Ericsson Scores $1.3B Indian Telecom Upgrade Deal

Swedish telecom equipment giant Ericsson (Nasdaq: ERICY) solidified its dominance of the key Indian mobile market Friday with a US$1.3 billion deal to provide equipment and services to the country's largest wireless carrier.

Ericsson won the contract to supply GSM (Global System for Mobile communications) and W-CDMA/HSPA (Wideband Code Division Multiple Access/High-Speed Packet Access) equipment and related telecom services to Bharat Sanchar Nigam, India's government-run mobile carrier.

The deal calls for Ericsson to upgrade the existing GSM network and to start introducing next-generation functionality on the W-CDMA/HSPA standard. The contract also calls for the first deliveries to be made next month and for the first phase of the work to be completed within a year, Ericsson said.

A 'Landmark Project'

Ericsson India President Mats Granryd called the deal a "landmark project" for both the country and the company, that will be "a catalyst for future telecom growth in the dynamic Indian market."

Ericsson has benefited from India's push to modernize its communications networks more than the other major telecom gear makers.

The company has supplied equipment to 49 of the 96 existing GSM mobile networks in the country, it said, adding that its switches and other mobile gear handles the calls and other services of about 40 percent of the country's wireless subscribers.

The Next Big Network

The U.S. listed shares of Ericsson were down more than 1 percent to $36.12 on the Nasdaq in morning trading Friday.

The upgrade is a major step toward bringing advanced telecommunications services to Indian consumers and businesses, said Kuldeep Goyal, Bharat Sanchar Nigam's chairman.

"Upgrading our network will pave the way for a premium communications experience for our customers, and enable us to address new customer segments cost-efficiently," he said, adding that Ericsson's track record in India helped make it a "natural choice" to receive the contract.

The deal calls for Ericsson to supply a range of its products and services, including its Mobile Softswitch Solution and its service-aware Packet Core, IMS (IP Multimedia Subsystem) and multi-service IP Packet Backbone networks. It will also help design the networks and assist with deployment, integration and training.

Like other emerging economies, India is becoming a key market for telecom gear makers, with more opportunities for the type of large-scale network build-out that generates billion-dollar contracts, ABI Research analyst Shailendra Pandey told the E-Commerce Times.

Much like China, India is a "large country with tens of millions of people living in rural areas that can best be served by wireless networks," Pandey added. "This represents a massive market opportunity for Ericsson and its competitors for years to come. Ericsson has managed to carve itself a nice niche there."

Searching for Growth

More equipment makers will be seeking those opportunities as markets such as North America and Japan continue to see slower growth, Ovum-RHK analyst John Lively told the E-Commerce Times. Capital spending by carriers in the U.S. on wireless is growing at around 2 percent a year, Ovum-RHK reported, with investments in wireline networks actually going down.

Many carriers in established markets are still sorting out networks and other assets that have been cobbled together through mergers, depressing capital spending for the short term, Lively added.

"The consolidation trend has left fewer customers for the gear makers and forced them to become adept at selling into new markets," he said.

That pinch has been felt by the major telecom gear makers -- who have experienced their own wave of consolidation -- with Alcatel-Lucent (NYSE: ALU) and Nokia Siemens both posting financial losses and moving to cut jobs as a result, Lively noted. Alcatel-Lucent has said it would slash as many as 12,500 jobs worldwide, and Nokia Siemens cut 9,000 workers from its payroll.

Ericsson, meanwhile, was in the news earlier this week after the president of its joint venture with Sony (NYSE: SNE) that makes mobile handsets abruptly announced his plans to step down. A Sony executive was installed to run that enterprise, which is the world's fourth-largest maker of mobile phones.