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Lower per GB data cost will drive Indian telcos to opt for 5G: Ericsson NEW DELHI: Swedish telecom gear maker Ericsson said that the need to produce data at a lower cost will drive Indian telecom operators to deploy 5G technology in the country. In an interaction with ET’s Danish Khan, Nunzio Mirtillo, Head of Market Area South East Asia, Oceania and India at Ericsson talked about the company’s performance in India, its managed services business and 5G deployments. Edited excerpts

Do you see Indian telcos delaying 5G deployment due to the financial stress?

Operators have so much to do now as they are in the middle of market consolidation. But, they are investing and need to invest much more in order to be competent in this market. They are thinking and working around 5G but not may be as the most important short term action to fix.

They will need 5G because it will help them produce Gigabytes at a lower cost. So, that is where the operators will have all the focus on 5G.

For India, this is very good because everyone is using technology and mobile broadband. We also know that there is a connection between the GDP growth of the country and use of technology. The system needs to understand and help the operators.

It is important for the government to understand if telcos can afford to invest and continue to invest. For the government, it is not only the spectrum but also the source of the indirect growth that you will get when the entire country will be connected.

But do you think that despite the pushback from telcos, India will be able to have the initial 5G launch by 2020?

Yes. I believe we will start to see 5G in India by 2020 because the pace of deployment in the rest of the world will be very fast. India is in a phase where it’s harvesting for technology. So, it will be natural for India to use 5G. This time more than ever is for operators to get into 5G.

How is Ericsson coping up with the current situation of consolidation and low business?

India has always been a key market for Ericsson for two reasons. One is the business interest and second is that we have been investing in India and have built our R&D centres, service centre, and own production facility.

What is happening in India now is that everything is accelerating. Operators are all the way up for consolidation. When consolidation usually happens in other parts of the world, it is seen as a challenge in the short term, from the operators and suppliers. But in the medium to long term, it is usually something good. It will make the system healthier in the sense that the operators that are finally left are bigger, they can sustain a long term business case which requires very big initial investment, and this is what is happening now. The current development is also making it possible for hundreds of millions of people in India to get access to service at a very at a very affordable price.

India is definitely a good place to be in for us. Business wise, we can learn more in this country than in other countries because not only you need to supply technology but you can learn how the technology has to be in a year, 2 years, and 3 years from now in order to cope with the traffic uptake in the best possible way. India is the second largest contributor for us in Q1 ahead of China.

Any specific reason behind India’s increased contribution towards overall sales?

China has seen less investment in short term for radio. While in India, although there has been a consolidation, this kind of incredible traffic uptake is such that operators are investing.

Do you see this growth to continue?

India is a big country and is evolving very fast with data traffic expected to increase five times by 2023. There are more than 1 billion people in India but only 300 million are using mobile broadband service. This will go from 900 million to 1 billion in the next few years. You will have a tremendous need for technology that can cope with this quality and traffic demand.

As a supplier or operator, you need to make sure that you invest enough so that you have the technology to make you a leader in this country. From a company point of view, what is needed in this country in the next 2-3 years is exactly in the centre of our focused strategy and we have therefore increased our R&D here in all these domains.

Are you content with the outcome of RCom episode?

We are happy and RCom is also happy that we did come to a conclusion. When we terminated our managed operations, it was done in a very cooperative and a professional way. So, one thing is that we get the litigation in the courts and that you have to do. But the thing is that how do we behave when it comes to terminate, when it comes to the people involved. I think there we have been very professional and RCom as well. There has been a full cooperation. You have different opinions and we use the legal systems. The legal system in India has executed, and in the legal court we can find an agreement. So, from that perspective, I feel fine.

How did your managed services business perform in Q1?

There was consolidation in the market and therefore some managed services businesses have disappeared because some of our customers have merged or disappeared. However, our market share has increased because we have got a big managed services operation with Bharti which is one of the biggest operator in the world.

To support the growing traffic and better quality, telcos now need to do various things other than managed services. And, investments must be made on managing networks with the help of software, using automation, artificial intelligence. That is where we are now investing when it comes to R&D for managed services.

Does it mean that the company will need lesser manpower for managed services, since you are bringing automation and AI?

Especially for the operators that will stay in India, they will need even more because the traffic and number of activities. There will be areas that will be automated, and for those areas, you will require less workforce. But then, there will be areas like field maintenance where we require manpower.

Does cost and pricing pressures continue in India?

I believe that it is. The cost per GB must go down. The component of cost to produce per GB involves everything, from the capex, the opex, and the cost of technology. All these costs continuously need to go down and R&D is the only way to do that.

We cope with telcos’ pricing and cost pressures by increasing our R&D, which makes it possible to be on the edge of technology at a much more convenient cost.

This year, what is the focus for Ericsson India?

It is to make sure that we deliver the most advanced 4G technology to our customers, keeping in mind that the operators in India will move to 5G in 2020. We need to ensure that their additional investment is future proof.

To be more specific, what can happen in India is that in the future, same spectrum bandwidth for 4G might possibly use it for 5G.

When it comes to the business, what are going to be the main levers for profitability this year or when you start the next year? Which are the areas?

With our new strategy, we are focusing on the basics. We are focusing on our core network, which is going to be virtualized, and our OSS, BSS systems and managed services. As you know, we are also implementing our plan which we had communicated to the stock market.. We do not only have the plan to improve our profitability but also to invest and increase our R&D.

When it comes to 5G partnerships, what sort of developments are taking place? Has the company already come up with some use cases?

I think that we will officially launch our 5G Innovation Lab at the IIT soon. The goal with Indian Institute of Technology is that we want to build an ecosystem and one of the main objective for us is to get new use cases.

That being said, what we provide is awareness on what is 5G, What 5G can bring to you, to the government, enterprises where we will have a university working with us. Then you have the business side. For example, we have with Bharti a memorandum of understanding. But we will work together on 5G. The most straightforward use case for 5G is mobile broadband that the operators have understood and that is why we are working with them. When it comes to our main operators, we will start with trying our basics- mobile broadband, and then all together we will look at the next step, new use cases. It is in multiple dimensions.

What is the update on manufacturing in India?

We have planned to use Pune production facility for other countries in Asia and we are working on all administrative processes in order to make it happen within this year. The Pune facility can become bigger in the near future. We will leverage it for countries around India. So, it is a perfect hub.

How much investment does it require to expand the facility to other parts?

When we set it up we said about $20 million. The capacity ramp up will happen.

Any comments that you would like to make on the manpower, hiring new people or rationalizing the current manpower?

Obviously, we are continuously investing into new competencies, but it is kind of normal. We can mention many cases but it is normal business life. The number of projects we run in a market area like ours, we talk in hundreds. So it is on a daily basis that we have to hire competence or people moving. It is a very dynamic situation.



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