Based on industry estimates, telecom companies,
including Bharti Airtel, Reliance Jio, Vodafone Idea and BSNL, are expected to
invest over $10 billion on buying 5G telecom equipment in the next five years
as they transition from non-standalone networks to standalone 5G networks.
After 20 years
in India and after having invested over $2 billion, the road ahead for Huawei
Technologies has never looked bleaker.
With
the government closing the doors to Chinese companies for 5G trials, Huawei is
set to miss out on what is the largest upcoming business opportunity for
selling telecom gear – the 5G trials.
Based on industry estimates, telecom
companies, including Bharti Airtel, Reliance Jio, Vodafone Idea and BSNL, are
expected to invest over $10 billion on buying 5G telecom equipment in the next
five years as they transition from non-standalone networks to standalone 5G
networks.
They will spend a further $3-4 billion
on managed access services.
Analysts
say that, between 2016-20, telcos put in a capex of over $19 billion (excluding
$4 billion on managed services) to build their 4G radio access networks.
While
half of the 4G network market share was with Samsung (which built the Reliance
Jio network), European players such as Ericsson and Nokia had an over 30 per
cent share.
The
rest remained with Chinese companies, predominantly with Huawei.
Now
Huawei’s market share will fall dramatically in the coming years because it has
been excluded from participating in the 5G sweepstakes, an area it had focussed
on for the last few years.
Huawei
declined to make any comment.
It
is true that the company will continue to work with operators to upgrade and
expand their 4G networks but this will be a shrinking business.
In
fact, even here, some telcos are moving away from Huawei.
Last
year, Airtel renewed its contract with Ericsson for expanding its 4G network in
eight circles but it replaced Huawei in parts of Tamil Nadu and Rajasthan with
Ericsson for its expansion.
Some
say, however, that the reason was perhaps that Airtel was unwilling to play the
pricing game.
It
is also clear that Chinese companies, including Huawei, will not be able to
participate in the upcoming over Rs 8,000 crore contract for 4G from
state-owned BSNL/MTNL which is still under discussion.
The
company is looking at offering the contract to homegrown system integrators.
The
problem for Huawei in India is that, unlike in China, it is overly dependent on
selling telecom gear for its revenues.
In
China, about 54 per cent of its revenues come from the consumer business which
mainly consists of mobiles.
In
India, however, its mobile handset business is very small.
Huawei
is a premium brand and its one mass phone offering, the smartphone Honor, has
failed to win much market share in a market dominated by other Chinese brands.
The
company also started an enterprise business a few years ago which, while
growing fast, very small.
Surprisingly,
domestic telecom companies have supported Huawei until very recently when the
border clashes with China on the border last year which left numerous Indian
soldiers dead, made such support untenable.
Bharti
Airtel’s Sunil Mittal, for example, has often said that Huawei’s 5G technology
is superior to that of the Europeans.
Other
telecom executives say that Huawei has offered long term credit lines from
Chinese banks with a low rate of interest which have been very useful.
For
perspective, though, it has to be noted that India represents a very small
market for Huawei, constituting a mere 0.5 per cent of its global revenues.
It
has not even made any money here, the way it has in Thailand and the
Philippines.
The
one chance to increase this market share – 5G – has vanished.
Moreover,
despite the huge challenges it will now face in India in the future, Huawei has
a large stake in India because it is a key global hub for R&D.
It
has invested $200 million in its R&D centre in Bangalore which is working
on some core technologies and is its largest centre outside China.
It
employs more than 6,000 employees and is hiring more.
It also runs the largest global
service centre from India, handling the running of telecom networks in over 30
countries.
The
question is whether these businesses will satisfy Huawei’s appetite after two
decades of betting big on India.