India's mobile subscriber base has been growing exponentially, from 6 million at the end of 2001 to 750 million by 2010 - a CAGR of 95%. This growth has enabled various telecom equipment vendors to flourish.
On the mobile devices side, local companies such as Micromax, Karbonn and Lava have sprung up, while companies such as HFCL, Coral Telecom, Tejas Networks and VMC have ventured into the core telecom space.
Most core equipment vendors initially operated as resellers for global players wanting to enter the booming market, acting as Indian subsidiaries or local partners. Fibcom, Anda Telecom, GOIP Global Services, Tirumala Seven Hills and Savitri Telecom all started this way. and most continue to be resellers.
The global players, including NSN, Ericsson and Huawei, have identified India as an ideal location for telecom R&D. Their presence has acted as another enabler for the growth of domestic vendors, as it has given them access to a growing pool of skilled professionals.
Emboldened by this and their experience as resellers, Indian telecom equipment companies started developing their own products. But few companies have invested in their own manufacturing facilities along with building R&D capabilities.
One reason for the lack of significant efforts or investments in equipment manufacturing is a lack of government support. Unlike the IT services industry, which has been offered various incentives such as extended tax holidays and exemptions for exports, very little has been done to aid telecom manufacturing companies (other than sporadically imposing import duties on telecom equipment and temporarily banning Chinese manufacturers’ equipment).
On the contrary, the Chinese government has played a vital role in ensuring their equipment manufacturers, such as Huawei and ZTE, dominate domestically and go head-to-head with Alcatel-Lucent, Cisco, Ericsson, Nortel, NSN and others in global markets.
This has been achieved through a combination of programs to develop and test new technologies in the country and initiatives such as tax breaks and providing loans at nominal interest rates. These companies also took advantage of these low cost loans to make huge investments in R&D. Huawei spends up to 10% of its investments on R&D in order to compete in the fast changing telecom environment. Huawei has also received close to $10 million in research funding from Chinese government since 2003.