Bharti Airtel, Reliance Jio, and Vodafone Idea (Vi) are enjoying huge price cuts from global vendors including Nokia and Ericsson. All of the private telcos have recently closed multi-billion dollar deals with Nokia and Ericsson. This time, Samsung was also in the mix of companies that telcos have chosen to give orders to. The discounts were about 30-40% for the Indian telcos compared to the price of gear in the international market. So why the discount for Indian telcos? The answer is obvious.
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It is the sheer scale that the vendors have to factor in! The orders from Indian telcos will be huge, as they are serving more than a billion people. Thus, vendors have the room to scale down margins in India, as they are going to earn in scale anyway! Also, when you look at the ARPU (average revenue per user) figure of the telcos in India compared to the telcos in the West, you will find a huge difference! The best ARPU of an Indian telecom operator is still less than $3.
As per ET, Ashwinder Sethi, partner at global TMT consulting firm Analysys Mason said that pricing for the Chinese and Indian markets is usually at a 35-40% discount compared to the markets in Europe, North America, and the Middle East.
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The speed at which the Indian telcos rolled out 5G boosted the revenues of Ericsson and Nokia majorly in the previous two financial years. Even though the revenue will go down for the vendors in the current financial year as telcos moderate capex (capital expenditure), the vendors won't be disappointed because they understand that the previous few years were exceptional in nature.
Vodafone Idea will soon start expanding 4G in more parts of India and also plans to launch 5G by the end of the current financial year. The telco has closed a Rs 30,000 crore equipment deal with the vendors.
