Ericsson billion boosts Bharti expansion bid

Details: Alec Barton; Category: Wireless Networks; 04 September 2006; 10227 views

Growing 5% every year, India 's wireless services market is in fact expanding faster than anywhere else. This mushrooming market will now grow even faster still thanks to a US$1 billion contract won by Ericsson from India's most highly valued telecoms enterprise - Bharti.

Modernisation, including upgrading and expansion of Bharti's GSM/GPRS network and managed services, will be the main result of the contract, along with Bharti increasing its footprint on Indian telecoms. Bharti will in turn compete more effectively with its rivals such as Motorola and Nokia, both keen to clean up any chances within a giant market where almost five million new subscribers join a mobile network every single month on average. Roughly one quarter of these newcomers choose Bharti as their network: Bharti's 24 million GSM mobile users are the consequence.

What Bharti is confident of achieving with Ericsson's expertise is a competitive edge over its rivals. Local carriers - and they include Reliance Communications Ltd with its CDMA technology and state-run Bharat Sanchar Nigam Ltd - allocate at least US$1 billion annually to their expansion plans. Ericsson outlined its intentions: "The three-year services agreement will see Ericsson manage design, development and deployment of Bharti's network, including capacity and coverage, enabling the operator to expand in rural India and reach out to all towns and cities in 15 regions."

Ericsson will also upgrade the Bharti network with mobile softswitch (Media Gateway and MSC Servers), the solution that is designed to pave the way to an all-IP network. Bharti Airtel will be able to reduce the operational costs and introduce new services in a cost-efficient manner.

Bharti will be raising the money for the new contract from internal sources, showing the greatest faith in it: "This contract will take care of all our roll-out needs in these 15 circles for the next three years," Manoj Kohli, Bharti's mobile president, explained to Reuters.

Ericsson has always been optimistic of winning orders from Bharti, having clinched US$650 million of orders in 2004 and 2005. Mats Granryd, Ericsson's head of operations in India , said: "It is clear that this deal shows that our products are good and it is promising when the biggest operator in India chooses us for such a big roll out...This is one of the biggest deals which have been done in India . The contract is for three years, but I am convinced that we will continue to deliver to Bharti even after that." In fact, Ericsson would also like to upgrade Bharti's network with its mobile softswitch system, which will allow the carrier to move toward a low-cost Internet Protocol platform.

Rural operations rocket

The three players already mentioned, Bharti, Reliance and BSNL, are relentlessly targeting India's rural areas. Over two thirds of the country's population live in rural surroundings and yet telecoms have not made their presence felt to any real extent in this environment. Of course, cheap call rates will link with state-of-the-art technology to boost tele-density.

Ericsson is no newcomer. The Bharti Airtel GSM/GPRS network within 15 of the 23 Indian telecoms regions is two-thirds managed by Ericsson. Bharti's ambition is to bring its network to every one of the 5,200 towns described as census towns by the Indian authorities by March next year, an expansion of 1,000 over the present total.

Shares in both Ericsson and Bharti appreciated substantially when the contract was announced 2.4% up for Bharti, 1.76% for Ericsson. Bharti's market value is U$16.5 billion; ownership is just over 30% by Singapore Telecommunications Ltd and nearly 10% by Vodafone Group Plc.

As if to emphasise Ericsson's commitment to India, it is also one of five bidders chasing GSM work worth US$4.8 billion with BSNL.

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