh Sanchar Nigam Ltd., VSNL, for international services. Thus began the process of privatising of services that had hitherto been under government control. A high-powered Telecom Commission to direct Telecommunication Policies was set up by the government in 1989. The second phase of reforms commenced with the general liberalization of the economy in the early 1990s and announcement of a New Economic Policy, NEP, 1991. Telecom equipment manufacturing was deregulated in 1991 and value-added services were declared open to the private sector in 1992, following which radio paging, cellular mobile and other value-added services were opened to the private sector. The National Telecom Policy announced in 1994 concentrated upon universal service and qualitative improvement in telecom services and also the opening of private sector participation in basic telephone services. An independent, statutory regulator was established in 1997. There was progressive growth in private sector telecom services in the country. The process of ‘corporatisation’ was completed when the Basic Services were also corporatised in 2000 by the creation of Bharat Sanchar Nigam Limited. The most important landmark in telecom reforms, however, came with the third generation of reforms, the New Telecom Policy 1999, NTP 99. With this, the government recognised the importance of telecommunications services for the common man and as a driver of economic growth. To further its quest to increase tele-density, the government also exempted all telecom equipment parts and supplies from customs duties. The target for the year 2007 is to have 250 million telephones installed – a tele-density of 22 per cent; this will call for an investment of US$15 billion. By 2010, 500 million telephones are expected to be in use; this will require an additional investment of about US$25 billion, and will create an additional 500,000 jobs. Twenty million broadband connections and 40 million Internet connections are also expected by 2010. Eight hundred million telephones are targeted for 2015 at a cost of some US$30 billion. This would also create 1.5 million jobs. The Indian telecom sector income now tops US$100 billion (almost Rs 4.5 lakh crore) or 13 per cent of the country’s GDP. Given current low telecom penetration rates and India’s giant population, the potential for India’s wireless industry is huge. Consequently, telecom is an important component of the infrastructure sector of the economy and the projected growth of subscribers, especially to wireless services, will rapidly drive its growth in coming years. Major policy initiatives in the past two and half years – such as reduction in licence fees from 15 per cent of revenues to six per cent for national and international long-distance licences, sharing of infrastructure to optimize efficiency, launching of ‘One India plan’ to allow calls at ‘One Rupee’ per minute across India, and the amendment of the Indian Telegraph Act to enable the USO Fund, universal service obligation fund, to support mobile telephony, and broadband services in rural and remote areas of the country – have greatly accelerated telecoms growth. Telecom manufacturers themselves have committed more than US$1.5 billion, another US$2 billion is expected in the next year or so, and the growth targeted for 2010 will call for an additional US$20 billion. Jobs, GDP growth and government tax revenues should all rise accordingly. Targets for telecom equipment manufacturing India presently produces about US$2.8 billion in telecommunications equipment, with an added value of about US$0.3 billion. India has to position itself as a regional hub for telecom equipment; manufacturing for domestic and export markets has tremendous potential for profit. Considering that some 75 per cent of India’s demand for telecom equipment, and handsets worth US$73 billion through local manufacturing, and given the export potential of US$12 billion, the total telecom equipment production target could be US$67 billion. However, suitable government policy measures will be needed to achieve this target. The decision to use the USO Fund for mobile telephony as well as broadband services will open up the vast, untapped rural market – some 70 per cent of India’s population. The rural population has substantial disposable income and aspires to join the country’s mainstream and share in the growth of its ICT sector. Rural access to telecommunications will be the most important development since the Green Revolution; it will change life in rural areas as never before. In fact, we are christening 2007 the ‘Year of Broadband’ in India. Presently, broadband penetration is quite modest at about three million connections. The USO scheme to provide intense coverage throughout the country, including its rural areas – using wireless broadband technology such as WiMAX – is expected to add more than one million broadband connections per month by the end of 2007. This will be driven by seeding the whole country with robust and ubiquitous network connectivity. As soon as broadband connectivity reaches a critical mass in the middle of 2008, a broadband sequel to mobile’s success story in India will emerge. To trigger this growth, BSNL has come out with an aggressive plan to provide five million broadband connections during 2007 with a minimum download speed of 1 MBPS. Private operators will, no doubt, take up this challenge and make 2007 a success for broadband. India is clearly the investment destination for the world, especially for the IT industry. GDP has been growing consistently at nine per cent, fuelling growth of services and manufacturing. Foreign direct investment in 2005-06 was US$5 billion and the private equity flow added another US$2 billion. The stock market is hitting new highs every week, while the Indian rupee is stable against global currencies. This is the ideal environment for innovation and growth. World leaders in ICT such as, Intel, Cisco, SemIndia-AMD, Microsoft, Motorola, Ericsson, Nokia, Kyocera, Siemens, LG, Samsung and others, have already set up or announced large investment plans for India in hardware manufacturing, chip design, R&D and software development totalling over US$18 billion (about Rs.80,000 crores). This vividly confirms India’s investment friendly climate. On the policy front, the government is likely to come out with a special package of incentives for establishing semi-conductor ‘fabs’ in India. A proposal for an Electronics and IT Hardware Manufacturing Policy is also under consideration, aimed at rationalising the tariff structure on capital goods and inputs, the unification of manufacturing for domestic market and exports, the registration of international patents, state-of-the-art technology transfer, TOT, research and development, and the like. The liberalization of India’s economic policy, de-regulation of key sectors and India’s progressive integration into the global economy are driving its increased adoption of ICT.

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