Date:31/03/2005 URL: http://www.thehindubusinessline.com/bline/catalyst/2005/03/31/stories/2005033100280200.htm

Back Landline reforms

Neha Kaushik

Bharti Teletech, which manufactures landline telephones, is banking on exports to stay in business, but hopes rural telephony and broadband initiatives will yield domestic growth.

Rakesh Bharti Mittal, MD, Bharti Teletech

THE next time someone asks for your opinion on the best phone brand, chances are you will rattle off Nokia, Motorola, Samsung or any other cellphone brand name. Obviously, you would say, who discusses landline phone brands anyway? In fact, official data also shows why telephony is getting increasingly synonymous with cellular mobility. In 2001-02, fixed line connections were at 38.42 million and mobile connections at 6.54 million; this had increased to 44.13 million and 44.49 million respectively till October last year. In other words, while the growth in fixed line connections has declined, mobile connections have grown by leaps and bounds overtaking the number of fixed line connections in the country.

With lacklustre growth having an impact on the domestic market for landline phones, fixed line phone manufacturers are finding innovative ways to maintain their revenues. The country's largest fixed line phone manufacturer, Bharti Teletech, for instance, is not only targeting driving the replacement market but is also looking to get onto the `outsourcing' bandwagon and has met with significant success in the global markets, despite competition from China.

"We exported five lakh phones in the last financial year and would be exporting a million units in the current year," says Rakesh Bharti Mittal, vice-chairman and managing director, Bharti Teletech. The company aims to export five million phones by 2008. Further, last year, Bharti Teletech, which makes phones under the Beetel brand, signed an agreement with Atlinks to manufacture GE's phones in India for the global market. Bharti intends to export a million phones to Atlinks alone in the next fiscal year. Incidentally, Atlinks was earlier sourcing its phones only from China. Atlinks is the world's largest manufacturer of fixed line telephone instruments with sales of about 28 million units and a 100 per cent subsidiary of Thomson. It is the exclusive manufacturer of GE Communication products for the world

"We are also currently exporting to over 30 countries, including major telecom operators globally," says Mittal. In fact, in Mauritius which has 3.6 lakh lines, Bharti has supplied 3.1 lakh phones through Mauritius Telecom. Additionally, the company has been the original equipment manufacturer for Sprint Inc of the US, Akai and Marconi. France Telecom recently conferred on it the preferred telecom equipment vendor status.

Bharti has focused on introducing feature-rich phones in the domestic market in order to drive replacement demand. The company, which has partnered with a Chinese design house for introducing new features and designs, would be spending about $1 million on R&D alone in the current year. "Our efforts are to increase the number of phones per household. We have launched more than 20 models/variants in the past year with features such as SMS, CLI, a range of 2.4 GHz range of cordless phones and so on. Moving forward, we may even introduce phones which enable the consumer to download ringtones," says Mittal.

The company's Beetel range of phones is priced in the Rs 200-4,900 range, including a range of cordless phones priced below Rs 2,000. Bharti, which has a 40 per cent market share in the retail market, is also selling the GE range of phones in the domestic market and has positioned it as a premium brand. At present, about 10 per cent of the company's domestic retail sales are coming from the GE brand.

Mittal is optimistic about a turnaround in growth in the domestic market as well. "There has been declining growth in the fixed line segment over the past two years. However, with initiatives on pushing rural telephony and broadband there is `re-focus' on the segment now by BSNL and MTNL. In fact, if broadband takes off, then it could become a huge market. Further, the fixed line base is still very small. We feel the segment has the potential to grow at 15-20 per cent per annum," says Mittal. Interestingly, while Bharti supplied seven lakh phones to MTNL/BSNL last year it will be supplying 1.5 million phones to the two operators in the current year. The Rs 200-crore Bharti Teletech is targeting to sell about five million phones in the current year, up from 3.2 million units in the last fiscal. The company has set itself a target to sell 10 million units per annum by 2008, with about half the sales coming from exports. The company will invest close to $2 million to double capacity to 10 million at its plants in Ludhiana and Goa over the next four years in order to achieve its targets.