If there is one market in India where I did not expect a decline in growth, it was the Indian telecom market. With the mobile subscriber numbers beating their own records time and again, the much awaited launch of 3G, launch of MNP the telecom sector has been abuzz with developments that signal a increased demand and increased play for more services and infrastructure.
Surprise Surprise!! The Indian Telecom Equipment sector revenues actually went down in 2010-2011.
Revenues of the Indian telecommunication equipment business declined 2.52%, which stood at Rs 117,039 crore in the last financial year as compared to Rs 120,069 crore in 2009-10
The survey conducted by Telecom Industry Journal also highlights additional pointers with respect to the Telecom Equipment Industry performance in 2010-2011
- Almost half of the total revenue came from carrier equipment makers; a decline of 12.5% from 2009
- Enterprise Equipment segment grew by 0.87%
- User device segment grew by 16.4%
- Nokia registered the maximum revenue in 2010 (I assume it includes revenues from Nokia-Siemens)
Now, a 2.5% decrease is not something that should send the alarm bells ringing but what surprises me is that the Telecom Equipment Industry suffered a decline even when the demand side (telecom operators et all) should have required more hardware / software / services from the Telecom Equipment Industry.
The mobile subscriber demand is increasing multi-folds, new services are being launched, 3G networks have been rolled out and need to be scaled up to efficient levels. All these developments and I think there should have been an increase in demand from operators and enterprise customers for products / services offered by telecom equipment players like Ericsson, Nokia Siemens etc.
There is a possibility that the demand actually increased but the prices of product / service decreased thereby generating less revenues for telecom equipment players. Well, I dont have the data but with the inflation the way it is I doubt if the prices would have gone down.
One other reason could be that enterprise customers and operators made the bulk of equipment related purchases in 2009 and did not have additional requirements in 2010-2011 period. This could be case too but one look at the service levels provided by operators and I don’t buy this argument as well.
Customer frustration with telecom operators is at its peak. 3G services have been lacklustre ever since it launched and the nation-wide rollout is yet to happen. My assumption is that to ramp up the service level quality, infrastructure upgrades would be critical and the orders to telecom equipment industry players should have gone up.
Are the operators handling the increasing customers and new services on the existing infrastructure itself and not making new investments? It might be a plain assumption but a decline in revenues for the telecom industry players in a booming telecom market like India makes me wonder.
Any reasoning you can think of for decline in Telecom Equipment sector revenues ?