Local telecom gear vendors corner less than 3% share in global telco infrastructure market: Report

Indian telecom gear vendors held a 2.6% share of vendor revenues in the global telco network infrastructure (telco NI) market for the four quarters ended 3Q20, according to a report by MTN Consulting.

This percentage, according to the consulting firm, included sales to telcos by HCL, Infosys, Sterlite, Subex, TCS, Tech Mahindra, Tejas Networks, and Wipro, in addition to Cyient, HFCL, and ITI Limited

Annualized telco NI revenues for these 11 companies, according to the firm’s estimates stood at $5.7 billion in 3Q20, out of a global market of $216.3 billion.

Nearly 70% of that $5.7 billion is recorded by three IT services players–Infosys, TCS, and Tech Mahindra. Out of these three, Tech Mahindra commands the highest revenue share in the market.

But despite their lower share in the global market, local vendors are expected to shine in home turf with state-run operators–Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) owing to the government’s equipment procurement rules that strongly favor local suppliers.

More recently, BSNL issued an Express of Interest (EoI) document for covering a potential network with 57,000 sites as it ramps up efforts for rolling out 4G but concerns remain if it will benefit local vendors.

For instance, the operator can partner with either Sweden’s Ericsson or Korean Samsung, having a large R&D presence in India, the report noted due to the absence of local companies capable of building an end-to-end 4G network.

In this regard, IT services companies have been eyeing BSNL’s 4G tender for a long time. Tech Mahindra, for instance, that works with Telefonica and Rakuten on Open RAN, may assemble the state-run telcos’ network in a way that will help with Open RAN opportunities.

However, regulatory hurdles are quite a few, and the procurement slow. Add to that, BSNL and MTNL’s Capex in 2019 stood at just $614 million, under 6% of India’s total, the report noted.

In contrast, India’s largest telco Reliance Jio did many things differently from its rivals. To begin with, it relied on foreign vendors but avoided Chinese gear completely. And then it has a negligible share of gear from Tejas in its network.

Also, to improve rural connectivity, the government launched a BharatNet project which has been especially helpful to local fiber manufacturers. But again, the budgetary allocation of $800 million for fiscal 2020-21 fails to make a mark as it works out to roughly 2% of telco industry Capex in China alone for 2019 and in isolation cannot help a local vendor go global.

Lastly, the year 2021 is likely to see some significant shifts in vendor share in the global telco NI market as spending on 5G increases, and interest in open RAN architectures grows.

But even then India-based vendors have less than 10% chance of growing their share of Telco NI above 4% in 2021, in light of the issues highlighted above.

A slow 5G rollout in India also implies fewer opportunities for local vendors to win new deals and gain experience which could be leveraged in the global market, the report said.