Getting Future Ready: Equipment vendors’ perspective

The year 2017 turned out to be an eventful one for telecom equipment vendors and solution providers. The intense competition triggered a need for rapidly scaling up networks and infrastructure. This, coupled with operators’ growing focus on 5G technology, created positive externalities for vendors. Meanwhile, government programmes such as Digital India, BharatNet and the Smart Cities Mission continued to drive growth and business opportunities. Leading vendors share their views on the industry’s performance in 2017, the key challenges, and their expectations for the coming year…

How did the Indian telecom network and equipment industry perform in 2017? What were the highlights and demand drivers?

Nitin Jain

The Indian government has announced the roll-out of 5G by 2020, a time frame that has been accepted by international standardisation bodies, vendors and service providers in many parts of the world. In fact, 5G may come even earlier, as Indian telecom operators aim to get the first-mover advantage. ZTE has started conducting Pre5G trials with India’s top operators like Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm Limited (RJIL), and also plans to design and develop future technologies.

Sanjay Kaul

The government has fast-tracked reforms in the telecom sector and continues to be proactive in providing room for growth for telecom companies. The Department of Telecommunications (DoT) undertook a slew of reforms and policy changes in 2017 aimed at facilitating ease-of-doing business. High smartphone penetration, accompanied by the availability of spectrum and the entry of Reliance Jio Infocomm Limited (RJIL), has led to tremendous growth in data consumption. However, monetisation of data services remains a challenge.

Sanjay Krishna

The past year saw communication service providers engaging in network expansion and infrastructure modernisation. Operator capex investments stood at around Rs 400 billion, a very encouraging sign. A report by the Telecom Regulatory Authority of India suggests that India meets more than 90 per cent of its demand for telecom equipment through imports and with continued industry growth, imports can touch Rs 1,500 billion by 2020. As part of the Make in India initiative, we need to create opportunities for small and medium enterprises in the telecom equipment space to fill in the gaps and reduce our ­dependence on imports. Cyient is actively ­contributing towards reducing this gap by working with partners like C-DOT to manufacture telecom equipment. The 5G roll-out in the country will increase demand for connected things and bring about a paradigm shift from internet of things (IoT) to internet of people, ­especially with rising data consumption and unprecedented availability of content in local languages.

Sanjay Nayak

In 2017, India continued to register rapid growth in high speed mobile and ­broad­band services driven by an increasing ­popularity of consumer broadband, e-commerce, video streaming, social networking and messaging applications. Both private and public sector operators are investing heavily in optical and 4G ­networks to keep up with the exponential rise in data traffic. India is now the world’s fastest growing market for optical ­networking equipment and this trend is likely to continue for many years since Indian operators have historically underinvested in optical networking technologies. Government entities too are undertaking large pan-Indian telecom ­pro­jects such as BharatNet and the Smart Cities Mission, which have a large optical networking requirement.

K.S. Rao

With the telecom sector continuing to be a critical driving force for growth and ­inno­­vation, the market saw important ­mile­stones being achieved through various initiatives. The Digital India vision ­pre­­sented a $1 trillion business opportunity, connecting far-flung rural regions to urban spaces. The creation of high-speed fibre in­­fra­structure is crucial to achieve this vision. Fur­ther, the emergence of IoT and 5G applications will make the availability of ubiquitous connectivity all the more important. With these demand drivers in place, fibre continued to be deployed by all ­classes of players. At one end of the spectrum were traditional operators, who invested in deep fibre assets for delivering the next ­gene­ration of data-heavy technologies via ­fibre-to-the-home, while on the other end were over-the-top (OTT) players. In addition to the data-driven mega trend on the consumer side, we are ­witnessing similar disruptive trends in the B2B segment. Today, virtualisation and cloud have become integral business strategies for all global companies. The above shifts and the creation of a competitive market due to consolidation in the telecom sector has resulted in the need for network enhancements to web scale. This is likely to make way for a large market for smarter fibre networks with ultra high speed and low latency.

Radhey Shyam Sarda

The telecom sector witnessed major consolidation in 2017 and the same will continue in 2018. Driven by the multifold inc­­rease in data traffic, both the telecom network and equipment industries witnessed a number of investments. The Indian telecom network and equipment industries have maintained a positive flow even in the face of the ongoing consolidation.

Huawei has been actively working with telecom companies, leveraging some of the key pre-5G technologies to help ­inc­rease spectrum and network efficiency. We have also been working with operators to help develop newer services in the domains of cloud, video, IoT, etc.

Ramgopal Yadavalli

The optical fibre market has witnessed an upsurge in demand. A geographical shift was observed in the growth requirements ac­ross the globe in 2017. The domestic mar­­­­ket has begun to become bullish. ­Fur­ther, going with the latest trends, we can anticipate the domestic market to become a prime region of growth.

What has been the impact of the ongoing consolidation on the telecom business?

Sanjay Kaul

The ongoing consolidation is paving the way for stronger Tier I players who are better placed to invest in new technologies and recruit skilled hands. Telecom operators will benefit from the synergy in their opera­tions, which will lower the overall cost of operations, thereby easing the pressure of thin margins. The industry will need to continually invest in innovation and infrastructure expansion. This will result in big positives in terms of servi­ces, applications, content and cost efficiencies. However, con­solidation and digital tra­ns­­formation may eliminate some manual jobs due to the increasing demand for skilled labour.

Sanjay Krishna

Consolidation in any industry is a sign of maturity. Rationalisation is inevitable once the industry undergoes transformation and consolidation. For every two jobs created, one job will be lost; for every three new cell sites, one will be shut; and out of every two vendors, one will be chosen. Becoming the vendor of choice depends on how innovative we are and the value we add to each client engagement. We have recently unveiled an IoT-enabled tower operations centre in Hyderabad.

Sanjay Nayak

In the long term, the impact of the ­ongoing consolidation will be positive for the industry since fewer but financially healthy players will remain, who can build robust networks and also a profitable ­business. In 2018, we are likely to witness a lowering of the competitive intensity amongst operators and the stabilisation of the industry. With rapid expansion in the 4G user base and the impending arrival of higher ­capacity 5G networks, operators are ­realising that if they fail to invest ­adequately in their optical infrastructure, they are likely to fall behind their compe­titors. We will continue to see strong in­vest­ments in fiberisation and optical spends, especially in metros.

Radhey Shyam Sarda

Lately, the telecom industry has been under pressure due to the ongoing ­consolidation, resulting in fewer players making investments in network expansion. How­ever, in the long term, the consolidation is expected to create bigger and financially stronger players, which will be better positioned to invest in newer technologies.

Ramgopal Yadavalli

The entire telecom space is talking about consolidation. However, the repercussions of consolidation are not expected to impact the optical fibre cable market in the same manner. On the contrary, the industry’s growth looks promising with all major players expanding capacities rapidly. Aksh has been enhancing its capacities, capabilities, expertise and know-how at strategic geographical locations. With proven manufacturing and installation capabilities, Aksh has further strengthened its turnkey offerings and expanded into sectors like metro rail, railways, power, energy, smart cities, fibre-to-the-x and defence.

What opportunities do programmes such as Digital India, Make in India, BharatNet and the Smart Cities offer for the telecom equipment industry?

Sanjay Kaul

The vision for Digital India and related pro­grammes like Make in India, the Smart Cities Mission and BharatNet are all great initiatives, aiming to create a catalytic impact to deliver better network/ digital ­infrastructure. The ambitious Digital India initiative mandates leveraging of network in­­fra­­structure to improve connectivity. The proliferation of technologies like 4G and 5G combined with a higher pe­n­­etration of fibre and internet protocol (IP) backhaul will make the Digital India vision come true as the network will deliver more speed, less latency, serve a higher density of broadband users, as well as promote net­wor­ked society, machine-to-machine and IoT.

Sanjay Krishna

These programmes have progressed, albeit at a relatively slower pace. But these are definitive steps in the right direction. Telecom operators have the right resour­ces to lead a major technology and social revolution through the Smart Cities Mission and Digital India.

Sanjay Nayak

The Indian government has done a fantastic job of completing BharatNet Phase I by December 2017. This network will serve as the backbone of Digital India. We see a strong intent on the part of the government for the Make in India initiative. Telecom equipment import is one of the largest items of our trade deficit. In addition, ­ha­ving a secured, trusted telecom network is a strategic national priority. Thus, the focus on design and Make in India seems to be a step in the right direction. These will ­pro­mote domestic products, intellectual property rights (IPR) and increased value addition in the country since low-level assembly and transfer of technology will not yield much benefit for India.

K.S. Rao

A massive digital inclusion ecosystem driven by the growth in data consumption, devices and emerging technologies such as IoT, and government-supported initiatives such as the Smart Cities Mission and Aadhaar is unfolding before us. India is unique as the scale here is unparalleled. Identity and financial inclusion have im­pacted almost the entire population base. BharatNet is large on a global scale. All of this is culminating in a huge opportunity to create fibre-based digital highways that are futuristic and scalable to ride all new technologies coming our way through the digital transformation. The government’s Smart Cities Mission is creating new op­portunities for telecom providers, infrastructure vendors, networking ecosystem players, application providers and the entire IoT ecosystem in general.

Radhey Shyam Sarda

Telecommunications is the backbone of the Digital India initiative, under which technologies like mobility, cloud, video, IoT, big data and artificial intelligence (AI) will play pivotal roles. The NTP 2018 is expected to pave the way forward for a conducive ecosystem. At the core of government’s Digital India vision are programmes like the Smart Cities Mission, Skill India and Make in India. To this end, the sector is preparing to invest in 5G and other key enabling technologies.

Ramgopal Yadavalli

In the past few years, the government has shown keen interest in developing the ­digital strength of the nation. Further, ­telecom providers have undertaken multiple projects for 5G roll-out. A cumulative result has been a higher demand for ­op­tical fibre cables. The surge in demand for optical fibre cables is not only being felt in the domestic segment, but is ­equally evident in the global scenario. While the US and China are showing robust growth at present, the European Union, the Middle East and Southeast Asia are expected to demonstrate rapid growth rates in the coming decade.

What are the key challenges before the in­dustry? How can these be addressed? Do you have a regulatory wish list?

Sanjay Kaul

Tariff wars, increasing debt burden, ­spectrum licence fees and new types of internet-based players have resulted in a massive disruption and financial stress in the telecom industry. The telecom ­industry at this point of time has a debt burden of close to Rs 5 trillion.

These challenges need to be addressed to accelerate the growth of the industry. Fiberisation and IP-fication of backhaul are on top of the list because without a solid connectivity infrastructure, the  Digital India vision will be hard to achieve. Digitalisation across industry verticals will create economic opportunities for both operators as well as industries. Hence ­tele­com operators should be seen as ­economic growth enablers.

For the creation of a true digital ­net­work, operators need to transform their network architectures at a fast pace to ensure service agility, high quality network per­formance, superior customer experience and lastly, end-to-end security. All of this demands more investment in the sector.

Sanjay Krishna

Competition from OTT players is the number one challenge that the industry faces. If you add the voice services provided on top of messaging apps, then the issue becomes much more significant. To ­add­ress this, the industry must relook at IoT as a technology for the masses. While ­com­munication service providers are trying to add value and solve business problems for enterprises, the value proposition is not compelling for the mass market.

Sanjay Nayak

The domestic industry needs to overcome its economies-of-scale handicap and fiscal disabilities that it faces in comparison with its foreign competitors. This can be done by leveraging our large domestic demand. The government has favourable policies such as preferential market access (PMA) to stimulate this, but so far (except in projects such as BharatNet), this policy has not proved to be effective due to various operational issues and there is clear scope for improvement in its implementation. The newer generation of telecom products is software-differentiated wherein significant value addition happens via software and design, areas in which India is inherently strong. It is therefore ­im­portant for the government to emphasise “design-led manufacturing” instead of traditional “factory-led manufacturing” to create wealth and jobs.

K.S. Rao

In an era where smarter data networks are valuable to India’s digital transformation, budgetary allocation for broadband infrastructure is a must. A certain percentage of the gross domestic product should be allocated for the roll-out of this critical infrastructure. For optical fibre manufacturing, the government should back high quality “Made in India” products by creating a conducive market environment.

Radhey Shyam Sarda

In order to ensure relevance and maintain long-term sustainability in a fast-evolving marketplace, telecom companies need to go beyond providing connectivity and bandwidth, and develop newer business models and revenue streams to better monetise core assets.

We think that it is the right time to start preparing for 5G in India from both the regulatory and ecosystem perspectives. As an example, 5G requires a robust bearer network that can be best addressed with a mix of fibre and E-Band technologies. Huawei is already providing leading optical and E-Band solutions for handling capacity requirement. The release of E-Band spectrum in India will complement the lack of last mile fibre availability and pave the way for a robust network.

Ramgopal Yadavalli

There is huge demand for complete turn­key solutions ranging from manufacturing to installation followed by servicing. Industry players are still learning to surf the high tides. There is a clear mismatch in the demand and supply today. Industry-wide capacity expansions are under way to meet this demand.

What is your outlook for 2018?

Nitin Jain

Transformation to a full cloud network has become the consensus among operators worldwide. Almost all operators across the world have started or are planning to start deploying a software-defined network (SDN) and network function virtualisation (NFV). Especially in a disruptive market like India, operators are forced to rethink and redesign network technologies, business processes and partnership models.

The key trends that will accelerate NFV commercialisation in the near future include cloud-native virtual network functions, open source orchestration platforms and network resources optimisation. All large operators in India started virtualising core network functions in 2017, and we think the next step is making these functions cloud-native, which means adding scaling capability and more automation.

Sanjay Kaul

With latent demand for data fuelling the digital economy, 2018 will be a growth year for the sector. We see growth in all domains – evolved programmable networks, data centre/cloud, automation/NFV, collaboration/unified communication and security.

Telecommunication is the backbone of Digital India and the next big opportunity is IoT and digitalisation of vertical industries like health, education, commerce, banking and retail. We predict that digitalisation will lead to huge efficiencies and create an incremental market opportunity of $600 billion by 2021.

Sanjay Krishna

New technologies like SDN, SD-wide area network (WAN), cloud computing and IoT will continue to grow in maturity and acceptance. I believe we could see the next leg of innovation in network-as-a-service as enterprises are getting hooked on to everything-as-a-service. There is also a lot of potential in the low-power WAN network, designed to allow long-range communications at a low bit rate among things, using IoT.

Sanjay Nayak

4G and fibre broadband will continue to be the key growth drivers. Given the exponential rate at which mobile data usage is ­growing, both private and public operators will focus on upgrading optical capacities on their backhaul networks and grow the number of fiberised cell sites on their ­network, which is abysmally low today. We expect that Phase II of the BharatNet ­project, to connect the remaining 150,000 villages, will begin this year. Besides Bharat Sanchar Nigam Limited, other large public sector units in the power and rail sectors such as Power Grid Corporation of India Limited, RailTel, etc. will continue with their optical networking build-outs. In ter­ms of optical technologies, there is ex­­pec­ted to be strong demand for packet transport network and metro dense ­wavelength division multiplexing products with terabit-scale optical transport network and packet switching capabilities.

K.S. Rao

As new technologies become more data driven, the density and reach of fibre is also increasing at an exponential pace, with fibre getting closer to the actual point of consumption. The ongoing competition in the telecom space is also creating a need for network enhancements over the next three to five years, which is likely to convert into a large market for smarter fibre networks with ultra high speeds and low latency. As 5G becomes a reality in India in the next few years, telecom players will also have to bring in 100 per cent fiberisation. With these, concepts like augmented reality, virtual reality, driverless cars, smart homes and smart factories will become to be a part of our everyday lives.

Radhey Shyam Sarda

India is headed towards a digital revolution. Additionally, there is a strong ­business opportunity in the country across banking, financial services and insurance, government independent software vendor, education, hospitality, energy, infrastructure and smart city segments.

The government has already set up a high-level 5G India 2020 Forum with the primary objective of early deployment of technology in India and a globally ­compe­­titive product development and manufacturing ecosystem. The convergence of social, mobile, analytics and cloud computing will be a leading technology enab­ler­­­ in the coming decade.

With an exponential growth in data traffic coupled with new innovative ­busi­ness models for cloud, video, 5G and IoT, among others, it may just be a matter of time before the industry with fewer ­players returns to its trademark growth.