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OEMs: Getting Ready For The Next Big Leap

The last few years have been disruptive for the telecommunications sector in India. Telecom has changed the operating models of many businesses and paved the way for government’s Digital India initiative with mobile becoming a major consumer phenomenon. The millennial generation, in fact, has not seen the world without mobile. Deloitte’s Global Mobile Consumer survey in 2017 revealed similar findings.

A new business model from a disruptive telecom operator in the country led to a huge upsurge in data usage leading to India becoming one of the fastest growing data markets in the world. To support the growing data demand as well as to meet the expectations of the customer, telecom operators in the country are upgrading as well as adding capacity to their networks on a war footing.

Telecom operators are traversing this journey supported by their equipment vendors who are trying to keep the momentum going by ensuring their factories are producing enough to meet the pressing customer demands. Telecom OEMs (Original Equipment Manufacturers) are not only supplying the equipment but also continuously optimising the network to ensure the effective utilization of their assets by operators.

Challenges facing telecom OEMs

While the trends reflect the rising demand of mobile internet, data services, mobile games, web content, etc., the sector is going through its own set of challenges. The huge capacity expansions needed to meet the demand and customer expectations have added to the capital and operational expenses of the operators. Moreover, these expenses have not been offset by a proportionate increase in revenues as most of the data being offered is either as a customer delight or at a rate where it is difficult to meet the costs. While data consumption is increasing, the Average Revenue Per User (ARPU) is declining. Besides, the huge outflows of expenses and interest payments for the loans taken to buy spectrum have resulted in additional burden.

The recent wave of operational shutdown by some operators coupled with consolidation in the telecom industry has shrunk the market size for OEMs, thereby increasing the risk exposure. The recent case of an OEM going to court against a telecom operator to recover unpaid dues highlights the difficult scenario.

In order to improve EBITDA and cash, telecom operators are continuously negotiating costs and payment terms with their OEMs. Thus, the OEMs are looking at different avenues to manage cash for supplying telecom equipment.

Increase in import duty on telecom gear combined with a depreciating rupee and rising oil prices has increased the expenses for telecom operators. To keep expenses in check, the overall order book for OEMs has shrunk.

As telecom operators upgrade their networks by replacing the legacy network nodes with newer technology, logistics and warehouse costs are going up as the old nodes have no takers across the globe.

Way forward

Telecoms will continue to struggle with decreasing revenues and have to make tough decisions. With the continued trend of operators expanding and adding capacities across Radio, Core, Transmission, Intelligent Network (IN), etc., the OEMs will be required to optimise without compromise. We might get to see the optimisation of not only network equipment but also the human resources via automating some of their processes, or begin doing some job-rotations, by encouraging employees to gain new skills and knowledge. Artificial Intelligence (AI) and Machine Learning (ML) are the most-talked about technologies doing the rounds since past few years across the globe. These will play a pivotal role in automating several back-office operations and dealing with mundane issues.

OEMs would need to consider innovative operating models to ensure success for themselves and for telecom operators. One way in which this can be achieved is through implementation of “Network as a Service (NAAS)”. OEMs can build a predictive pricing model wherein they supply the equipment, and charge the operator based on the capacity added and experience delivered to the customer. A few telecom operators globally have tried this model and have found reasonable success.

Telcos are getting ready to embrace the next big thing – 5G. Trials are being done globally and in 2019, we would see commercial deployments starting in India too. OEMs will have to put in their resources to commercialize and operationalize their products. However, focus should not be only on speed increase: 5G detaches the network infrastructure hardware and software, thus enabling new possibilities such as agile, secure, and high-quality content delivery. The world of 5G is, hitherto unknown, and would require changes to the entire network landscape. OEMs will have to build structures that can work with Telcos to set up the network, optimize it, and then run it for them. The challenge of getting skilled resources for such large-scale deployments can be overcome if OEMs tie-up with universities and get this subject introduced in the curriculum. This will help them find skilled resources and to create testbeds outside their own labs.

The adoption of 5G will bring new business avenues such as Internet of Things (IoT) which telecom operators are trying to get into for new revenue opportunities. This space is currently dominated by small firms that have the technical capability but not enough resources to expand. OEMs can explore this domain to offer a managed service which the operator can further monetise.


With the rapid increase in awareness of technology, customers are willing to explore newer avenues for enhanced mobile experience. Meanwhile, operators, OEMs, and content providers have together scripted success stories in the last few years and are working together to scale the next peak. OEMs must enable (and push if required) the operators to rollout the 5G faster with an increased coverage both in rural and urban areas beyond traditional services thereby providing the customers an experience of trendy games, premium entertainment content, AR, VR, etc. Trends come and go but OEMs need to embrace emerging technologies and always be prepared for adopting the next wave of disruption.

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