Alcatel prepares for an Indian party

By : |April 30, 2004 0



PARIS: Alcatel, the 12.5 billion Euro equipment vendor, which has been operating in India for over 20 years but has never really been on a growth spree, has now chalked out new, aggressive and daring plans to try and get the best out of the big Indian telecom pie.


The first and the most significant activity of its multi-pronged strategy will be to get focused on technologies and operators. Everything else will follow from there. The company is very clear that in any country it will bet on two technologies, and two operators. “In India, Alcatel has decided that GSM and DSL broadband will be its technology focus”, informed president of mobile communications group at Alcatel Etienne Fouques to a select media group from India.


Strategies for the Indian Market



According to him, there are plans to take people off from old traditional technologies, and in their place get more people to work for emerging technologies such as GSM, and DSL broadband. In fact, while doing this the people strength of the company will go up from 600 to over 1,000 soon.


While Alcatel has revealed that the two technologies are going to be GSM and DSL broadband, it does not want to share the names of the two operators it plans to primarily partner with. However, industry speculates that one of them could be BSNL. “BSNL, because of its focus on GSM as well as its big plans for broadband, will surely be one service provider Alcatel will like to have on its side” said a senior industry guru from rival Ericsson.


One look at the GSM expansion plans of BSNL, an operator which not just Alcatel but all equipment vendors keep in mind when making business plans, is enough to understand Alcatel’s hope from India. BSNL plans to spend Rs 7,000 crore to buy GSM network equipment to take up its GSM subscriber base to 25 million by 2005 end. On the DSL broadband front, Alcatel wants to carve its success through efforts to get broadband Internet at reasonable price so as to reach about 20 percent of Internet users. It plans to focus on applications such as video on demand, e-working and also try to get content in place. The preferred target will be enterprise users, and users in cities and big towns.



“Such straight-jacket focus can exclude Alcatel from opportunities outside GSM and broadband,” opined a senior expert from Lucent, another Alcatel rival. While industry critics may argue that such strict focus in an emerging market may prove to be a hurdle for growth, the general consensus is that Alcatel is betting on winners, and that such focus will also have its own advantages. Alcatel however is being more cautious. “This does not mean that we do not have the capability to offer other technologies or other operators. Our entire portfolio of products and services will be available to Indian operators,” added Fouques.


The second strategy is to get into a revenue sharing mode with service providers. This means that Alcatel will put its fate alongside its clients or the operators, and get a share of their revenues. The company plans to start with the GSM operators, where it has a very small market share, but which is the most rapidly growing market in the telecom sector. According to unconfirmed reports, Alcatel is already discussing revenue sharing with BSNL and Reliance. Alcatel is also considering this model for broadband services, as and when the big players launch those services.


In fact, the company says that looking beyond just revenue share, it is also considering organizing financing for its buyers. While the company refused to share the details of the model, one industry expert calls Alcatel daring, and defines this type of a model a little risky, considering that Indian telecom sector is still undergoing teething issues. Slightly unrelated, but there have been instances in the past, where service providers have told equipment vendors to wait for payments till revenues started flowing in, but ultimately the service provider wound up and the equipment vendor burnt its fingers badly.


Alcatel itself is a well-known example of such disaster. “Our strategy will primarily be to go after established players”, said Alcatel president Olivier Picard, who is confident that the company will be able to get over 20 percent market share. A tall order considering the fact that today the company’s share is almost negligible in GSM network market.


Exploring outsourcing opportunities


The company claims that in the emerging countries, Alcatel is among the top four GSM equipment players. Telecom outsourcing is another opportunity, which Alcatel will want to tap, to really get into a high growth mode in India. At a time when Ericsson has actually bagged a huge network management outsourcing deal from Bharti, Alcatel is also eyeing that route to quick market capture. Alcatel Integration and Services Division president Frederic Rose said that Alcatel would also be actively exploring such outsourcing jobs in India. Rose claimed that Alcatel has real life cases where by taking up outsourcing jobs, it has brought down not only the operators’ headcount but also its opex by as much as 20 percent.


According to Alcatel sources, talks are going on with Reliance. Outsourcing might be a little too early for India, especially for incumbent operators such as BSNL, but surely Alcatel is gearing up for an opportunity, which everyone admits, is huge. Alcatel’s designs on India do not revolve only around its plan to lure operators by offering revenue share and financing, but identifying preferred technology and service provider, and outsourcing. There is another front too which this company plans to attack, in order to enhance its position in the Indian market vis a vis other telecom majors such as Motorola, Lucent, Ericsson, and Siemens. One significant strategy is the message that Alcatel top management wants to give to its own people – that it believes that India is going to be the growth engine.


India-a key market for Alcatel?


“India is one of the most promising telecom markets in the world today. This country will play a major role for Alcatel worldwide”, added Picard. The India team size is likely to double in the coming months, a new development center is being planned in Bangalore. The top management focus and confidence on India is expected to percolate down the line and enthuse the local team to get more aggressive in the market and perform better.


“Alcatel top management is convinced that India is not just a big market but also a key market. That means a lot in terms of the support we will not get from them in terms of resources” believes Alcatel India MD and Indian sub continent VP Ravi Sharma.


With these strategies chalked out, what is likely to be the growth in Alcatel’s India business this year compared to last year? On that, all that Sharma is ready to say is that “We want to be a significant player in GSM, Broadband and transmission equipment. And in fixed line switching equipment, we want to be able to defend our 50 percent market share”. The optimism has already percolated down. Considering that Alcatel already has service providers such as BSNL, MTNL, Bharti, Tata Teleservices, VSNL, and Reliance as its customers, it is now only a question of successfully going back to them again with the new strategy.


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