BSNL, the former incumbent fixed line and mobile carrier in India, is finalizing a $4.5-4.7 billion deal with Ericsson and Nokia Siemens to deploy 45.5 million GSM lines. Ericsson’s share of this deal is about $2.82 billions. What is remarkable about this deal is that it represents about 10.8% of Ericsson’s total sales of $25.9 billions in 2006. Ericsson’s sales to the USA represented 8% of its total sales in 2006. We are talking about one company in India generating more sales than the entire USA.
As can be seen in the graph below, sales to emerging markets like China, India, Indoesia, Brazil etc is what is and will drive Ericsson’s telecom equipment business globally.
The equipment suppliers are already aware of the tectonic shift in the structure of global telecom business that is inexorably moving to emerging markets especially in Asia. It is time that consulting firms and equity analysts also smell the coffee…
Source: Ericsson Annual Report 2006
2 Comments
Business as usual
The above tender is on the verge of being canceled by the new Telecom Minister of India Mr. Raja. I guess he wants to get his cut from the deal that was finalized by his predecessor. Motorola may have even given him an advance from the way he is promoting the company. Coming in the wake of Sarin’s comment on the lack of transparency in the Indian M&A process, the Minister’s greed will vitiate the investment climate.
When sanctity of contracts and process are violated so brazenly by the Minister, it portends a difficult time for the telecom sector. I have never in my life heard of employees going on strike to protest decision of the company’s leadership that blunt the long-term competitiveness of the company. But this has happened at BSNL.
Raja is the most retrograde thing to have happened for the telecom sector in India, in a long time:
1. He has opposed the cut of USO levy from 5% to 2.5%, in the backdrop of over 10,000 crore rupees lying unused in the USO fund.
2. Delaying the GoM (high powered cabinet level group of ministers) meeting to resolve spectrum allocation issues that are hampering service rollout.
3. Overseeing the decline of BSNL as both GSM growth and market share declines. Hutch has overtaken BSNL in terms of mobile subscriber base.
Raja will get his cut after all..
After finalizing its plans for a long-awaited but significantly scaled down mobile network contract, Indian operator BSNL is putting plans in place for another massive GSM tender.
Indian Communications Minister Andimuthu Raja said BSNL will open a new tender for 40 million to 50 million GSM lines, with award of the contract to take place within nine months, Reuters reported.
The move comes after BSNL backtracked on its planned massive GSM contract award, eventually slashing the size of the deal.
http://www.telecomasia.net/article.php?type=article&id_article=5271
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