ZTE 6 : Deal Maker

ZTE is the one of the few telecom equipment vendors that came out untouched following the special surveillance on the import of select networking equipments. ZTE reported 50% growth in revenue during the last financial year. Revenue increased to Rs 7,200 crore from Rs 4,800 crore. Wireless, wireline and terminal business contributed to the 50% growth.

In the managed services space, ZTE received orders from Tata Teleservices, Aircel, Sistema Shyam and STel in FY 2009-10. ZTE currently enjoys over 75% market share for NGN products and is also the market leader in the CDMA category. ZTE experienced large scale growth in the GSM space in India.

The company reported a considerable increase in the recruitments in India. Figures suggest that out of the total recruitments by ZTE in 2009, 50% hiring was done in India. India also accounted for one-tenth of ZTE's VAS revenues in 2009. Following 3G, ZTE sees a huge potential for VAS in India and will continue to invest here.

To meet the evolving requirements of the industry, ZTE plans to make targeted investments in 2G, 3G, bearer network and fixed line broadband in the Indian market. 3G may boost its business in India. With 3G coming, the existing 2G backhaul-especially for transmission-will not be able to meet the large scale data transmission. This presents an opportunity for ZTE to help operators expand their backhaul systems.

Green brought some good business to ZTE India. ZTE has been adopting green and cost saving technology strategies to help protect the Earth and the investments of operators. ZTE's green 3G base station site relies on wind and solar energy for operation. Compared with similar base stations, this green solution reaches 100% energy saving capabilities.

It has also made inroads into the WiMax market. But, security issues hampered revenues from WiMax. In the WiMax arena, ZTE has emerged as a strong contender after making successful inroads into the Indian broadband market with its BSNL WiMax win in 2009.

Underlining its commitment to the Indian market, the main areas of focus for ZTE in the coming years would be a diverse product strategy powered by innovative technology, workforce development and extended presence in the country through new touch points. ZTE aims to keep the staff training rate over 80%. Additionally, in the first half of 2010, the company plans to train 314 product experts in the 2G and 3G domain for its India engineering center.

The company also unveiled its plans to set up its local laboratory in India along with local after-sales staff to effectively manage projects. Efforts are also on to build the NOC line of business to provide managed services, operation and maintenance for projects. To support this initiative, ZTE plans to additionally hire around 800 employees as technical staff in India in the current year.

India is vital for ZTE. ZTE India has contributed 9% of the sales revenue of ZTE Corporation in the year 2009. How does it want to take into confidence several ministries in India? The strategy is three-fold. Increase the employment base in India using the local manpower, mentor more Indians into senior management and strategic roles within ZTE, and have factories to manufacture goods for the Indian market.

It will also ensure complete compliance with all the laws of the land and invite relevant authorities to put in place all the required check-points to ascertain and confirm that its products comply with the national security guidelines.

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DK Ghosh, CMD, ZTE India

We will use Chinese experience for 3G rollouts in India. Security concerns might be a dampener. So how do you plan to tread in the Indian market?
We intend to work closely with the government in the Indian business environment and will continue to cherish the relationships that we have built with customers and partners here. We will also continue to further establish our commitment to India as a strategic market by focusing on increasing the employment base in India using local manpower, mentoring more Indians into senior management and strategic roles within the company, and by manufacturing more goods for the Indian market. We will ensure complete compliance with all laws of the land, and invite relevant authorities to put in place all the required check-points to ascertain and confirm that our products comply with the national security guidelines. It has been our endeavour to work with the Indian government and we will continue to provide all the necessary support towards achieving this objective.

Highlights

• 50% growth in Indian sales
• One tenth of its VAS reveue came from India
• Received Manages Services orders from TATA, Aircel, MTS & STel
• Enjoys more than 70% market share for NGN products
• Plans to hire additional 800 technical staff

The Chinese vendors in India, including you, have been betting big with low pricing; but profit margins have thinned down drastically. How has it impacted your business?
ZTE India has contributed 9% of the sales revenue of ZTE Corporation in the year 2009, as per the financial report of ZTE Corporation. While ZTE India's gross profit will not be higher than the average profit of Asia (in 2009 the Asia region's average profits, exclusive of China, was 22.32%), India is the largest market outside China for ZTE. India is too large to be ignored by any telecom company, including operators and equipment providers. It is a strategic market for ZTE and we have invested a lot in India. 3G will bring about a revolution for the Indian telecom industry and ZTE is looking at becoming an important player in this segment.

What makes ZTE invest heavily in VAS?
India accounted for one-tenth of ZTE's VAS revenues in 2009. We see a huge potential for VAS in India and will continue to invest here. Today, it has become essential for operators to focus on VAS to generate revenues. With the upcoming 3G launch, operators will be more keen on VAS because subscribers will want to use the 3G technology to enjoy more VAS services like Internet games, etc. This offers a

good potential for ZTE to develop VAS, hence, the focus on VAS. We plan to invest Rs 88 crore in India for VAS

What are the new opportunities that you see for the company in the market?
3G offers the biggest opportunity for both UMTS and WiMax. With the 3G bidding over, operators who have won 3G spectrum will try and establish their network as soon as possible, resulting in a fierce competition. We won the topslot in China's 3G tender in 2008, and hope to use the experience in China for the benefit of the Indian market. Also with 3G coming, the existing 2G backhaul-especially for transmission-will not be able to meet the large scale data transmission. This presents an opportunity for ZTE to help operators expand their backhaul systems. Lastly, managed services is an area that is likely to see huge investments from the Indian operators.

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