From the time of its inception in 2000 to going public in 2017, Tejas Networks’ journey in the Indian telecom sector has been an interesting one. The company has achieved significant growth while tackling its fair share of hurdles and obstacles in the equipment manufacturing space. Currently, the company is focusing on research and development (R&D) in emerging technologies such as 5G and internet of things (IoT). Sanjay Nayak, chief executive officer and managing director, Tejas Networks, shares his views on the company’s key focus areas, opportunities and challenges, and future roadmap…
How has the telecom equipment manufacturing ecosystem evolved in India?
While telecom services have grown, the majority of the telecom equipment used in the country continues to be imported, contributing significantly to our trade deficit. Global equipment players have been interested in selling their products in India but have been reluctant to make investments in domestic manufacturing. On the positive side, many global electronic contract manufacturers have established a strong presence in the country and have created large manufacturing capacities. Of course, Tejas Networks’ success – growing from a startup to a listed company – is a very positive signal for the domestic ecosystem.
We are now seeing strong intent and support from the government for “Design and make in India” for telecom equipment. The latest Telecom Regulatory Authority of India (TRAI) recommendations on local manufacturing as well as the new Preference to Make in India (PMI) policy are steps in the right direction. These have strengthened the local content requirements in many categories of security-sensitive telecom products. If the PMI policy is effectively implemented, it will promote domestic R&D, intellectual property rights (IPR) and value addition in the country.
How is Tejas faring after completing a year as a public entity? What are the company’s key focus areas?
The year 2017-18 was a milestone one for Tejas, during which we successfully completed our initial public offering (IPO) of Rs 7.77 billion. Post-IPO, backed by a strong balance sheet, we have continued to aggressively invest in R&D as well as international sales. The exponential increase in data traffic in telecom networks around the world requires service providers to upgrade the capacity of their existing fibre optic networks and connect more of their sites on optical fibre. The advent of 5G will create even more demand for data and is expected to further accelerate investments in optical networks.
Our focus continues to be on R&D and innovation, and we will continue to invest in advanced optical and data networking products. Our software-defined hardware products are very versatile; they are built on the latest standards and are globally competitive.
On the sales front, we have a focused strategy for expanding our market share in the country and increasing our presence in the fast-growing markets in Southeast Asia, Africa and the Americas. We now have customers in over 70 countries. We are also expanding our product portfolio with next-generation passive optic networks (PON) for multi-gigabit fibre access, long term evolution (LTE)-advanced solutions for wireless access, as well as Ethernet switches.
How is the operator consolidation impacting your business?
In the long term, the impact of the ongoing consolidation will be positive for the industry since fewer but financially healthy players will remain and will invest in building robust networks. Of course, in the near term, there is some financial pressure on them, but we are not seeing it impacting their optical networking investments in any major way.
How are you planning to leverage the 5G opportunity?
5G will continue to accelerate the demand for optical networking equipment since it will not only increase the per-cell throughput by at least 10x when compared to 4G/LTE, but will also see a massive 100x increase in the number of devices. Besides increasing cell-site fiberisation, 5G will lead to a densification of cell sites. In addition, by adopting a centralised cloud-based architecture, 5G will introduce a new market for optical fronthaul equipment, thereby vastly expanding the addressable opportunity for our products.
What is your view regarding TRAI’s recent recommendations on promoting local telecom equipment manufacturing?
TRAI’s recommendations lay a greater emphasis on R&D and design-led manufacturing. If implemented effectively, India can become a global source for telecom products and achieve the goal of net zero imports by 2022. The new National Digital Communications Policy (NDCP), 2018 includes several laudable recommendations such as the fiberisation of 60 per cent base stations by 2022 and the facilitation of access to background IPR in new technology areas on FRAND (fair, reasonable and non-discriminatory) terms to Indian product companies.
What opportunities have emerged from the implementation of BharatNet Phase II and other government initiatives like Digital India and Smart Cities?
Tejas Networks is proud to be associated with the BharatNet project, having contributed significantly to Phase I and now playing an important role in Phase II as well. Smart city projects also present us with a good opportunity, since they all require optical transmission and Ethernet switching products for building their backbone network. We are working with system integrators, consultants and startups to create a fully Indian ecosystem of products for smart cities.
We believe that there is a vibrant startup ecosystem of Indian IoT and software companies, which have all the required elements to build a smart city. As a country, we should have open interfaces and a standard architecture so that domestic startups can get an opportunity to participate in these smart city projects. Currently, a lack of standard architecture and restrictive tender conditions are depriving domestic startups of a vast opportunity.
What are the key challenges faced by the company?
Our current focus – and challenge – is on growing our international business. However, at times, the lack of “Brand India” for deep-technology products does become a hurdle for us in international markets. To address this, we are focusing on emerging markets that have “India-like” needs in terms of affordability, technology and quality, and where our success in India serves as a great benchmark and reference for our customers. We are also excited about the government’s increasing focus on promoting high-tech project exports in telecom via the Telecom Exports Promotion Council, of which I am the co-chairman.
“5G will introduce a new market for optical fronthaul equipment, thereby vastly expanding the addressable opportunity for our products.”
Do you have a regulatory wishlist?
We already have great policies such as PMI, but we would like to see more effective and stringent implementation of these policies. All government-funded projects as well as security-sensitive networks should promote the use of domestic equipment. Also, as recommended by TRAI, the government should give financial incentives to private telecom service providers to buy domestic products.
The newer generation of telecom products is increasingly IPR and software differentiated and the government must lay emphasis on “design-led manufacturing” in addition to the traditional “factory-led manufacturing”. There should be a greater focus on R&D and the ownership of IPR within the country. TRAI has recommended the formation of a Rs 10 billion Telecom R&D Fund for the creation of Indian products, which should be implemented at the earliest.
The government should also establish a Sovereign Patent Fund along the lines of that in South Korea, Japan, France and China, to ensure fair licensing of essential patents and background IPR in emerging technology areas such as 5G, IoT and cybersecurity.
What is your outlook for the Indian telecom industry? What are the key areas of focus for Tejas going forward?
India is an exciting telecom market given the exponential rate at which data usage is growing and the increased digitisation of the economy. Indian telecom operators as well as the government will continue to focus on upgrading optical network capacity and increasing the fiberisation of cell sites, office buildings and homes. India will be the world’s fastest growing optical market for the next many years since operators have been historically spending significantly lower on optical capex and a lot of catching up needs to be done. While 4G and FTTx roll-outs will continue over the next 24-36 months, we expect the 5G capex cycle to start after that. Tejas Networks expects to benefit from this huge domestic demand.
In terms of optical technologies, we expect a strong demand for Packet Transport Network and Metro DWDM products with terabit-scale optical transport network (OTN) and packet switching capabilities. The rapid growth in data traffic and the adoption of bandwidth-intensive applications are forcing telecom operators to upgrade their transmission networks with higher speed 100/200/400G wavelengths and OTN technology for better capacity management. To cater to the home and SME broadband market, many operators plan to roll out FTTx services on gigabit PON technologies. Tejas today has a full range of integrated optical access and transmission products, from megabyte to terabyte capacity, based on the latest global standards and technologies, to address the needs of our customers.