Strong signal from Tata: The game is on in the telecom gear

Amidst all this, one stall attracted an unusually large crowd of people – the Tata Group’s display area. The salt-to-software conglomerate filled its tent with telecommunications equipment; marketed its semiconductor prowess and, quite predictably, solutions around 5G.

Parag Naik, chief executive of Sankhya Labs, a wireless communications and semiconductor solutions company, told this writer at the time, “I don’t have a minute to breathe.” are here.”

Naik left before he could finish the conversation and took another set of bureaucrats who arrived.

In March 2022, Indian telecom equipment company Tejas Networks acquired a majority stake in Sankhya Labs. A year ago, in July 2021, an arm of Tata Sons acquired a controlling stake in Tejas Network. At the mobile show, Sankhya Labs was showcasing equipment from Tejas Networks as well as equipment developed by it.

We all make calls, surf the internet, download videos and stream music on the go. While most of us are familiar with telecom service providers, such as Jio and Airtel, device makers are the backroom guys. Tools are the backbone that enables communication.

This appliance market is a playground dominated by multinational companies. Within visual distance of the Tata stall at the Mobile Congress, there were two large stalls set up by Nokia and Ericsson. They are the two giants to hold a combined 68% share of India’s telecom and networking products market in 2021-22, according to Frost & Sullivan. Tata Group now wants to disrupt this market and compete fiercely with them.

Through acquisitions and group synergies, Tata is slowly building up its telecom gear play. Stahl, and subsequent statements by the group’s executives indicated their intent.

“The goal is clear. We want to be one of the top five players in the $200 billion global telecom gear market over the next five years.”

“The group is committed to be a major player in the telecom technology sector. We are consolidating all our telecom equipment and technology offerings under the Tejas network, which we acquired recently, Tata Sons Chairman N Chandrasekaran said in a recent interview to Fortune India.

The time is right for the growing ambitions of the Tata group. The world is in transition. India and many other countries are looking to reduce their exposure to Chinese telecom equipment makers – Huawei and ZTE in particular. Even beyond telecommunications, multinational companies are now looking to reduce their dependence on China for the manufacture of critical goods and equipment. They learned a hard lesson over the past two years as China’s ‘zero-Covid’ policy backfired, causing severe disruption to supply chains. Input and production costs increased, as well as the price of goods passed on to end consumers.

India has emerged as the second most sought-after manufacturing destination worldwide and telecom is a priority sector – the central government has announced a production-linked incentive scheme for telecom equipment.

The Tata Group is looking to establish itself as a strong player here, starting with being a major supplier to the state-owned telco, Bharat Sanchar Nigam Limited (BSNL).

liftoff

Tejas Network was started in 2000 in Bengaluru. The company has seen many ups and downs in the last two decades. And it remains a small to medium sized player.

Industry insiders said the company’s products have yet to gain major traction in any market. “They don’t have a product or market share to show,” said a senior industry watcher, on condition of anonymity.

Numbers tell the story. Nokia reports net sales of €2.7 billion (approx. 23,533 crore) for network infrastructure and €2.9 billion (approx. 25,274 crore) for mobile networks in the December 2022 quarter. The consolidated revenue of Tejas Network for the same period was 275 crores.

Under the umbrella of the Tata group, the company seems to be rapidly transforming from a small player into a force to be reckoned with. It may soon taste its first multi-billion dollar 4G equipment contract.

Tejas Networks is part of the Tata Consortium which is the frontrunner to supply 4G equipment to BSNL. The consortium also includes IT services exporter Tata Consultancy Services (TCS) and government-owned Center for Development of Telematics (C-DoT). The deal could be a huge order for 100,000 sites, with an estimated outlay of around 25,000 crore, of which network equipment will be about 13,000 crores.

“We are L1 (lowest bidder) in a very large pan-India tender to build our 4G and 5G backbone, winning against global multinationals. And we believe this will have significant revenue potential over the course of the next year. We expect to close (the order) sometime in this quarter and this will probably be the largest single order ever for the optical networking business,” Tejas Networks co-founder and CEO Sanjay Nayak said at the company’s third quarter announcement. Said during earnings. Called on 6 February. He didn’t take the name of BSNL.

He added that the gear maker has significantly increased production capacity by signing up three new electronic manufacturing services, or EMS, vendors as its contract manufacturing partners and ramping up its internal capacity – warehousing, production floors, research and development (R&D). Invested in expanding. As well as people. The company now has 1,250 employees, a 60% increase from a year ago. About 800 of them are in R&D.

Setting up a 4G network for India’s largest public sector unit in the telecom sector will set the ball rolling for the local gear maker. Possibly, set the stage for other domestic contracts and, going forward, a global expansion.

china factor

A massive tailwind for Tejas is coming from the absence of Chinese telecom gear makers, Huawei and ZTE, not only from all new Indian telecom contracts – 2G, 4G, 5G and so forth – but also from several overseas markets, such as the U.S. .S. and Europe.

India banned the use of Chinese gear by its telecom service providers a few years back. Recently, India banned Chinese gear from being used even as a replacement, effectively putting them out of any telecom business in the country.

“Geopolitics is working in our favor. Another factor working for us is the economy of scale which can only be compared with China. This, in turn, gives us a real competitive edge,” said the executive quoted above. He added that Tejas Networks is one of the four companies — the others being Nokia, Ericsson and Cisco — that have received ‘reliable source approval’ from the company. National Cyber ​​Security Coordinator (NCSC): In India, NCSC coordinates with various national agencies on cyber security matters and takes final decisions on source destination for telecom gear.

group rapport

For the longest time, Tejas had limited access to large customers despite having the product.

“We have almost everything you need in our product portfolio – almost the same as Nokia or Huawei or Ericsson. The problem is that we didn’t have enough customers. We never had enough market access,” said the executive quoted above.

The Tata Group brand opens many doors. The group is also pumping the total 1,890 crores in Tejas. “The backing of the Tata group will put the company on the map,” said a sector analyst on condition of anonymity. The proof of this is in the company’s stock performance, he said. 246 A piece on 29 July 2021 – when it announced that a Tata Sons subsidiary would acquire a controlling stake in – 613.55 on 6 March.

While this may be a difficult time in itself, Tejas may have a chance to win contracts in India and abroad as part of a consortium of Tata group companies. The BSNL bid is an example where Tata Consultancy Services or TCS has positioned itself as a system integrator. Tejas could also be part of a consortium with Tata Communications, a company aiming to slice the 5G business pie at enterprises. Tata Communications, which operates an advanced subsea fiber network, sells communications, collaboration, cloud, mobility, network and data center services, among other solutions.

TCS did not comment on its plans to expand its role as a systems integrator or partner with other Tata group companies to build 4G and 5G telecom networks in India.

So, what exactly is the private 5G opportunity and how can Tejas benefit?

5G is expected to provide ultra-high data speeds with extremely low latency. In other words, no lag. It will facilitate automation and efficiency never seen before. Coupled with other technologies such as the Internet of Things (IoT), artificial intelligence (AI) and machine learning (ML), 5G is expected to enable autonomous vehicles, drones, remotely assisted surgery, traffic control and everything from smart cities. is seen for. factory.

This is the reason why telcos as well as non-telco companies are pinning their hopes on 5G for enterprise, also known as private 5G networks or captive non-public networks. It is expected to be a multi-billion dollar revenue stream globally. According to Finnish gear maker Nokia, personal 5G in India is expected to be a $240-250 million market by 2027, while globally, the market could generate revenue of $7.5 billion, growing at a CAGR of 23.5% from $2.5 billion in 2022 growing from

AS Lakshminarayanan, MD and CEO of Tata Communications, recently told Mint that the company has invested in providing industrial connectivity as a service. Going forward, 5G networks will power such connectivity. The company is in talks with Indian and international customers to offer it.

N Ganapathy Subramaniam, chief operating officer of TCS, has been quoted in media reports as saying that the company will help organizations set up their own private 5G networks.

Tejas could benefit from being a telecom gear supplier for 5G private networks when the roll out begins.

challenges ahead

All this does not mean that the Tata group will not face challenges. If Tejas doesn’t pan out, and at the right time and pace, the conglomerate is hoping to take advantage of the synergies could be a toss-up. After all, Tejas remains a mid-sized business with an order book of 1,431 crore by December 2022.

An analyst in the telecom sector, who did not wish to be named, said there was room for more players in the global telecom vendor market. But as things stand, Tejas will have an uphill task. He added that not all global markets will be available for entry because Huawei and ZTE are still operating in many Southeast Asian and African markets, making the US and European markets expensive and difficult to access.

Meanwhile, Tejas needs to integrate Sankhya Labs, a company developing technology for 5G as well as 6G. “The focus of Sankhya’s R&D team is now on strengthening and accelerating development programs for other areas such as 5G, radio, cellular transmission, satellite communications and semiconductor chip design,” the senior executive said earlier.

So far, Tejas and Tata group executives are brimming with confidence. India’s push to promote the indigenous telecom ecosystem is a great opportunity that they do not want to miss at any cost.