Nortel expects APAC to be growth engine

Shailendra Bhatnagar

NEW DELHI: Nortel Networks Corp., one of the world's largest telecoms gear makers, expects the Asia-Pacific market to drive future sales as demand for equipment takes off in the under-penetrated region.

"We view Asia as the growth engine for the company in the future," John Giamatteo, Nortel's Tokyo-based president for the Asia-Pacific region, told in an interview.

"Capacity expansion in Asia-Pacific and the market in general is growing much faster than other parts of the world, and we hope to get more than our fair share of that growth."

Brampton, Ontario-based Nortel makes equipment for fixed-line, mobile and Internet networks. The Asia-Pacific area, where many countries are witnessing a mobile services explosion, contributed 14 percent of Nortel's third quarter revenue of about $2.3 billion.

"Countries like India, Pakistan, Indonesia and Vietnam are the high hitters of low penetration, and then you have advanced markets such as Japan and South Korea," Giamatteo said.

Giamatteo said Asian giants such as China, the world's largest mobile services market, and India, the fastest-growing, would fuel equipment sales in the coming years. Analysts say Asia is likely to spend well over $30 billion on telecoms equipment and services in 2005, up from about $28 billion last year.

In August, Nortel won a hard-fought deal to supply 7 million GSM lines to state-run Bharat Sanchar Nigam Ltd, India's largest telecoms firm by sales and the third-ranked mobile operator.

India has more than 48 million mobile users and the cutthroat sector adds about 2 million each month, thanks to low call rates.

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More growth is expected as carriers such as Bharti Tele-Ventures Ltd. and Reliance Infocomm Ltd. spread their networks in communication-starved rural areas where wireless is often the cheapest and quickest mode of expansion.

Analysts expect India to have 100 million mobile users by 2007 as only five in 100 now own a handset, compared with 25 in 100 in China. About 46 percent of Nortel business is in wireless, though Indian carriers are rolling out broadband services too.

"That is why everybody is here and everybody is investing -- this is the future," said Giamatteo, on his 15th visit to India since 2002. He now plans to visit each month this year.

Indian carriers are likely to spend $60 billion over the next decade, and Nortel will vie with North American rivals Lucent Technologies Inc and Motorola Inc., France's Alcatel and China's Huawei and ZTE Corp for that business.

Nortel, having recently sewn up an equipment joint venture with South Korea's LG Electronics Inc., hopes to have a larger presence in one of the most sophisticated and feature-rich wireless markets, he added.

The deal gives Nortel half of LG's infrastructure business, ranging from optical to wireless and next generation network products, in return for helping LG finance its expansion.

"The synergy between handset makers and high-end infrastructure is becoming increasingly important," he said.