A unique transition year ahead!

A unique transition year ahead!

After emerging from the COVID-19 pandemic relatively unscathed, the telecom industry is entering a new phase, and faces a new set of challenges. These challenges include navigating a supply chain left in shambles due to the impact of the pandemic and representing a separate concern, the inexorable rise and encroachment of hyperscalers in the telecom domain, which threatens to completely disrupt the status quo in the industry.​

2022 is poised to be a unique transition year for the telecom industry. While unprecedented government stimulus that originated in the wake of the COVID-19 outbreak continues to be pumped into the global economy, lifting all players in some way across the market landscape, CSPs and their vendors must transition to the fundamentally new network architecture, which is software-based, fully virtualized and cloud-centric. CSPs must also determine where they will play in the new value chains that are being created in the digital economy, most notably in hyperscalers’ marketplaces, and in conjunction with new players that are entering the scene in domains such as private networks and satellites. Meanwhile, supply chain challenges are expected to persist through 2022, with continuing semiconductor and component shortages as well as ongoing skilled labor deficiencies and shipping delays, all of which threaten to delay market development and hinder vendors’ ability to recognize revenue and pursue new growth opportunities. Inflation (potentially stagflation) and rising interest rates also pose risks, portending margin pressure and debt refinancing challenges.​

Taken together, these circumstances indicate 2022 will be an unusual year for the telecom industry.

The industry is well poised for rapid growth. There is massive investment in the offing. Network creators and government funds are investing heavily in digital infrastructure. 5G, FTTX, and O-RAN are the preferred technologies being backed, and these are pushing demand for optical networking.

Among the telcos, while in India, Bharti Airtel has plans for more than 30,000 cell sites and large-scale FTTH roll, China Telecom earmarked USD 13-billion CapEx, and AT&T, Verizon, and T-Mobile in the US announced a much higher CapEx spend for 2021 as compared to the previous years.

Continued investments from other segments also like cloud companies, private equity, as well as the citizen networks are being made. Notable amongst these is US President, Joe Biden’s USD 100 billion over the next eight years to expand the high-speed broadband access network to the entire United States. Strong investments are promised by private equity investors in both greenfield and brownfield digital networks. This marks the beginning of a decade of network creation cycle, powered by such large investments. And the investments are expected to strengthen as we move forward.

In terms of the technology drivers, for these newer-age digital networks, the networks are moving clearly to the edge of wherever the consumption is, and newer technologies are powering these newer-age digital networks. 5G is clearly getting into the mainstream both in terms of usage as well as deployments. 2020 saw almost over 163 commercial deployments for 5G happening globally. With this, 5G has become the fastest technology to reach 400 million subscribers. Just to provide a perspective, 2G took almost 30 quarters, 3G took 25 quarters, 4G took 17 quarters, and 5G took just 5 quarters to reach this number of 400 million subscribers. On this, increased CapEx across the globe is being seen by most telecom companies.

In terms of the fiber-to-the-edge and fiber-to-the-home (FTTH) rollout, Europe continues to witness a furious FTTH build with multiple operators doing more than a million homes every year. In the US, AT&T has deployed more than 3 million-plus fiber to the premise and business locations access more than 90 cities in the current year. The shift that is happening with the open radio access network (O-RAN), the O-RAN is making inroads with major communications providers, either starting to deploy or continuing to do trials in integrating this new technology in their networks. Verizon has started to deploy O-RAN gear in terms of commercial deployment, European operators, such as Deutsche Telekom, Orange, Telefónica, and Vodafone have joined forces to support the rollout of open RAN in their future mobile networks. And, India too is considering O-RAN deployments for 5G, when it starts coming in 2022 in the country.

OFC demand is showing sustained long-term growth, and is expected to sustainably grow over the next several years. The current CRU projections talk about a longer-term growth projections over the next 4–5 years. And, this growth is across the globe in different geographies. This year, the demand in India is supposed to grow by 19 percent largely on the back of increasing cell-site connectivity, increasing FTTH deployments, as well as deepening connectivity for rural and semi-urban deployments. The geographies like Europe are expected to grow by 7 percent YoY on the back of buoyant FTTH activity. In North America, the deployments are going extremely strong and are expected to grow by 8 percent, and in the China market, which is a significant market, deployments are expected to grow by 4 percent on the back of almost between 600,000 and a million 5G base station deployments.

H1 2021 saw regulators pressed by governments to accelerate spectrum auctions or to raise base prices for spectrum in 2021, partly to address financial shortfalls but also to ensure that economies can transition faster to a digital-first footing. Huawei and other Chinese vendors have struggled to secure network supply contracts in US-aligned developed markets, albeit still winning deals in emerging markets, where cost has a greater priority than security concerns.

The immediate priority for most government businesses, as Covid-19 vaccinations mean the virus is becoming endemic and must be endured, is to ensure a return to business-as-usual. Although investments in IT hardware and software will, generally, increase to ensure a degree of agile working, capex will be focused more on simplifying supply chains and business models in the short to medium term, meaning that digital transformation will not be uniform or as rapid as previously envisaged. And, to work at scale, this transformation will require input from all stakeholders, from the state level to the employee/consumer.

Globally, governments and consumers are growing concerned about the reach and influence of the Big Tech companies, with market dominance, data privacy, and security – the main areas around which efforts to do something are taking shape. The key drivers behind regulatory overhauls in this field are automation, regionalization, power, geopolitics, and the Big Tech companies’ own calls for clear rules, by which they should be expected to abide.

Tech remains geopolitical despite the less innately combative stance of the Biden administration in the US. While US rhetoric has been dialed back substantially, giving China less to rail against and less often, tech-focused restrictions against Chinese companies will most likely remain in place, and could become more rules-based.

Despite broader differences in both perception and ideology toward technology, conflict is not expected to lead to a bifurcation of the global tech ecosystem, but rather, accelerate the ongoing trend of regionalization.

Different approaches to governing the internet have long been present; for instance, the centralized, protectionist model implemented in China has created an insular internet market there, while other markets have mostly adopted a more hands-off, market-based approach toward their internet governance.

Sector outlook for telcos in 2022 is neutral, says Fitch Ratings. The credit rating agency expects industry consolidation, and a gradual resumption of roaming revenues, with border curbs easing off, to drive modest improvements in net leverage and mid-single-digit growth for Asia-Pacific (APAC) telecoms revenue. M&A may gain traction in some jurisdictions in 2022, as scale becomes important for 5G. Telcos are expected to maintain prudent capital management through staggered 5G investment and disciplined shareholder return policies to preserve balance-sheet strength.

Telecom CapEx, the sum of wireless and wireline telecom investments, outlook confirms positive equipment momentum, says Dell’Oro Group. In Q2 2021, PON OLT spending jumped 17 percent year-over-year (YoY), and total market hit USD 3.6 billion, Open RAN radio and baseband projections have been revised upward – total cumulative Open RAN revenues are now projected to approach USD 10 billion to USD 15 billion between 2020 and 2025, and disaggregated DWDM systems revenue outperformed the broader optical transport market.

The mobile core network (MCN) is forecast to have an overall revenue compound annual growth rate (CAGR) of 3 percent from 2020 to 2025. Dell’Oro also estimates the 5G portion of the MCN market to have a 33-percent CAGR. Other key highlights are:

• The cumulative investment is expected to be over USD 50 billion from 2021 to 2025, with regional shares in the range for North America – 18 percent to 23 percent; Europe, Middle East, and Africa – 30 percent to 35 percent; Asia Pacific – 40 percent to 45 percent; and Caribbean and Latin America – 5 percent to 10 percent.
• By the year 2025, MCN functions associated with 5G are expected to represent over 70 percent of the revenue mix between 4G and 5G MCN functions.
• 5G Core builds by the three incumbent service providers for 5G Standalone (5G SA) networks in China are continuing to exceed expectations. In addition, in 2021, the new Chinese communications service provider, China Broadcasting Network will be beginning construction of its 5G SA network.
• Deployments of more 5G SA networks are expected in the latter half of 2021 in Australia, Germany, Japan, South Korea, Switzerland, and the United Kingdom. AT&T and Verizon should begin in the earnest in 2022 and 2023 with their 5G SA networks. Geographic coverage is minimal at launch and is expected to grow throughout the forecast period.

5G service providers and public cloud service providers are ideal partners. With the advent of the 5G Standalone (5G SA) era, 5G service providers (SPs) have the opportunity to increase their revenues from the segments of the enterprise market requiring real-time or near real-time wireless communications. In the past, 3G and 4G wireless network performances were based on best effort. Some networks differentiated themselves with coverage and/or speed, but it was still a best-effort network, with no guarantees of specific performance levels or service. The 3GPP 5G mobile network specifications have the features to deliver performance guarantees. A 5G SP can now increase revenues from the enterprise market by offering premium services and performance with guaranteed service level agreements (SLAs).

Global telecom equipment market
Cumulative revenues for the telecom market in Q1-Q3 2021 are at USD 100 billion.  The overall telecom equipment market advanced 9 percent in total equipment revenues year to date versus 2020, with 6 percent growth in Q3, according to Dell’Oro Group. This covers equipment segments of broadband access, microwave and optical, transport, mobile core network and RAN, SP router and switch. The growth in the quarter was underpinned by healthy demand for both wireless and wireline equipment.

While the majority of the suppliers were able to navigate the supply chain situation fairly well in the first half, supply chain disruptions had a greater impact in the third quarter, though clearly this was not enough to derail the positive momentum that has characterized the market over the past six quarters.

The collective global share of the leading suppliers remained relatively stable between 2020 and Q2’21-Q3’21, with the top seven vendors comprising around ~80 percent of the total market.

Ongoing efforts by the US government to curb the rise of Huawei is starting to show in the numbers, especially outside of China.  Other governments too made moves to exclude or limit the Chinese vendor including the U.K. last year. At the same time, Huawei continued to dominate the global market, still nearly as large as Ericsson and Nokia combined. Nokia and Ericsson each had around 15% share of total revenues, compared to about 29% for Huawei alone. Another 20% or so was taken by ZTE (11%), Cisco (6%), Samsung (3%) and Ciena (3%).

Overall, ZTE and Samsung are trending upward, with Samsung gaining a percentage point driven by share gains in the RAN business while Huawei is losing some ground YTD relative to 2020.

Additional key takeaways from the 3Q’21 reporting period include:

• Positive market sentiment in the third quarter was driven by strong growth in RAN and Broadband Access, which was more than enough to offset weaker trends in Optical Transport.
• RAN and Broadband Access are also the strongest growth vehicles for the YTD period, fuelled by surging demand for 5G, PON, and FWA CPEs.
• With the pandemic resurging and the visibility surrounding the supply chain weakening, the Dell’Oro analyst team is expecting near-term growth to decelerate – the overall telecom equipment market is now projected to advance 2 percent in 2022, down from 8 percent in 2021.

Huawei’s lead in the equipment market contrasts its consumer smartphone business, which was hurt by US sanctions and earlier placement on the Commerce Department’s Entity List in 2019.
Huawei held 17 percent share of global smartphone shipments in the first quarter of 2020 but contracted rapidly after Q2 2020, declining to just a 4 percent share in Q1 2021, according to Counterpoint Research. It spun off its budget smartphone brand Honor so it could survive and gain access to key components that were cut off as part of U.S. actions – after which Honor in August became the third-largest smartphone brand in China in the low-mid-segment with 15 percent share. Apple in October moved to the No. 1 position in China with 22 percent share of smartphone sales in the country, ahead of Vivo and Oppo, as well as Huawei who trailed the premium smartphone market with just 8 percent share.

Huawei’s Q3 results showed trouble in the consumer business as overall sales plunged 38 percent. Huawei didn’t break out its quarterly results by business segment, but attributed revenue declines to consumer.

“Overall performance was in line with forecast,” said Guo Ping, Huawei’s Rotating Chairman in a statement. “While our B2C business has been significantly impacted, our B2B businesses remain stable.”

In the first three quarters Huawei still generated revenue of CNY455.8 billion ($71.5 billion) with net profit margin of 10.2 percent. That compares to network equipment rivals Ericsson and Nokia which in the first nine months of 2021 reported respective net sales of SEK 161 billion ($17.78 billion) and EUR 15.788 billion ($17.85 billion).So, what is the overall value of this market? Well, it looks like it will be hitting of even breaking the USD 100-billion mark, if Dell’Oro’s expectation of full-year growth in the 5-percent – 10-percent range is achieved. The market in 2020 was worth between USD 90 billion and 95 billion, according to the research firm, so a mid-point of that range growing at 7.5 percent would result in a market worth USD 99.4 billion, but growth at the high end of the range would tip it into three figures.

Two of the key drivers will be the RAN and broadband access markets, both of which have been growing at a strong pace this year so far. The RAN market is set to grow at between 10 percent and 15 percent this year, which means it could be worth as much as USD 40 billion, while the increasing number and size of investments in fiber broadband access networks around the world is driving growth in the broadband access market, which Dell’Oro reports was worth USD 3.6 billion during the second quarter alone.

Indian telecom industry
The Indian telecom sector is at an inflection point, given the impending switch to 5G network; expanding 4G rollout by telcos; PLI schemes to boost exports; the implementation of BharatNet Phase-II and the government’s focus on rural connectivity through Digital India.

The next couple of years shall see a pan-India 4G network, including both wireless and optical-transmission infrastructure rolled out, strengthening of high-speed home and enterprise broadband on optical fiber, and an increased use of domestic telecom products.

Modernization of defense networks, technology upgradation of utility networks to cater to growth in packet traffic, and strengthening cybersecurity are on the cards.

The development of urban infrastructure in 100 smart cities with secured public safety infrastructure is already underway.

All these are creating an unprecedented environment for growth. 2022 is set to usher in the decade of network creation; with 5G, FTTx, and O-RAN at the center stage. While India has 13 percent of the world’s telecom subscribers, and is one of the biggest consumers of mobile data in the world, the CapEx spend by Indian telecom operators is disproportionately low and is only 5 percent of the global equipment spend. With an increased demand for highly reliable, high-speed home/office fiber broadband connectivity, the impending 5G rollouts, and the stabilization of competitive intensity amongst telcos, a robust CapEx cycle is expected in the years to come. The 5G readiness is already happening from the operator’s perspective. Telcos have started working toward transport readiness.

The recent approval by the Department of Telecom, of the Made in India standard 5Gi has been a surprise. It is all set to be formally incorporated in the global 5G standard (3GPP).

This is expected to enable telecom equipment makers, especially the domestic players, to start using this standard to develop network gear for 5G services. A formal agreement is expected to be announced shortly. The DoT has been coordinating with the global players for the incorporation of 5Gi with the 3GPP standard. The new standard was developed under the supervision of Telecom Standard Development Society India and DoT, with major contribution from all major IITs and the IISc.

It is also supported by Indian technology companies, including TCS, Saankhya Labs, HFCL, and Tejas Network. The new standard could make their equipment more relevant for Indian 5G deployment.

Leading vendors
Nokia Solutions and Networks India Private Limited reported a 20 percent increase in 9M 2021, over the same period last year. Its revenue was ₹7530.45 crore in the January-September 2021 period, an increase over ₹6382.66 crore in the January-September 2020 period, which indicates the momentum has been quite good in India at a time when 5G has not yet started. Its IP optics is seeing growth as telcos start to evolve the network to the next level. Despite Covid-related challenges and overall low CapEx cycle, the vendor has maintained its run rate of site rollouts. In 2020, Nokia rolled out about 120,000 sites in India, which is both new sites and expansions. And it is maintaining a similar run rate in 2021. The Chennai factory output is also not impacted because of Covid and is going quite well, and again continues to be 50 percent exports and 50 percent for the India market. 5G base stations or 5G Node-Bs are also getting manufactured and being exported.

With Ericsson’s plans to reduce its operations in China after suffering a big sales drop in one of its biggest markets due to retaliation for Sweden’s ban on China’s Huawei from selling 5G gear in the country, and the proportion of revenue that it earns from China dropping to around 3 percent of the total from 10–11 percent, the manufacturer is upbeat on India.

“It is an attractive market for Ericsson because of the volume it offers, and we shall continue to invest here. More than 98 percent of whatever we need for India is produced in India,” says Nunzio Mirtillo, head of Ericsson Southeast Asia, Oceania, and India. He is worried that the Indian government must make adequate spectrum available. “The government should make available at least between 80 and 100 megahertz of 3.5 or the mid-band to the existing operators. India should make sure that they auction millimeter wave spectrum (26 GHz, 28 GHz bands), which is 400 megahertz which will be very much needed going forward to match the tremendous demand of mobile broadband that will be there in the future. And also, you need to take care of the transport network, so we also need enough spectrum on the E band for connecting the 5G networks. In India, if the telecom service providers don’t get access to the millimeter wave spectrum, the overall country will not be as effective as the rest of the world (through 5G). (Adequate) spectrum has to be made available, otherwise in the medium-term, India will have a deficit compared to other countries. Because you need it to be part of the network evolution plan for 5G,” he adds.

With the Indian government so far not granting permission to Huawei India for the 5G trials, the manufacturer’s presence in India has become uncertain. It is widely accepted that excluding Huawei from the network could increase the price and slow down India’s rollout. The trump card that Huawei has, and for which India is yet to find an answer is the number of patents the company holds. Huawei has declared almost 1000 patents more than any of its rivals, Ericsson, Huawei, LG, Nokia, Qualcomm, and Samsung, the maximum being the core ones, the standard-essential patents.

Ciena certainly has much to celebrate. The company has reported its highest-ever quarterly global revenues, at USD 988.1 million in Q3 2021, and its President and CEO, Gary Smith, is forecasting revenues of more than USD 1 billion in its current quarter. And, India is partly responsible for this. “We are taking full advantage of our leading position to address the opportunities that are driving network investment, including capacity adds to address bandwidth demand as a shift to the cloud with new architectures and network builds intense focus on edge applications. And obviously (there is) the need for network automation, as well as Huawei replacement opportunities within the strong demand environment,” noted the CEO, who once again identified India and Europe as the markets, where Ciena is set to benefit from a cut in operator spending on Huawei optical network equipment, though he cautioned that such opportunities take a long time to materialize.

Samsung, which has been the largest 4G vendor in India in terms of volumes deployed with Jio, will be more open to scale their offerings and pitching to other telcos. Likes of BSNL and other private 5G networks would be potential targets initially. With 5G SA coming on, Samsung could look at winning circles in India, which are more data-centric, and most traffic can be moved to 4G/5G networks.

Ankit Agarwal, who recently took over as managing director of STL is bullish about the India market opportunity, including business prospects arising from upcoming 5G deployments, and connectivity projects like BharatNet. With its portfolio spanning optical fiber and cables, network design and deployment, as well as network software, STL positions itself as an integrated solutions provider. With a global footprint, fiber capacity of 50 million fiber kilometers and planned cable capacities of 42 million fiber kilometers, STL says it is very well positioned to lead in this decade of network creation.

Tejas Networks sees a very large opportunity in the telecom sector, both in India and global markets, with the new cycle of investments in 5G and fiber-based broadband rollouts. Tejas Networks, with the acquisition of 26 percent stake by Panatone Finvest Limited, has become a part of the Tata group. The company will utilize the proceeds raised from the preferential allotment to invest organically and inorganically in the research and development, sales and marketing, people, infrastructure, and to enhance its manufacturing and operational capabilities to cater to this large market opportunity, and for other general corporate purposes.

ZTE India appointed Li Jian Jun as new chief executive officer in March 2021, replacing Yan Xiao, who served the local operations for just over a year. The appointment comes at a time when the Chinese company is struggling to grow its business in the country. It is awaiting clarity over its involvement in BSNL’s 4G network expansion even as it seeks over ₹1000 crore in pending dues from the telco. ZTE is also one of the main players in the country’s wireline equipment market. However, TEC’s recent move to put mandatory testing and certification for wireline equipment on hold has also impacted the vendor’s business with private telecom operators. The recently introduced rules mandating the telcos to use equipment from trusted sources only, and accessing the website www.trustedtelecom.gov.in to find vendors from whom they can procure particular network equipment, is also playing spoilsport for the Chinese vendor.

The Indian telecom industry is facing some headwinds. Indian 5G program for the time being seems to have got derailed. The 5G trials are being conducted by Reliance Jio, Bharti Airtel, Vodafone Idea, and MTNL with Ericsson, Nokia, Samsung, and C-DoT. In addition, Reliance Jio Infocomm has been conducting trials using its own indigenous technology as well as Samsung gears. BSNL will conduct trials separately.

The 5G trials scheduled to be over by November 26, have, on the request of the telcos been given an extension for six months, and the carriers will be able to carry out 5G trials until May 2022. The Indian government will now have to push the date of the spectrum auction too, earlier planned for the January–March 2022 quarter.

The 5G trials seem to have not been going as smoothly as reported in the media. Some of the areas of concern as peak throughputs of 1.5 Gbps or more are not seen universally and has not been tested with 1000-plus devices accessing at the same time; Jio seems to be far from ready with its home-grown technology, more likely it has only developed the core of the network and small-cell radios, while Airtel too is struggling with TCS, its 5G technology partner.

And then the question remains, where is the customer? With such anticipated high spectrum fees, huge CapEx involved, some returns to start trickling in at least three years away and more, the decision of the Indian government to not allow the Chinese vendors, the going ahead is tough, to say the least.

There will be a delay in the ordering of the 5G equipment on the telecom manufacturers too. The telecom manufacturers are expecting an investment of pan-India 5G network rollout to be about ₹2 lakh crore. Motilal Oswal has pegged site CapEx at ₹90,000 crore for pan-India coverage of 600,000 sites and cost per site of ₹15 lakh. The brokerage estimates that about 9000 sites will be required for a city as Mumbai.

The OFC manufacturers, in the near future are expecting an investment for fiber to be ₹25,000 crore, assuming pan-India fiber requirement of ~2.5 million km and cost/km of fiber layout at ₹100,000. Crisil estimates a total industry-wide CapEx of up to ₹2–2.5 lakh crore on fiber over a 10-year CapEx cycle, with 70 percent front loaded in the first five years, which can go up as new and disruptive use-cases emerge in 5G. Currently, around 33 percent of telecom towers are connected with fiber in India, which needs to reach at least 70 percent to fully utilize the potential, which 5G services could offer. Against a target of 7.5 million km of fiber required to be deployed, only 2.68 million km have been deployed to date. An E&Y report pegs the CapEx requirement at ₹45,000 crore to reach 70 percent tower fiberization by 2024.

At the service provider end, with 5G spectrum auctions postponed, however, telcos continue to heavily invest to increase capacities in their 4G networks, upgrading backhaul and transport networks, enhancing their spectrum portfolios, and enabling cloud and virtualization technologies in preparedness of 5G.

The telcos are also forging partnerships across the value chain, including web-scalers, technology players, original-equipment manufacturers, and working with enterprise clients across sectors, including manufacturing, logistics, and healthcare to test 5G-based solutions. The telcos are closely working with start-ups to develop vertical/industry-specific 5G use-cases that could be deployed, meeting specific needs of the industry verticals. This is in line with global trends. Communications service providers are the lead partners in just 16 percent of the 600+ enterprise 5G projects, identified globally up to and including Q1 2021, down from 21 percent a year earlier, according to a research based on Omdia’s study. That decline comes in a market in which the number of enterprise 5G projects doubled during the 12 months to the end of March 2021. Meanwhile, alternative service providers, such as private network specialists, have ramped up their efforts and are outpacing telcos, scooping up the lead-partner role in 27 percent of enterprise 5G projects, a figure that represents significant growth from 7 percent a year earlier.

Airtel and Vodafone Idea’s interest in open-RAN, which would allow an operator to use different vendors in the same radio access network, is also expected to cause a ripple. Jio is developing its own open RAN stack, which it plans to deploy in its own network and sell globally. Operators claim O-RAN will produce alternatives to Nokia, Ericsson, and the big three equipment vendors by allowing other companies to focus on specific hardware or software elements. The injection of rivalry, they hope, will lower costs. But not everyone is convinced.

“Open RAN is not a solution that can replace existing networks in India one-to-one,” says John Strand, the CEO of Danish advisory firm Strand Consult. “It is not a technology that can substitute for 2G and 3G. Another question is whether Indian operators want to replace existing 4G equipment, and establish a set of parallel base stations, for example, one set running 2G and 3G and another 4G and 5G.” With a second network built on the same site, rental and energy consumption costs could rise significantly.

The PLI scheme, hugely being encouraged by the government, has the potential to ring in a course reversal for Indian telecom companies (telcos), which have been largely import-dependent and reliant on global vendors for their network roll-outs and reduce the share of telecom imports in overall demand to under 50 percent. The scheme covers major telecom equipment, except optical fibers, domestic gear manufacturers, demand for which is expected to double by fiscal 2025.

So far, imports have accounted for 75–85 percent of the total telecom equipment market. While some global vendors have their manufacturing bases in India, majority of equipment has been imported from East-Asian countries such as China, Malaysia, South Korea, and Vietnam.

The nascent domestic equipment industry, on its part, has been catering mainly to public sector undertakings (PSUs).

All that is expected to change now, with the government extending the PLI scheme to the telecom equipment sector to boost domestic manufacturing and attract investments in the target segments of telecom and networking products.

Under the scheme, 10 MSMEs and 10 non-MSMEs (of which at least three are domestic companies) will be shortlisted on the basis of their investment commitment. The shortlisted companies will then receive incentives for incremental sales generated over the base year, fiscal 2020.

The government has earmarked ~₹12,200 crore for the scheme, and expects investments of ~₹3000 crore, with an incentive to CapEx ratio of 4:1, which is the highest among all PLI schemes.

The fledgling domestic equipment industry missed the last wireless CapEx boom over fiscals 2016–2021, which saw telcos pump ₹3 lakh crore to strengthen their 4G networks, as they were largely dependent on global vendors for their core, radio, and transport network rollouts.

However, it can be constrained by low cap on R&D investments, pricing pressure in the telecom industry, and delay in 5G auctions.

Some 85–90 percent of the domestic demand for telecom gear is driven by wireless network investments of telcos. Telcos have so far largely depended on vendors in China and other East-Asian countries. Imports accounted for around three quarters of the equipment demand of telcos. 5G networks, by their nature, are investment-intensive. They entail at least 70 percent tower fiberization levels (from 30–35 percent at present) and 4–20 times higher radio site deployments compared with 4G. This would lead to higher investments in optical and radio networks, respectively, concludes Isha Chaudhary Director, Crisil Research.

A spend to the tune of ₹6466 crore is expected from the Indian government. The use of the Universal Service Obligation Fund (USOF) to provide 4G connectivity in 7287 villages has been approved. The villages are spread across five states of Andhra Pradesh, Jharkhand, Maharashtra, Odisha, and Chhattisgarh. The estimate of ₹6466 crore includes the operational expense of managing the network for the next five years. The work that relates to the provision of 4G mobile services in identified uncovered villages will be awarded through the open competitive bidding process as per extant USOF procedures.

Fitch forecasts Bharti’s CapEx to increase to about ₹37,000 crore (FY21 – ₹33,300 crore), of which ₹3700 crore is likely to be paid upfront to acquire 5G spectrum assets. The company is expected to also seek to strengthen its fiber infrastructure – connecting towers with fiber and backhaul infrastructure to prepare its network to launch 5G services in 2022-23.

CapEx on 5G infrastructure in 2022-23 is expected to replace current 4G CapEx, as 4G coverage is largely complete. Barring a one-time 5G spectrum payment, Bharti is likely to generate positive free cash flow in FY22 on higher EBITDA generation, which should be sufficient to fund higher core CapEx, interest costs, and taxes.

Some recent procurements made by service providers
NOKIA
Bharti Airtel. April 2020. Nokia and Bharti Airtel entered into a multi-year agreement to deploy Nokia’s SRAN solution across nine circles in India, helping Airtel to enhance the network capacity of its network, in particular 4G. The rollout, which will also lay the foundation for providing 5G connectivity in the future, will see approximately 300,000 radio units deployed across several spectrum bands, including 900 MHz, 1800 MHz, 2100 MHz, and 2300 MHz, and is expected to be completed by 2022. The contract is estimated at ₹7500 crore.

Nokia will be the sole provider of SRAN in these nine circles. The deal will also include Nokia’s RAN equipment, including its AirScale Radio Access, AirScale BaseBand, and NetAct OSS solution, which will help Airtel to monitor and manage its network effectively. Nokia Global Services will also play a crucial role in the installation, planning, and deployment of the project, which will be executed via the cloud-based Nokia Delivery Platform.

July 2020. Nokia announced that its CloudBand-based software products are powering Bharti Airtel’s Voice-over-LTE (VoLTE) network in India. The network supports over 110 million customers, making it the largest cloud-based VoLTE network in India and the largest Nokia-run VoLTE in the world.

The cloud-based VoLTE deployment allows Airtel to provide its mobile customers faster and more reliable, cost-efficient call connectivity. The solution, which has been deployed to cover all 22 telecom service areas in India, uses commercial off-the-shelf IT hardware with cloud-based virtual network functions (VNFs), which consumes much less power and space compared to the traditional 2G/3G circuit-switched legacy core. The VoLTE solution enables Airtel to free up spectrum by ramping down its 3G network, allowing the operator to utilize the freed-up spectrum to deploy 4G/LTE services for better speed and capacity.

As part of its cloudification strategy, Airtel will also deploy Nokia’s CloudBand infrastructure software with the aim to create new revenue opportunities for 5G and internet-connected devices.

Vodafone Idea. June 2020. Nokia and Vodafone Idea announced the successful completion of the first phase of world’s largest deployment of dynamic spectrum refarming (DSR) in India. The companies also announced that they have deployed the country’s biggest massive multiple-input multiple-output (mMIMO) installation.

Nokia’s dynamic spectrum refarming solution (DSR), which has been deployed across key cities in India, will enable Vodafone Idea to enhance user experience with optimal use of its spectrum assets. Nokia’s solution includes its module AirScale BaseBand, which allows service providers to efficiently address the growing mobile broadband needs of subscribers in densely populated areas. Nokia’s DSR solution also enables service providers to dynamically share spectrum across different technologies, and to automatically change spectrum allocation in line with evolving spectrum usage.

As part of the single radio access network (SRAN) contract, Nokia has also deployed more than 5500 TD-LTE mMIMO cells in the 2500 MHz spectrum band in eight circles (service areas) in Mumbai, Kolkata, Gujarat, Haryana, Uttar Pradesh (East), Uttar Pradesh (West), Rest of Bengal, and Andhra Pradesh. The deployment will help Vodafone Idea to enhance coverage, reliability, and speed. India has seen a massive increase in data usage in recent years.

December 2020. Nokia partnered with Vi Business, the enterprise arm of Vodafone Idea Ltd. to offer future-ready services that will help enterprises to digitally transform, and improve efficiency, reduce operational costs, and enhance security.

Reliance Jio. In March 2020, press reports created a buzz with the news that Reliance Jio had replaced Nokia and Oracle’s 4G voice technology with their own components, and built end-to-end network gear for 5G illustrating how India’s largest telecom operator is now capable of building network equipment. However, no major swap had taken place, Nokia’s Chief Marketing Officer Barry French clarified on the company’s website. Jio had replaced only one among the dozens of Nokia’s components in its core network and the European company’s technology continues to power Jio’s infrastructure.

AirFiber Networks. May 2021. Nokia announced that AirFiber Networks, an internet service provider (ISP) in Bangalore and Tamil Nadu in South India, will use its broadband solution to launch high-speed data services and expand its network to better serve its subscribers. Nokia’s gigabit passive optical networking (GPON) solution will enable AirFiber Networks to provide high-speed broadband services in Bangalore and underpenetrated areas across the state of Tamil Nadu, aiming to reach over 100,000 subscribers in a year. Once deployed, AirFiber Networks’ subscribers will be able to access network for remote working, and other services over broadband connection, such as remote education and healthcare.

ERICSSON
Bharti Airtel. July 2020. Bharti Airtel renewed its agreement with Ericsson to provide pan-India managed network operations through Ericsson Operations Engine.

The three-year deal saw Airtel launching Ericsson Operations Engine. Ericsson is deploying the latest automation, machine learning, and artificial intelligence (AI) technologies to enhance Airtel’s mobile network performance and customer experience. Ericsson is also managing Airtel’s network operations center and field maintenance activities across India.

Ericsson is also providing network optimization services, combining multi-vendor networks expertise with its state-of-the-art machine learning/AI-enabled cognitive software suite. The agreement builds on the 25-year collaboration between Ericsson and Airtel in India.

October 2020. Bharti Airtel and Ericsson strengthened their long-standing partnership with a renewed multi-year contract to supply and deploy 5G-ready radio and transport solutions from Ericsson. By using MINI-LINK 6000 products, Airtel has also increased the network’s backhaul capacities.

December 2021. There were media reports that Vodafone Idea is looking for a third-party provider of 5G equipment in an effort to avoid an Ericsson/Nokia duopoly. The company is looking at both local and international vendors, said the news item.

HUAWEI
Vodafone Idea. June 2021. Vodafone Idea awarded an add-on contract worth ₹400–450 crore to Huawei for wireless and wireline network upgradation, just before the government mandate of using equipment only from trusted sources came into effect. Huawei though has been fulfilling only limited equipment deliveries as the telco already owed some ₹850 crore to the Chinese vendor.

Bharti Airtel. March 2021. Bharti Airtel awarded a telecom infrastructure expansion contract worth around ₹300 crore to Huawei. The deal is part of an ongoing Airtel process to expand its NLD network, which is currently run by Huawei.

OTHER EQUIPMENT VENDORS
May 2020. IBM and Red Hat were selected by Bharti Airtel to build its new telco network cloud, designed to make it more efficient, flexible, and future-ready to support core operations and enable new digital services. The next-generation core network, analytical tools, and new consumer and enterprise services would be built on top of this cloud platform, based on open standards.

Using IBM and Red Hat’s portfolio of hybrid cloud and cognitive enterprise capabilities, Airtel plans to adopt an open-cloud architecture that uses Red Hat OpenStack Platform for all network workloads and Red Hat OpenShift for newer containerized workloads. It will also tap into Red Hat’s ecosystem of network OEMs.

May 2020. Airtel’s project sees it deploying Altiostar’s vRAN virtual network functions (VNFs), which support the O-RAN specifications, across its 4G network in many major cities. This makes Airtel the first operator in India to deploy a macro-layer vRAN, designed to boost flexibility and cost efficiency now, and ease migration to 5G in future.

May 2020. Airtel announced a contract for wireless backhaul equipment from Ceragon. Airtel is also looking to increase 4G network capacity in urban areas and expand its coverage in rural areas as well as prepare for its future evolution to 5G.

June 2020. Vodafone Idea has been engaged with Mavenir within the OpenRAN space to develop solutions catering to the traffic requirements of Indian networks.

September 2020. ITI Limited received an LoI from Bharti Airtel for FTTH rollout in eight circles in the country. The work involves laying of optical fiber backbone for providing broadband connectivity throughout the country. The time period for execution of the order would be three months.

October 2020. IBM was selected by Vodafone Idea Limited to help the operator embrace open source at scale across the enterprise by implementing the Big Data Platform on open-source Hadoop framework. As VIL’s strategic technology partner, IBM is leading the end-to-end implementation and management of the Big Data Platform. This includes an agreement earlier this year to deliver its Open Universal Cloud with IBM and Red Hat to accelerate network and IT modernization. IBM has been a strategic IT partner to Vodafone Idea for more than a decade.

June 2021. Bharti Airtel implemented one of the world’s newest photonic infrastructure designs from Ciena to almost triple optic fiber network capacity for delivering a world-class 5G experience to customers. Rolling out 600G and 800G in Delhi, Mumbai, Bangalore, and Kolkata allows Airtel to fast-track 5G and support high-growth cloud applications, while lowering the cost per bit. To improve resiliency and service availability in cities where fiber cuts are common, Airtel has implemented a self-optimizing network design, using an advanced C&L-band infrastructure with Layer 0 control plane with Ciena’s 6500 Reconfigurable Line System (RLS). Airtel can also proacti­vely localize, troubleshoot, and rapidly repair fiber fault conditions with Ciena’s Liquid Spectrum PinPoint OTDR software analytics. Additionally, to maximize efficiency of the network and allow for quick turn up of new high-bandwidth services, Airtel has deployed WaveLogic 5 Extreme coherent optics along with manage, control, and plan (MCP) domain controller.

August 2021. Juniper Networks was selected by Bharti Airtel to deliver network upgrades for the expansion of Airtel’s nationwide broadband coverage across India. Airtel has rapidly expanded its Fiber-to-the-Home (FTTH) broadband coverage to over 430 towns with plans of covering 30 million households in over 2000 cities in the next three years. In support of this increased nationwide penetration into many previously underserved cities and markets, the latest network upgrades build on the strong long-term relationship between Airtel and Juniper Networks. As part of the deal, Juniper Networks will supply, install, and provide support for upgrades to the MX Series routers and line cards as part of its market-leading broadband network gateway (BNG) to manage their subscribers and services, as well as carrier-grade NAT (CGNAT) solutions to ensure secure encryption across the network respectively.

September 2021. Tejas Networks was selected by Bharti Airtel to enhance its optical network capacity in key metropolitan markets. Tejas will supply, install, and support its state-of-the-art TJ1600 DWDM/OTN products for extending Airtel’s optical networks toward the edge, supporting 5G backhaul, B2B services, and broadband applications.

STL
The vendor started FY21 with an order book of ₹10,037 crore across all customer segments – global telcos, cloud companies, citizen networks, and large enterprises. Key deals included T-Fiber for rural broadband in Telangana, Telekom Albania digital transformation and multi-million dollar contracts in India, Europe and Middle East.

Over the year, STL had secured:
September 2020. Airtel partnered with STL to build a densely fiberized, future-ready digital network across 10 telecom circles. This modern optical network will enable Airtel to deliver world-class customer experience through enhanced scalability, reduced latency, and improved bandwidth. The densely fiberized, future-ready network, will also form the foundation for many next-gen services such as 5G, FTTH, IoT, enterprise networks, and Industry 4.0.

With OFC manufacturing plant in Italy, Data Centre solutions CoE headquartered in the UK, and strategic engagements with key customers in telecom and cloud, STL rapidly scaled operations in Europe. Almost 30 percent of the total revenue in H1 FY21 came from Europe.

March 2021. STL announced that it had secured major new deals and extensions to current engagement with leading telcos in the Middle East and Africa region (MEA). The deals worth more than USD 100 million took STL’s order book to a record high of ~₹11,300 crore.

April 2021. A strategic collaboration was formed with Openreach, UK. STL was selected as a key partner to provide optical cable solutions for its new, ultra-fast, ultra-reliable Full Fibre broadband network. Under the partnership, STL is responsible for delivering millions of kilometres of optical fibre cable to support the build over the next three years. Openreach has plans to use STL’s expertise and innovation to help accelerate its Full Fibre build programme and drive efficiency. This collaboration with Openreach strengthens a 14-year-old technology and supply relationship between the two companies.

June 2021. STL announced a partnership with Vocus Group, a specialist fibre and network solutions provider in Australia. Vocus, with a terrestrial network of c.30,000 route-km will leverage STL’s Opticonn solution, which offers a range of optical fibre and cable products, optical interconnect offerings and pre-connectorised kits.

September 2021. Sabafon, Yemen selects STL to transition from traditional business systems to a fully Cloud-native SaaS-based BSS and OSS solution. The 5-year long deal will involve STL delivering and supporting a new-age, converged, charging, Business, and CRM solution deployed in a public cloud infrastructure.

At the close of the calendar year, STL unveils its 5G portfolio. One of the first indigenous companies with 100 percent homegrown 5G-ready solutions, the company combines the power of optical, wireless, virtualisation, and deployment methodology to build robust 5G infrastructure. With solutions as Opticonn, Celesta, Stellar, Accellus and LEAD 360o the manufacturer gears up to cater to the needs of leading network creators across the globe.

In 2021, announcements were made of strategic partnerships between Reliance Jio and Google Cloud for providing a complete end-to-end cloud offering for fully automated lifecycle management of Jio’s 5G network and services; with Intel Corp to develop RJio’s 5G networking technology and for working on co-innovations for its 5G radio-access network (RAN); and Cisco and Bharti Airtel to expand the telco’s existing SD-WAN deal to include managed SD-WAN and secure access service edge (SASE) architecture; Bharti Airtel and Tata Consultancy Services (TCS) for implementing 5G broadband network solutions in India with TCS’ O-RAN-based Radio and NSA/SA Core among others.

The next two years, India will witness one of the most significant transformations in its telecom history leading to world-class telecom services, and emerging as the global manufacturing hub for telecom equipment.

Nokia : Humanity connected
Nokia creates technology that helps the world act together. As a trusted partner for critical networks, it is committed to innovation and technology leadership across mobile, fixed and cloud networks. The company creates value with intellectual property and long-term research, led by the award-winning Nokia Bell Labs.

Nokia Solutions and Networks India Private Limited
Net sales for Nokia India was ₹11771.15 crore in 2020-21, in comparison to ₹12140.34 crore in 2019-20. However, net profit after tax declined to ₹549.8 crore in FY21, from ₹663.24 in FY20.

Net sales was ₹7530.45 crore in Q1-Q3 2021 (January-September 2021) from ₹6382.66 crore in Q1-Q3 2020, a 20 percent YoY increase, and a 26 percent YoY increase in constant currency. India’s contribution increased from 4.3 percent in 9M 2020 to 5 percent in 9M 2021.

2020 had been a good year for Nokia India. Having closed 108 deals in the year, the largest perhaps was the multi-year contract the gear maker signed with Bharti Airtel at a value of almost USD 1 billion at the beginning of the fiscal. Nokia is deploying SRAN solution across nine circles, helping Airtel to enhance the network capacity of its networks, in particular 4G, and improve customer experience.

The rollout, which will also lay the foundation for providing 5G connectivity in the future, will see approximately 300,000 radio units deployed across several spectrum bands, including 900 MHz, 1800 MHz, 2100 MHz, and 2300 MHz, and is expected to be completed by 2022. The deal will also include Nokia’s RAN equipment, including its AirScale Radio Access, AirScale BaseBand, and NetAct OSS solution, which will help Airtel to monitor and manage its network effectively. Nokia Global Services will also play a crucial role in the installation, planning, and deployment of the project, which will be executed via the cloud-based Nokia Delivery Platform.

Nokia had won under 100 deals in 2019 and 75 in 2018.

“The deal momentum has been quite good for all of our businesses – be it radio, core business, application business, fixed network or GPON. Indian telcos have been preparing for 5G, which has driven the deal momentum,” said Sanjay Malik, Senior Vice President and Head of India Market. “We are managing 5G deployment in the US from India through our GNOC and helping devise strategy. Our engineers are ready for deployment in India from a backend perspective readiness. The government and private entities have also ramped up their network spends, helping Nokia win new business. A 15–20 percent increase in traffic is now forcing Indian telcos to expand network, both in terms of coverage and capacity. And once the spectrum auction happens, then naturally either through the hardware expansions or software expansions or refarming of the spectrum, this is going to grow exponentially,” he added.

Nokia Corporation
In the first nine months of 2021, reported net sales increased 3 percent, primarily driven by Network Infrastructure and Nokia Technologies, partially offset by Mobile Networks and Cloud and Network Services, which were negatively impacted primarily by foreign exchange rate fluctuations. On a constant currency basis, Nokia net sales increased 6 percent in the first nine months of 2021.

Third-quarter profitability is up thanks to a mixture of cost-cutting and investment in research and development – the basis of the turnaround strategy Pekka Lundmark, CEO, Nokia announced when he replaced Rajeev Suri last year. His main worry is the shortage of components Nokia needs for its products.

Sales growth of 2 percent year-on-year to nearly €5.4 billion (USD 6.3 billion), was apparently constrained by the supply-chain problems that have hit the entire industry. Improvements across numerous divisions followed a renewed commitment to R&D. Overall investments in that area rose 12 percent for the quarter, to about €1.04 billion (USD 1.21 billion). With a more competitive line-up of products, the company’s gross margin rose 3.6 percentage points, to 40.7 percent.

To fund R&D expenses, Nokia aims to slash other operating costs by around €600 million ($696 million) annually before the end of 2023. That will entail cutting between 5,000 and 10,000 jobs, leaving Nokia with between 80,000 and 85,000 employees in total. It has already cut about 13,000 since 2018.

The CEO is guiding for a full-year net sales of €21.7bn – 22.7bn and comparable operating margin of 10–12 percent He even expects to be closer to the upper end of this range after Nokia’s strong performance so far this year. The vendor continues to manage supply chain constraints but challenges are increasing into 4Q.

It expects to maintain its expectation for Nokia Technologies to deliver a slight improvement in comparable operating profit in full year 2021, relative to full year 2020, and stable performance over the longer-term. Group Common and Other primarily consists of support function costs. The net negative impact of Group Common and Other is expected to be between €150 and 200 million in 2021 and approximately EUR 200 million over the longer-term. The update to its 2021 expectation largely reflects the year-to-date impact from Nokia’s venture fund investments.

Turnaround efforts have largely focused on a mobile networks business that accounts for about 43 percent of sales. The vendor had to seek an alternative source, after Intel, its only supplier for a certain class of 5G chip ran into production problems. Nokia fell back on alternatives supplied by Xilinx but subsequently found these programmable chips to be of higher costs that chewed into profitability. Using chip suppliers including Broadcom, Intel and Marvell, Nokia has been phasing out Xilinx chips, a process it expects to complete by the end of next year. It recently unveiled a more competitive set of 5G products.

However, sales dropped 5 percent, to around €2.3 billion ($2.7 billion), and by the same percentage on a constant-currency basis. It may be attributed to the earlier loss of a major 5G contract with Verizon to South Korea’s Samsung and continued declines in legacy radio access products, as well as services.

There are currently two engines of growth. The first is Nokia’s new-look cloud and network services business, which combines software with other activities. Revenues here grew 13 percent, to €748 million ($867 million), thanks largely to a surge of interest in the 5G core, the control center of the network. This division also swung to an operating profit of €23 million ($27 million), from a loss of €148 million ($172 million) a year earlier.

The other is fixed access. Previous underinvestment in fiber, a backlash against Chinese vendors and pandemic-fueled demand for broadband services have provided a perfect combination for Nokia, which reported a 29 percent increase in fixed network sales, to €588 million ($682 million).

January-December 2020. 2020 was a year of unprecedented change, and brought to the fore the true value of technology and the need to find smart solutions to global problems, from climate change to stalling productivity. Fixed and mobile networks kept the global economy and critical infrastructure running even as the COVID-19 pandemic led to nationwide shutdowns across the world.

Overall in 2020, Nokia saw improvement both in gross margin and operating margin performance up by 2.1 percentage points and 1.9 percentage points year-on-year respectively. This development was supported by a regional mix shift towards the higher-margin North America region, ongoing R&D efforts to enhance product quality and cost competitiveness, and improvements in the Networks business.

From the financial point of view, Nokia reported 21.852 billion euro in revenue with an operating profit of 885 million euro. The revenue is 6 percent lower than in 2019, while the operating profit increased 82 percent. Nokia’s reported net loss for 2020 of 2.513 billion euro.

Reason for such a reported loss is an increase in sales tax related to derecognition of Finnish deferred tax assets worth 2.9 billion euro. Nokia explained it this way: “The derecognition was required due to a regular assessment of our ability to utilize the tax assets in Finland in the foreseeable future that is done primarily based on our historical performance. These tax assets are not lost, and the derecognition can be reversed.”

The company delivered a strong cash performance for the year and ended 2020 with net cash and current financial investments at approximately EUR 2.5 billion, up approximately EUR 0.8 billion from 2019. Net sales decreased by 6 percent year-on-year primarily due to network deployment and planning services within Mobile Access. Nokia Enterprise continued to make great progress in 2020 and delivered double digit year-on-year growth in net sales.

Mobile Access displayed a clear financial improvement. 2020 saw growth in radio access products and the 5G gross margin increase due to product cost reduction, partly helped by higher ReefShark shipment volumes.

Nokia invested 4.1 billion euro in Research and Development in 2020, resulting in 1500 new patent fillings, with 4000 patent families now declared as essential to 5G. The company owns 20,000 patent families, wherein each family comprises multiple individual patents.

Nokia has some big names as customers of the OZO Audio technology including ASUS, Axon, HMD Global, OPPO, OnePlus, and Panasonic, while the company also has program to license Nokia’s patents in industries like connected cars, smart meters, payment terminals, asset tracking and other IoT device.

2020 ended with 188 commercial 5G agreements and 44 live 5G networks.

October 2020 saw an announcement that the company would move to a new operating model from the beginning of 2021. The new structure comprised four new business groups, each with a clear mission and empowered with the resources and accountability to achieve their goals:

Nokia closed 2020 with a Board satisfied with its operational performance and strengthened cash position. And entered 2021, expecting a year of transition, with meaningful headwinds due to market share loss and price erosion in North America. Nokia would go on to make further investments 5G R&D, sacrificing some short-term margin to ensure technology leadership in 5G and sustainable long-term financial performance. Nokia’s top priorities for 2021 included completing the turnaround in Mobile Networks and implementation of the new operating model while strengthening accountability and inspiring corporate culture.

Ericsson
Ericsson provides high-performing solutions to enable its customers to capture the full value of connectivity. The company supplies communication infrastructure, services and software to the telecom industry and other sectors. Ericsson has approximately 100,000 employees and serves customers in more than 180 countries. Ericsson is listed on Nasdaq Stockholm, and the Ericsson ADS trades on NASDAQ New York. The company’s headquarters are located in Stockholm, Sweden.

Ericsson India Private Limited
Jan–June 2021. Ericsson’s share of sales from the India market doubled in the first half of the current year 2021 to 4 percent, making the country the third-highest revenue contributor for the group, according to the company’s financial performance report. This was primarily driven by 4G investment in India. India had contributed 2 percent to the global sales for Ericsson during January–June 2020. Ericsson India net sales was ₹1912.72 cr in April-June 2021, up from ₹902.94 cr in April-June 2020, and was ₹2565.11 cr in January-June 2021, a decline from ₹2735.81 cr in January-June 2020. The vendor has maintained its market share when the merger with Vodafone and Idea happened. When it comes to Bharti Airtel, Ericsson has increased market share substantially in the last few years.

“India is a strategic market for Ericsson, and for us our presence here is important. We are committed to the country and will continue to invest. To this effect, we have participated in the government’s PLI scheme for the telecom sector and the additional investments made under this scheme will help us scale our Pune facility. We look forward to the opportunity of helping Indian service providers seamlessly evolve their networks from 4G to 5G.” says Nitin Bansal, MD, India & Head-Networks, South East Asia, Oceania and India, Ericsson.

Ericsson India Private Limited’s Annual General Meeting (AGM) was last held on September 30, 2020 and as per records from Ministry of Corporate Affairs (MCA), its balance sheet was last filed on March 31, 2020.

In CY2020, South East Asia, Oceania and India was 13 percent of net sales in 2020, value is SEK 30048 million out of total SEK 232,390 million (it was SEK 29776 mn in 2019). In 2020, sales grew by 1 percent in South East Asia, Oceania and India.

Ericsson
January–September 2021. Reported sales decreased by 1 percent. Sales adjusted for comparable units and currency increased by 6 percent, driven primarily by sales in market area North America and in Europe and Latin America. Networks sales adjusted for comparable units and currency increased by 8 percent, and Digital Services increased by 1 percent. Sales in Mainland China in Networks and Digital Services declined by SEK 5.8 billion, impacting the Group growth rate adjusted for comparable units and currency by 4 percent, with the same impact in Networks and Digital Services. Sales adjusted for comparable units and currency increased by 9 percent in Emerging Business and Others, while Managed Services declined by 5 percent.

Reported gross margin increased to 43.4 percent (40.2 percent), driven primarily by strengthened operational leverage in Networks.

Reported EBIT increased to SEK 19.9 (16.8) billion as a result of improved gross income.

Reported EBITA increased to SEK 21.0 (17.7) billion. EBITA, excluding restructuring charges, was SEK 21.0 (19.1) billion, corresponding to an EBITA margin excluding restructuring charges of 13.1 percent (11.7 percent).

Net income year-to-date improved to SEK 12.8 (10.4) billion, with the improved gross income partly offset by the financial net.

Networks sales were stable YoY, despite considerably lower volumes from Mainland China, reflecting market share gains in other markets. Excluding sales in Mainland China, Networks sales increased by 8 percent in the third quarter, compared to the same period last year. However, late in 3Q, the company experienced some impact on sales from disturbances in the supply chain, and such issues will continue to pose a risk.

Gross margin improved to 47.8 percent (46.7 percent), driven by operational leverage and higher IPR revenues. Digital Services sales grew by 1 percent despite a stark sales reduction in Mainland China. Excluding sales in Mainland China, Digital Services sales increased by 6 percent in the third quarter compared to the same period last year.

Initial revenues from 5G contracts are seen driving growth in the Core business.

Gross margin was 42.3 percent (43.5 percent), impacted mainly by initial deployment costs in cloud-native 5G Core projects. Increase in R&D investments in the 5G portfolio, including Core and orchestration continues, further strengthening its competitive position.

With increasing sales, in combination with a higher share of software sales, the company expects profitability to gradually improve and over time exceed the original target of EBIT margin of 10 percent–12 percent.

South East Asia, Oceania, and India. Currency-adjusted sales decreased by 16 percent YoY. Networks sales declined YoY due to accelerated rollouts in the second half of 2020, and timing of orders in 2021. Sales declined YoY in Digital Services due to timing of orders and project milestones. Managed Services declined YoY, mainly due to contract renegotiations and timing of variable sales. Market area sales decreased by 17 percent, from SEK 7.8 billion in 3Q2020 to SEK 6.5 billion in 3Q2021.

January–December 2020. Despite a challenging environment in 2020, Ericsson completed its turnaround, delivered on its financial targets, and established a leadership position in 5G. More importantly, the people continued to deliver and to serve the customers with no disruptions. The pandemic showed the criticality of the digital infrastructure for society. Looking ahead, this infrastructure will increasingly drive global sustainable growth and Ericsson is well positioned to create value from the ongoing digital transformation.

Net sales. Reported sales increased by SEK 5.2 billion or 2 percent to SEK 232.4 (227.2) billion. Networks sales increased by SEK 11.0 billion or 7 percent, Digital Services sales decreased by SEK 2.5 billion or 6 percent, Managed Services sales decreased by SEK 3.0 billion or 12 percent and Emerging Business and Other sales decreased by SEK 0.3 billion or 4 percent. Sales adjusted for comparable units and currency increased by 5 percent.

IPR licensing revenues increased to SEK 10.0 (9.6) billion as lower volumes with one licensee were offset by new contracts. Sales growth in Networks was primarily driven by higher hardware deliveries following increased footprint. In the geographical dimension, sales growth was primarily driven by North-East Asia, North America, and Europe.

Sales growth adjusted for comparable units and currency increased by 10 percent. Digital Services sales declined mainly due to lower sales in the legacy portfolio, primarily in hardware. Sales grew in South-East Asia, Oceania, and India and in North-East Asia. Sales adjusted for comparable units and currency declined by 3 percent.

Sales declined in Managed Services, mainly due to lower variable sales in a managed services contract in North America, post the merger between two large operators and transfer of a managed services contract to an associated company. Sales adjusted for comparable units and currency decreased by 10 percent.

Sales in Emerging Business and Others declined due to reduced sales in the media businesses. Sales adjusted for comparable units and currency decreased by 4 percent.

In the market area dimension, sales growth in North-East Asia, North America as well as in South-East Asia, Oceania, and India offset a decline in the two remaining market areas.

The sales mix by commodity was: software 22 percent (21 percent), hardware 41 percent (38 percent) and services 37 percent (41 percent).

Gross margin. Reported gross margin was 40.3 percent (37.3 percent). Gross margin excluding restructuring charges improved to 40.6 percent (37.5 percent) with strong margin improvements in all segments. A lower share of services sales had a positive impact on the gross margin. Networks margin was supported by operational leverage. Digital Services margin improved due to increased share of software as well as limited impact from the critical contracts in 2020. Managed Services gross margin improved mainly as an effect of efficiency gains. The gross margin in Emerging Business and Others increased driven by Emerging Business (IoT platforms, Edge Gravity exit, and Cradlepoint).

Restructuring charges included in the gross margin increased to SEK 0.7 (0.3) billion.

Operating expenses increased to SEK 66.3 (64.2) billion with increases in research and development expenses, selling and administrative expenses, and reduced provision release from impairment losses on trade receivables.

Research and development (R&D) expenses increased to SEK 39.7 (38.8) billion. Higher R&D expenses in segment Networks driven by investments in a broader portfolio of antenna and site solutions and in 5G, while R&D investments in Digital Services decreased. Restructuring charges impacted R&D expenses by SEK 0.4 (0.3) billion.

Selling and administrative (SG&A) expenses increased to SEK 26.7 (26.1) billion mainly due to the acquired Cradlepoint business as well as continued investments in compliance and digital transformation. Revaluation of customer financing was SEK 0.3 (0.7) billion. Restructuring charges impacted SG&A expenses by SEK 0.2 (0.1) billion. Impairment losses on trade receivables.

Impairment losses on trade receivables were SEK 0.1 (0.7) billion.

Other operating income and expenses was SEK 0.7 (9.7) billion. Costs of SEK 10.7 billion related to the resolution of the US SEC and DOJ investigations impacted 2019 negatively. Share in earnings of JVs and associated companies was SEK 0.3 (0.3) billion.

Restructuring charges increased to SEK 1.3 (0.8) billion. The restructuring charges were mainly related to restructuring of the acquired antenna and filter business in segment Networks and to organizational changes as a consequence of the operator merger in North America.

Operating income and margin. Reported operating income improved to SEK 27.8 (10.6) billion. Operating margin in 2019 was impacted by costs of SEK 10.7 billion related to the resolution of the investigations by US SEC and DOJ. Operating income, excluding restructuring charges and the SEC and DOJ resolution regarding the investigation costs in 2019, improved to SEK 29.1 (22.1) billion, with an operating margin excluding restructuring charges of 12.5 percent (9.7 percent). The improvement was primarily driven by hardware sales in segment Networks.

Net income and EPS. Net income improved to SEK 17.6 (1.8) billion driven by stronger operating income. EPS diluted was SEK 5.26 (0.67) and adjusted EPS was SEK 5.83 (1.07).

Huawei
Founded in 1987, Huawei is a leading global provider of information and communications technology (ICT) infrastructure and smart devices. The company is committed to bringing digital to every person, home, and organization for a fully connected, intelligent world. It has 197,000 employees and operates in over 170 countries and regions, serving more than three billion people around the world.

Huawei Telecommunications India Private Limited
April 1 2020–March 1, 2021. In FY21, Huawei Telecommunications India Private Limited had an annual revenue of ₹3703.6 crore, from ₹6658.9 crore in FY20. The net profit for FY21 was ₹125.2 crore, in comparison to ₹249.5 crore in FY20. Earnings per equity share was ₹208.67 in FY21, and ₹415.86 in FY20. During the financial year, the Board of Directors declared and paid a final dividend of ₹500 per equity share aggregating to ₹300 crore on equity share capital of the company. The company’s foreign exchange earnings were ₹2069.05 crore and foreign exchange outgo ₹2143.38 crore. Installation of industrial machinery and equipment contributed 28.46 percent and retail sale of telecom (traded goods) contributed 65.92 percent to the total turnover of the company.

During the financial year, Feng Tian and Xianli Cao were appointed as additional directors of the company with effect from April 6, 2020. Jinge Li and Qiuen Peng had resigned from the Board on April 6, 2020. Xiongwei Li was appointed as additional director of the company with effect from May 18, 2020, and Mingjie Chen had resigned from the Board on May 18, 2020.

Huawei Investment & Holding Co. Limited
January-September 2021. During this period, Huawei generated revenue of CNY 455.8 billion (USD 70.44 billion), a sizeable 32 percent decline year on year over 2020, and its net profit margin was 10.2 percent. During the same period, in 2020, Huawei generated CNY 671.3 billion (USD 98.57 billion) in revenue. The company’s net profit margin in this period was 8.0 percent.

January–December 2020. In 2020, Huawei’s annual revenue reached CNY 891,368 million, a 3.8 percent year-on-year (YoY) increase. Net profit grew slightly less, 3.2 percent YoY, to CNY 64,649 million. This is attributable to two factors – the enterprise business maintained steady growth thanks to the digital transformations in multiple industries and as investment increased in future-oriented research and innovation, branding, and ecosystem building, total operating expenses as a percentage of revenue increased slightly. In 2020, the company’s R&D expenses as a percentage of revenue increased by 0.6 percentage points YoY. However, selling and administrative expenses as a percentage of revenue declined by 0.6 percentage points as certain business activities like business trips and exhibitions were cancelled due to COVID-19. Net finance expense in 2020 amounted to CNY 367 million, a YoY increase of CNY 545 million. Due to currency fluctuations in emerging markets, net foreign exchange losses increased by CNY 298 million in 2020.

As of December 31, 2020, the balance of cash and short-term investments reached CNY 357,366 million, down 3.7 percent YoY. Huawei’s trade receivables balance was CNY 75,026 million, a YoY decrease of 12.0 percent. Thanks to faster payment collection, DSO was reduced to 52 days, 6 days faster than in 2019. The balance of inventories and other contract costs climbed to CNY 167,667 million, a YoY increase of 0.2 percent, and ITO reached 107 days, four days faster than in 2019. Trade payables balance dropped to CNY 74,865 million, a 44.8-percent YoY decrease, and DPO reached 48 days, 43 days faster than in 2019. Total short-term and long-term borrowings amounted to CNY 141,811 million, an increase of 26.4 percent YoY, as of December 31, 2020.

Sales Financing. With its global coverage, Huawei’s sales financing team maintains close contact with customers to understand their financing needs and taps into a wide range of financing resources around the world. To transfer risks, Huawei arranges for third-party financial institutions to provide sales financing, such as export credit facilities, leasing, and factoring. Huawei has established systematic financing policies and project approval processes to strictly control financing-risk exposures. Huawei only shares risks with financial institutions on certain projects, and measures and recognizes the risk exposures to ensure that business risks are under control.

Business highlights include driving ubiquitous connectivity, enabling pervasive intelligence as a One-stop AI-development platform ModelArts 3.0 and the industry’s first full-lifecycle knowledge computing solution to accelerate AI adoption in industries was launched and building a digital platform as Huawei CLOUD and Intelligent Twins.

In November 2020, Huawei Technologies had to sell its Honor smartphone business to a consortium of more than 30 companies, since the budget brand needed help to maintain access to vital components and supplies amid a US crackdown.

A newly formed entity, dubbed Shenzhen Zhixin New Information Technology Co. Ltd., was formed and Huawei does not hold any shares nor is it involved in any business management or decision-making activities. By spinning off Honor into an independent entity, the sub-brand can retain access to vital components to sustain the business. Most Honor smartphones are assembled by China-based companies Huaqin Technology and Wingtech Technology, which also supply Xiaomi, Acer,
and HTC.

Huawei believes deeply in the power of digital technology to provide fresh solutions to the problems we all face. In 2021, it continued to push the boundaries of technology, driving digital transformation forward with customers and partners. The attempt is to create digital technology that makes lives better, makes businesses more intelligent, and makes society more inclusive, ultimately bringing Huawei closer to a fully connected, intelligent world.

Ciena India
In 2021, Ciena clinched good new wins in India due to the telecom operators replacing Huawei equipment from their networks.

“Telecom operators are actively replacing Huawei networks in India,” said Gary Smith, chief executive officer at Ciena. Smith said that Ciena has seen this dynamic for a while, and that it is clearly a multi-year tailwind for Ciena. “We have good order flow and good new wins in India, some of which are on the back of that. It will take a little while for the company to deploy its orders,” he added.

Earlier in the second-quarter earnings call in June, the manufacturer said it had continued to navigate through COVID challenges in India, with the company recording 48 percent year-on-year (YoY) and 26 percent year-to-Q3 2021 revenue growth in India.

Meanwhile, James Moylan, chief financial officer at Ciena, had said “there are opportunities” for the company in India. “We said earlier that India is a place which has moved very aggressively to exclude Huawei from their builds, there are opportunities for us. We have taken advantage of those opportunities. It has to be noted that the telecom department introduced multiple policy changes post the clashes between Chinese and Indian troops in June 2020, with the changes limiting the involvement of Chinese vendors.

Our company expected that India would start to show in its revenue stack a little higher as compared to its previous quarters. That has been the case; it’s not quite 5 percent of our revenue, but it’s up very nicely year-to-date. It’s (India) going to be a great place for us to be for a long time,” added Moylan.

In late June 2021, Ciena had announced that Bharti Airtel deaployed its photonic infrastructure designs to almost triple its optic fiber network capacity for delivering a world-class 5G experience to its users. The solutions from Ciena will enable Airtel to fast-track 5G and support high-growth cloud applications while lowering the cost per bit.

Ciena Corporation
For fiscal year 2021, November 2020–October 2021, Ciena Corporation reported revenue of USD 3.62 billion, as compared to USD 3.53 billion for the fiscal year 2020.

Ciena’s GAAP net income was USD 500.2 million, or USD 3.19 per diluted common share, as compared to GAAP net income of USD 361.3 million, or USD 2.32 per diluted common share, for fiscal year 2020. And, adjusted (non-GAAP) net income was USD 456.5 million, or USD 2.91 per diluted common share, as compared to adjusted (non-GAAP) net income of USD 460.1 million, or USD 2.95 per diluted common share for fiscal year 2020.

On December 1, 2021, Ciena’s Board of Directors authorized the repurchase of up to USD 1.0 billion of the company’s stock, replacing the previous share repurchase authorization. In connection with this new authorization, the company intends to enter into an accelerated share repurchase (ASR) arrangement under which it will repurchase USD 250 million of its common stock. The final settlement of the ASR is expected to be completed in the second quarter of fiscal 2022.

Tejas Networks
Tejas Networks designs, develops and sells high-performance and cost-competitive networking products to telecommunications service providers, internet service providers, utilities, defense, and government entities in over 75 countries. Tejas products utilize programmable, software-defined hardware architecture with a common software code-base that delivers seamless upgrades of new features and technology standards. Tejas Networks is ranked among top-10 suppliers in the global optical aggregation segment and has filed 350 patents.

Tejas has an extensive portfolio of leading-edge networking products for building end-to-end broadband networks, based on the latest technologies and global standards. Tejas products include carrier-grade optical transmission (based on DWDM/PTN/OTN technologies), fiber broadband (based on GPON/NG-PON), broadband wireless (based on LTE 4G/5G) as well as multi-gigabit Ethernet/IP switching and routing products that are fully designed and manufactured in India. Tejas products utilize a novel software-defined hardware architecture that enables deliver highly differentiated network solutions. Tejas is also one of the leading innovators in India’s ICT sector, with over 350 patents and a large repository of 300+ silicon IPs, and is amongst the top listed companies in India, who spend a large percentage of their revenues in R&D.

All large private telecom operators, telecom PSUs, and utilities in India use Tejas products in their networks. Tejas is also the leading domestic supplier of optical and data networking products for various Government of India projects of national importance, having security/strategic implications, such as National Fiber Optic Network (BharatNet), defense networks, and Smart Cities. Tejas GPON products are installed in over 70,000+ Gram Panchayats and 2500+ towns across India for BharatNet project.

2021 was a game changing year for Tejas Networks, when on July 29, 2021, Panatone Finvest Limited, a subsidiary of Tata Sons Private Limited, acquired a controlling stake in the company. Tejas Networks received a strategic investment of ₹837.5 crore toward preferential allotment of shares and warrants. It was a win-win situation. Tata could now develop its own 5G solution and take it to the global markets. It already had the software and software-integration capabilities through TCS. Tejas would help to bring in the hardware capabilities, leverage the incentives through the PLI scheme, and also realize its 5G plans in the enterprise segment. In turn, Tejas Networks would be able to realize opportunities in India and overseas with the new cycle of investments in 5G and fiber-based broadband rollouts. The deal provides it the necessary financial resources, global relationships, and strong ecosystem to innovate and scale its business. Sanjay Nayak continues as Managing Director and Chief Executive Officer to lead Tejas Networks, along with the existing management team, through the next phase of growth.

April-September 2021. For the half year ended September 30, 2021, net revenue of Tejas Networks was ₹317 crore, which was a YoY increase of 72.1 percent, resulting in a profit-after-tax of ₹11.2 crore, as compared to a loss of ₹5.2 crore for the corresponding previous period. As on September 30, 2021, cash and cash equivalents, including investment in liquid mutual funds and deposits with financial institutions, increased to ₹1195 crore, and it continued to be a debt-free company. With healthy cash reserves, the manufacturer is in a strong position to invest for business growth.

For Q2 FY22, consolidated net revenue was ₹172.8 crore, which was a YoY increase of 61.8 percent, resulting in a profit-before-tax of ₹3.3 crore as compared to ₹4.5 crore for the corresponding previous period. Profit-after-tax was ₹s3.7 crore as compared to ₹4.5 crore for the corresponding previous period.

FY2021. Tejas Networks showed a solid turnaround in financial performance with robust year-on-year growth in revenues while returning to profitability. Performance on almost all financial parameters improved while continuing to be a zero-debt company. As a deep-technology company, investments in R&D continued and it remained focused on innovation to create globally competitive products. Since all the R&D manpower is located in India, the equipment maker gets a significant competitive cost advantage as compared to its global peers.

The company now has a globally competitive portfolio of software-defined-hardware products, and is well-positioned for building high-capacity optical backbone networks as well as high-speed broadband access networks. It has also invested in creating wireless-access products, based on the latest LTE technology, which is the base for 4G and 5G radio networks. The management is confident that being well-positioned, they will continue winning new customers and gaining market share in the existing accounts.

Being in the technology business, Tejas Networks continually invests in R&D and innovation to support the latest standards and strengthen the competitiveness of our products. During FY2021, they spent 20.6 percent of the revenues on R&D, which placed them amongst the Top-3 listed companies in India in terms of R&D spends as a percentage of revenues. The vendor continues to be a leading technology innovator in optical networking and broadband access, with 350 patent applications and a rich portfolio of 300+ semiconductor IPs.

Tejas has an end-to-end portfolio of optical products, from the core of the network to the access. The TJ1600 family of products for high-capacity metro and long-distance networks is based on cutting-edge DWDM (Dense Wavelength Division Multiplexing) and OTN (Optical Transport Network) technology and can support up to 600 Gbps per wavelength. TJ1400 product is a unique converged platform for high-speed broadband access that uses GPON (Gigabit Passive Optical Network) technology for optical fiber-based services for residential and business customers, as well as LTE technology for Fixed Wireless Access (FWA) services. In addition, it has a rich set of Packet Transport Network (PTN) products and Ethernet switches for critical infrastructure buildouts.

Tejas Networks
Tejas Networks ended the financial year 2020-21 with strong revenue as well as profitability growth. Net revenue was ₹514.8 crore (net of pass through component sale), which was a YoY increase of 35.6 percent, with a profit-before-tax of ₹22.5 crore as compared to a loss-before-tax and before-impairment-of-intangibles was ₹68.7 crore for the corresponding previous period. Profit-after-tax was ₹s37.5 crore as compared to a loss-after-tax and before-impairment-of-intangible-assets of ₹167.3 crore for the corresponding previous period.

The international business during the year saw a robust YoY revenue growth of 62 percent and was 40 percent of our total revenue (up from 33 percent during FY20), led by customers in Africa, Mid-East, and South-East Asia. The business in India saw positive tailwinds due to increased demand for highspeed broadband connections and government policy for promoting domestic telecom equipment. The company saw strong order inflows as well as new customer wins, resulting in a YoY booking growth of 54 percent and ended FY21 with an order book of ₹679 crore.

With its products being deployed in over 75 countries, there is great opportunity to become a trusted and reliable global source for leading-edge, yet cost-competitive telecom products.

During FY2021, India business grew healthily across both government and private segments. We are well established as one of the leading suppliers of optical networking and broadband-access equipment to private telcos as well as government networks.

“We are enthused by the Honourable Prime Minister of India’s call to build an Atmanirbhar Bharat (self-reliant India) in critical areas of technologies, such as telecom, which has long-term security as well as economic significance. We see a strong intent from the government to promote products developed with Indian R&D and IPR, and which are manufactured in India. We believe that supportive government policies, such as the product linked incentive (PLI) scheme, the mandate for all telecom service providers (both government and private) to source only trusted telecom equipment, and further strengthening of Preference to Make in India (PMI) policy, clearly signals that the government wants to make India a global telecom equipment manufacturing hub, especially in light of the new geopolitical situation.

We have the right product mix at competitive price points; great R&D team, which continues to develop leading-edge technologies; highly favorable geopolitical situation, where countries are seeking trusted telecom products; increased digital adoption, driving increasing investments in network capacities, and more importantly, favorable Indian government policies and intent. All these combined together set a great platform for our future growth,” observed Balakrishnan V, Chairman, Board of Directors, Tejas Networks.

STL
STL is an industry-leading integrator of digital networks that enables telcos, cloud companies, citizen networks, and large enterprises deliver enhanced experiences to their customers.

In the backdrop of strong industry tailwinds of large global 5G investments, increasing FTTx penetration, and continued investments to modernize networks by governments globally, STL has devised a well-rounded strategy to deliver on its global plans through the company’s three growth levers – grow optical business, globalize system integration, and build disruptive wireless solutions. Armed with an integrated business model, offering system integration services including optical networking solutions, wireless solutions, and network software solutions, the company has made a series of strategic investments, thereby increasing its total addressable market by 5×.

In the optical networking segment, in November 2020, STL acquired Optotec, Italy, at an enterprise value of €29 million, and along with Metallurgica Bresciana S.p.A., a European specialized optical cable manufacturer that it had acquired in July 2018, the group has available a capacity of 50 million fkm fiber and 42 million fkm OFC.

STL strengthened its system-integration segment and acquired Clearcomm Group Ltd., a UK-based network integration company in July 2021. The manufacturer had in September 2019 acquired IDS Group, a data center network infrastructure design and deployment specialist based in the United Kingdom. This move enhanced the presence of its network-integration solutions across UK and Europe.

In the wireless segment, STL launched Accellus, its flagship solution for 5G-ready, open, and programmable networks. In January 2020, STL had announced an investment in ASOCS, a developer of open, disruptive, and virtualized radio access network (vRAN) solutions, delivering 4G and 5G for cellular networks. As a part of the overall transaction, STL had acquired a 12.8-percent stake in the company and board representation. With its disruptive efforts in this area, STL has built intellectual property with 54 patents as of Q2 FY22.

H1 FY22. STL reported a robust 30-percent YoY revenue growth in its financial results for the second quarter ended September 30, 2021. And recorded ₹15.08 billion in revenues with ~43 percent coming in from the EMEA region and ~12 percent from the Americas.

Its order book grew from ₹10300 crore same time last quarter to ₹11,500 crore by the end of H1 FY22. Out of this, ₹4200 crore is executable in this fiscal itself. The manufacturer also has about 23 percent of O&M revenues, which will start kicking in, in FY23 and that will be a non-trivial contribution to the revenues as they go ahead from FY23 onwards.

The company continued to focus heavily on technology innovation, taking big steps like investing ~3.5 percent of its revenues in R&D and announcing a 5G R&D lab in the UK. STL further strengthened its patent portfolio in Q2 FY22, taking the total patent count to 636. 5G wireless solutions and optical interconnect – STL’s strategic growth areas – contributed to more than 50 percent of IP filings in the current quarter.

FY2021. For the year ending March 31, 2021, the company reported ₹4825 crore in revenue. STL closed the year with 27-percent YoY revenue growth, and exports at 42 percent.

Backed by large global deals, the order book stood at ₹10,754 crore, out of which about ₹5500 crore is executable in FY22 and the rest in FY23 and beyond. Part of the open order book is relating to the maintenance part, about 25 percent, therefore that extends over a much longer period, beyond the immediate year or two.

Some key financial highlights:

• Won marquee deals – STL won multi-year, multi-million global deals, such as a three-year strategic collaboration with Openreach to provide millions of kms of optical fiber cable to help connect UK with a full-fiber network; ~USD 100 million deals in the MEA region – for building future-ready digital networks and partnership with Airtel to build optical network across 10 circles;
• Exhibited strong growth in OFC volume and optical interconnect business. STL grew its OFC volume by more than 35 percent in FY21. Optotec’s interconnect products are now integrated into its Opticonn solution;
• Grew patent portfolio by 105 percent. With 191 filings in FY21, STL’s global patents reached 569, also adding the first 5G patent;
• Developed 5G and open-source products. STL developed hardware plus software offerings, including Garuda indoor small cells and 5G radios and tested programmable FTTx with a large Asian telco;
• Delivered exponentially despite the pandemic. With technology excellence, STL took Project Varun (Navy Communication Network) and Mahanet (Rural Broadband) to 92-percent and 98-percent completion, respectively; and
• Hired industry stalwarts globally across the US, the UK, Singapore, and India.

STL has set a target to reach ₹100-billion revenue run rate by Q4 FY23 with net debt/equity <0.5 and RoCE >20 percent.

HFCL
The story of HFCL is one of grit and determination. Of faith and perseverance. Of dreams and opportunities. In one of the most disruptive years in human history, HFCL fell back on its innovation DNA to overcome the challenges and leapfrog into a new era of growth.

Its IO products saw wide acceptability, and it prepared for the next big upgrade in the world of telecommunication by setting up a dedicated 5G business unit, and developed products and solutions that witnessed strong traction despite the market slowdown. The focus reflected in the numbers.

The group came up with a new, dedicated R&D center this year to enrich their product portfolio and develop next-gen 5G compatible products and system integration services. They are looking at developing anti-drone technologies, contributing in the making of smart coaches to smart cities, creating their own space in Industry 4.0, adopting the latest technologies and customising them to make work processes and functions intelligent and seamless. Their newly developed products like electronic fuses and electro-optics devices will translate to sizeable business going forward. The increased R&D spend is planned at ₹150 crore FY22.

H1 FY22. Total revenue stood at ₹2338.2 crore, with EBITDA at ₹364.7 crore, EBITDA margins at 15.7 percent, PAT at ₹176.6 crore, and PAT margins at 7.58 percent. The company’s debt-to-equity ratio was 0.33 and RoCE 22.7 percent.

Moving forward, HFCL sees opportunities in:

OF and OFC. Demand is expected to arise from expansion of 4G networks, evolution of 5G networks, BharatNet, Railways, Smart City projects; growth in FTTH connections to 50 million by 2024; and OFC export opportunity to multiply on account of global markets realigning with China+1 strategy.

Telecom and networking landscape is promising in terms of expansion of 4G networks with allocation of additional spectrum, and evolution and implementation of 5G networks globally. The expected CapEx is ₹4–5 lakh crore over next 4–5 years in India alone. The BharatNet Phase-II Project, Wi-Fi, infrastructure, and electronics and optic networks offer a ₹30,000–40,000 crore opportunity. The open radio access network (O-RAN) will lead to huge opportunities for the manufacturers. The PLI scheme will boost the local manufacturing and competitiveness. The defense, railways, security, and surveillance segments also hold promise.

The road ahead
The group has identified a clear path ahead. Its focus is planned at developing technology as a clear disruptor, Make in India for the world, expanding global reach, leverage cost-competitive manufacturing across the portfolio, and backward integration to enhance margins and self-sufficiency; target profitable turnkey projects to leverage on implementation capabilities; create value-added system-integration capabilities in telecom sector; monetize invested capability build-up toward next frontier, including 5G and defense manufacturing; pursue profitable growth with margin-accretive revenues, and cost-efficient operations while creating value for stakeholders.

FY21. During the year, HFCL Limited grew its revenues, and EBITDA and margins saw a healthy increase notwithstanding the operational challenges.

Revenue from operations. The net sales during FY21 stood at ₹4422.96 crore as compared to ₹3838.91 crore in FY20 representing an increase by 15.2 percent year on year, The net revenue from the Turnkey Contracts and Services increased to ₹3217.50 crore in FY21 from ₹2991.99 crore in the previous year, contributing 73 percent of total consolidated revenue in FY21. The net sales from Telecom Products increased to ₹1205.46 crore in FY21 from ₹846.92 crore in the previous year, contributing 27 percent of total consolidated revenue in FY21.

A healthy growth of 13.5 percent took its EBITDA to ₹585.71 crore. Profit after tax grew by 3.8 percent to reach ₹246.24 crore. HFCL closed the year with an outstanding order book of ₹6875 crores.

Making a mark. The manufacturer shipped 100,000 Wi-Fi network products within a few months of production commencement; and 150,000 units mark reached by the end of FY21. It set up PM-WANI model villages at Baslambi, Haryana, and Baidebettu, Karnataka. Commercial operation of Fiber-to-the-Home (FTTH) cable plant commenced at Hyderabad.

Maintaining a strong order book. HFCL received an order of ₹260.97 crore for design, manufacture, supply, installation, testing, and commissioning of communication systems of Kanpur and Agra Metro; an order of ₹800 crore from L&T for supplying IT equipment, software solutions, and associated equipment for setting up data centers, security operation centers and network operation centers; an order from a leading Indian outsourced service provider for the onsite harness manufacturing for the aerospace and defense and the automotive industries through our subsidiary HTL, and an order of ₹174.43 crore from a leading private integrator of data networks for the supply of optical fiber cable for the construction of Telangana Fiber Grid under BharatNet Phase-II program.

Business performance review
Optical fiber cable (OFC). HFCL is a leading manufacturer of optical fiber cable (OFC) in India. The company is adding an additional 4 million fkm/pa capacity of OFC manufacturing at its Hyderabad facility, slated to be completed by December 2021. It would raise HFCL’s OFC manufacturing capacity to 22.5 million fkm/pa (18.5 million fkm/pa currently) on consolidated basis. Besides volume increase, this round of OFC CapEx is aimed to further strengthen the company’s portfolio with newer types of cables, such as microduct cable, micromodule cable, and advance ribbon cable, among others.

In order to meet the demand from last mile connectivity segment, the company is also expanding its FTTH cable-manufacturing capacity by 1.2 lakh cable km/pa.

The capacity addition would further expand its lead as the largest FTTH player in the country, with installed capacity of 7.2 Lakh cable km/pa from current capacity of 6 lakh cable km/pa. FTTH capacity expansion is coming up at the company’s Hyderabad plant.

HFCL is also planning to expand its global footprints, foreseeing the good export opportunities for OFC-backed by China+1 strategy. During the year under review, the company commenced production of optical fiber cables for Fiber-to-the-Home (FTTH) applications from its Hyderabad plant.

The industry competition, and the race to add more subscribers to their user base, is expediting the transition to 5G. The OFC requirement in a 5G tower is 3× more than that of a 4G tower. So, every new tower and up-gradation of existing tower would require ~3x more optical fiber cable. This should tremendously boost the demand for OFCs, and HFCL is all set to grab this opportunity.

Optical fiber. HFCL is expanding its manufacturing capacity of optical fiber, a vital raw material, to 10 million fiber kilometer per annum (fkm/pa) from 8 million fkm/pa at its Hyderabad plant, estimated to be completed by the end of March 2022. During FY21, state-of-the-art Hyderabad optical fiber manufacturing plant was ramped up to full-capacity utilization after overcoming the disruptions in 1QFY21 due to pandemic. The Plant production capacity was further enhanced through focused approach toward efficiency improvement and sweating of existing assets, thus achieving an exit rate of production at 8 million fkm per annum in 4QFY21.

Telecom networks and turnkey solutions. The year FY21 was of great significance for HFCL’s communication business with achieving noteworthy revenue, multiple new orders, setting up record benchmark of 100K unit’s shipment for newly launched HFCL product line IO. For FY21, a revenue of ₹1861.82 crore was generated from defense projects. During the year, the company has also received new orders from Larsen & Toubro (L&T India) worth ₹800 crore for supply of network gears for NFS UNMS projects.

The company has indigenously designed and developed carrier-grade Wi-Fi systems, UBRs, and Ethernet switches, and has already shipped 1.5 Lakh units of Wi-Fi and UBR to leading telecom service providers in FY21, and generated a revenue of more than ₹150 crore during FY21. HFCL also managed to complete its ongoing trials and start commercial supplies to a few countries in Africa as well.

During the year, HFCL set up a model PM-Wani village in Baslambi (Haryana).

HFCL is one of the largest telecom project service providers for Reliance Jio, and is currently engaged in rolling out of 4G OFC network services across Northern India. The company has deployed FTTH network connecting approx. 3.5 million home customers in 207 cities of Northern India.

The company is connecting about 1800 villages in Jharkhand by GPON network wherein ~8000 km of OFC network is being laid out. Apart from deploying networks in Punjab and Jharkhand, HFCL is also supplying fiber optic cables in Maharashtra, Telangana, and Chhattisgarh.

New 5G business unit. HFCL has launched a 5G business unit to cater to the needs of communication service providers, enterprises and industry verticals, both in India and for global markets.

Products. HFCL is investing in building a portfolio of 5G products that include 5G radio access network (RAN) products and 5G transport products.

Railway communication and signaling. HFCL is also enhancing its value proposition for the railway sector. The addressable market in Railway Business vertical was 10 significant orders with a combined contract value of ₹942 crore.

The projects include setting up telecommunication systems, including OFC networks, for Dhaka Metro and Mauritius Metro worth ₹138.85 crore and ₹51 crore, respectively. During the year under review, HFCL won contracts of Kanpur Metro and Agra Metro Rail projects worth ₹260.97 crore.

Defense. HFCL continues to innovate its product pipelines, and focus on providing high-technology defense products and solutions.

HFCL is the only Indian company to have developed electronic fuses for artillery ammunition with own intellectual property rights (IPRs). Electronic fuses of HFCL are NATO (North Atlantic Treaty Organization) certified resulting in access to a wider customer base among NATO countries, and meet the most stringent requirements of armed forces across the globe. The company has also participated in a bid for supply of 5 million electronic fuses for the Indian Army over 10 years. The company has successfully cleared the technical evaluation and would be shortly going in for user trials with the Indian Army. The bid is at the technical-evaluation stage, while efforts toward the development are in the last stages of trials. This will be a major boost toward the indigenization of defense equipment.

The company is also developing ground surveillance radars and software-defined radios for defense. The company has already been selected for the development of software-defined radio (SDR) by the Indian Army.

Security and surveillance. The company has successfully executed various projects and continues to focus on providing innovative solutions through value-added products and services. HFCL has successfully executed the first safe city project at Ludhiana for Reliance Jio. HFCL has also won the competitive bidding for further maintenance and expansion of the system and received the letter of acceptance for ₹36 crore to maintain Ludhiana Safe City System for next five years, and expansion and integration of the same with the smart city system.

HFCL has been declared L1 by NTPC for the project of providing perimeter security along with access management, gate security, and integrated command and control center at their five power generation plants.

HFCL with its proven track record, healthy order book, strong system-integration acumen in telecom, defense, railway, security and surveillance sectors, and cutting-edge technologies, is well placed to serve the needs of its customers in India and abroad.

Vindhya Telelinks Limited and Birla Cables Limited
Flagship companies of the MP Birla group, Vindhya Telelinks Limited and Birla Cables Limited, cater to the telecom industry.

Vindhya Telelinks Limited has emerged as a leading manufacturer and supplier of jelly-filled telecommunication cables, as well as of optical fiber telecommunication cables and connectorized cable products. Its Engineering, Procurement, and Construction (EPC) business offers complete services for engineering, design, procurement, supply, construction, installation, testing, and commissioning for telecom/power/gas pipeline segments.

Under the company’s IP-1 license for creating the complete optical fiber cable network, various telecom operators have been enjoying the use of network created by the company, and more network is being created to give the services on a continuous basis to the end-users. The company is also involved in giving the operations and maintenance (O&M) services in maintaining the telecom networks apart from system integration (SI) as well.

In 2020-21, VTL achieved revenue from operations of ₹1502.05 crore as compared to ₹1883.19 crore in the previous year, a decline of about 20.24 percent, mainly due to the challenges posed by the COVID-19 pandemic and associated economic slowdown during the first half of the financial year. In terms of segmental basis, the EPC business segment registered a decline in revenue of 28.56 percent because of bottlenecks faced in the first half in rollout of projects whereas cable business segment has registered an increase of 6.82 percent in revenue in comparison with the previous financial year due to increased volume of business in specialty cables and associated equipment/accessories achieved during the second half of the financial year. The profit before depreciation and tax for the year stood at lower level of ₹15,583.36 lakh as compared to ₹18,205.48 lakh in the previous year, primarily because of higher commodity prices and overall lower revenue from operations on account of economic and social disruptions caused due to pandemic.

The company’s revenue from operations on account of sale of products, comprising of telecommunication cables, other wires and cables, FRP rod/glass rovings and traded goods, etc., increased from ₹451.17. crore in the previous year to ₹481.93 crore. Revenue from sale of telecom cables stood at ₹452.93 crore on March 31, 2021, as compared to ₹333.39 crore on March 31, 2020:

Birla Cables Limited’s main business activities are manufacturing and sale of all types of optical fiber cables, copper communication cables, structured copper cables, specialty cables, and allied accessories.

FY21. There is a reasonable increase in OFC business which reached the level of ₹165.09 crore during the financial year 2020-21 as compared to ₹121.38 crore in the previous year due to nominal increase in off-take, especially from the long-term customers of the company from the exports segment. Out of this, exports also played an important contributor and it stood at the level of ₹119.50 crore during the financial year 2020-21.

The company’s sales turnover from copper cables and structured cables witnessed a fair jump during the financial year 2020-21 increasing to ₹152.80 crore during the financial year under review as compared to ₹93.94 crore in the previous year.

The revenue from operations increased by 47.27 percent to ₹328.52 crore during the financial year 2020-21 as compared to ₹223.07 crore during the previous year, primarily due to reasonable increase in order flow, especially from the long-term customers.

Samsung
Samsung gained a lot with its experience with Jio. Before Jio, Samsung was largely unproven when it came to deploying networks outside its home country. Building a vast network for Jio’s 400 million subscribers, gave it the standing it had sought for so long in the telecom equipment industry.

Globally, Samsung controlled 3 percent of the telecom equipment market in 2019, up from 1.5 percent in 2018, according to estimates from Dell’Oro Group.

With its eight-year exclusive contract with Jio having ended in 2020, the company needs another large contract. The manufacturer has been taking a shot at getting BSNL to transition its legacy 2G and 3G networks into 4G LTE networks.

There is a reason that Samsung is on the backfoot here. All operators, apart from Jio, require single RAN technology, where the same base station could be used for 2G, 3G, 4G, and even 5G. Established traditional vendors, including Nokia, Ericsson, Huawei, and ZTE offer single RAN. Samsung doesn’t. A single RAN BTS is cheaper from an equipment perspective and also occupies less space on the site, thereby leading to lower tower rentals. Samsung might be more costly because operators will need some 2G equipment from another vendor, if they are buying 4G from Samsung. As Samsung tries its luck with other telcos, it will need to find a work-around to the challenge that it lacks the technology. It could perhaps offer something noteworthy from a 5G (+4G) perspective such as a much lower total cost of 5G (and 4G) which makes up for the additional cost of 2G from another vendor,

Having said that, Jio may just depend on its 4G gear partner so that its 5G equipment is backward-compatible. With 5G in the offing, Huawei being shut out of many markets, Samsung second only to Huawei in 5G patents, and having one of its biggest 5G deal to date, a USD 6.6-billion five-year contract with US group Verizon in October last year, and other contracts in the US with Sprint, AT&T, and US Cellular, with KDDI in Japan, Telus and Videotron in Canada, and Spark in New Zealand, may find the tide turning in its favor.

The vendor has taken a decision that now is the time to invest heavily – very heavily – in securing its role as a global technology superpower, and has announced its plans to spend 240 trillion Korean won (USD 205 billion) during the next three years on a broad range of sectors, including telecom and specifically 5G/6G, so it can lead the post-Covid industrial restructuring.

With the industry shifting more toward a new era of more IT- and cloud-oriented networking infrastructure, which opens the door for experienced tech players with big pockets to challenge the leading telecom manufacturers, the vendor could be in for an accelerated tectonic shift.