Indian telecom to require local equipment manufacture

India’s two large telecommunications services companies, Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL), have decided to require their suppliers to manufacture equipment directly in India or through contract manufacturers in the country, the country’s minister for information technology and communications, Dayanidhi Maran, announced Wednesday.

The two companies made the decision to ensure quality, timely delivery, and good after-sales service, Maran said at the annual conference of the Telecom Equipment Manufacturers Association of India. The government also plans to request that private sector operators in the country adopt a similar purchase policy, Maran said.

BSNL, based in Delhi, is fully government owned, while MTNL, also in Delhi, is majority-owned by the Indian government.

In April, Maran told reporters in Bangalore, India, that BSNL and MTNL were considering a proposal that would require suppliers to manufacture their products locally. The proposal would boost local manufacture of equipment, while multinational companies would benefit from making the equipment in India because of the financial advantages offered by the country’s low-cost labor, Maran said at the time.

The Indian government is planning to have 250 million telephone connections in the country by the end 2007, which would take telephone penetration in the country to 22 percent. The government also aims to bring broadband connectivity to 10 million subscribers by the end of 2007. The country had 104 million telephone connections and a telephone penetration rate of 9.61 percent as of June, according to the Telecom Regulatory Authority of India in Delhi. BSNL was the largest service provider, with 47.5 million connections, while MTNL had about 5 million subscribers.

Although the country has attracted investments by multinationals in the areas of technology research and software services, India is not seen as a hot location for manufacturing because of its infrastructure bottlenecks. During a visit earlier this year to India, K.Y.Lee, chief executive officer (CEO) of Taiwanese electronics maker BenQ Corp., said his company was not considering manufacturing in India because the country does not offer a sufficient transportation infrastructure and a large enough base of component suppliers. BenQ has, however, set up an embedded software development facility in Mumbai.

Motorola Inc., in Schaumburg, Illinois, also said earlier this year that it had no plans for manufacturing in India. The company may instead look at some “back-end assembly” in India, as opposed to the full manufacture of products, Edward Zander, Motorola’s chairman and CEO, told reporters in Bangalore in August.

A few telecommunications vendors have plans to manufacture in India. Nokia Corp., of Espoo, Finland, intends to begin manufacturing base station controllers in Chennai in south India by next year, in addition to the mobile handsets it was already planning to make in the country. Telefonaktiebolaget LM Ericsson in Stockholm makes radio base stations in India. Electronics manufacturing services company Elcoteq Network Corp., which is also Espoo-based, operates a manufacturing facility in Bangalore.

REFERENCES: Nokia to make more equipment in India, May 31, 2005