Chinese Low Cost Labor Massacres Western Telecom Jobs (Nokia, Alcatel, Motorola)

14 Feb, 2012 by
Green Investing

The relentless rise of Chinese telecom equipment and OEM companies has massacred telecom jobs in the West with major companies like Nokia, Alcatel and others firing in the thousands. Note Huawei and ZTE have become the nemesis of the telecom equipment makers which are showing losses in the last few years. These companies are not managing to compete with the low cost engineer advantage of the Chinese firms . Nokia is also firing thousands in its western factories in Poland and other places as it moves production to Asian factories. Note while Nokia has become unprofitable to other causes like Apple and Android, low cost phones from Asia is the biggest factor in its demise as well.

Note ZTE and Huawei have won large orders as they sell equipment in the biggest markets such as India with prices which are 20-30% lower than that of the western companies such as Motorola (bankrupt and solar), Nokia – Siemens and Alcatel Lucent. These western companies had earlier merged to survive but they are still making billion dollar losses. The massive advantage of the Asian companies is due to their technically advanced cheap labor force where the cost of an engineer is 1/10th of the western companies.

Global Arbitrage of Labor has cost massive disruptions to the Western Labor Force

One of my pet theories is that they we see a lot of distortions and oppurtunities for arbitrage is because labor is not globalized while capital and trade are . When capital and goods/services with some restrictions can move freely around the globe , there are innumerable restrictions on movement of labor leading to outsourcing. The MNCs with sprawling global structures are able to best exploit this situation by moving most of their labor requirements to low cost locations in Asia. It is not only manufacturing and low valued added work that they are moving but their entire R&D capabilities. Applied Materials , one of the world’s largest semiconductor has moved and is in the process of moving the rest of its manufacturing and R&D capabilities to Asia. This is leading to mass layoffs in its US operations.

Finnish phone maker Nokia has announced it will be cutting down on its manufacturing operations in Hungary, Mexico and Finland in order to move device assembly work to its Asian factories instead. Nokia said the move would cause approximately 4,000 workers to be laid off.
“Shifting device assembly to Asia is targeted at improving our time to market,” said Nokia in a statement. The company added that the transition would allow Nokia to work more closely with suppliers and enable it to “introduce innovations into the market more quickly and ultimately be more competitive.”

Alcatel-Lucent to Cut Up to 1,800 Europe Jobs, Union Says

Alcatel-Lucent, France’s largest telecommunications-equipment supplier, plans to eliminate as many as 1,800 positions in Europe through firings and relocation, a top union official said.Almost 500 positions in Italy, or 20 percent of the total in the country, will probably go, Philippe Saint-Aubin, a representative of the European workers’ council for the Paris- based company, said in an interview today. Also affected will be more than 10 percent of the workforce in Belgium, and 5 percent in France, where Alcatel employs 9,000 workers, he said.Alcatel-Lucent, scheduled to report earnings tomorrow, lags behind rivals such as Nokia Siemens Networks in adjusting its workforce as phone companies withhold gear orders. Nokia Siemens Networks, the venture between Nokia Oyj and Siemens AG, said in November it will eliminate 17,000 jobs, or about 23 percent of its workforce.

Scary Big Bang Broadband/ Media Invesment by Reliance Behemoth could crush Indian Telecom Companies

7 Jan, 2012 by
Telecommunications

Reliance Industries the biggest private company in India with billions of dollars in free cash flow being generated by its oil and gas business,is set to make a  massive investment into the broadband business through 4G. Reliance which is primarily an oil and gas company is investing heavily into Retail, Financial Services and Media. The company is set to become a media behemoth after buying substantial chunks into the content business of NW18 and Eenadu network.

Reliance has a massive balance sheet which is has used strategically to acquire 4G spectrum (Infotel) and content.The company had revolutionized the telecom space through the Monsoon Hungama campaign when it had provided super cheap telecom  mobile plan with handsets. It could do the same in the Internet space through providing super cheap Tablets like Aakash with super cheap broadband plans on 4G. It already has content to provide its subscribers.Note broadband companies in India provide poor service at high rates, so Reliance can takeover the broadband space in India easily if it executes right.

With voice becoming a commodity with super low or free pricing,data is the only way to earn money for telecom companies in India. If Reliance executes its strategy right,then these telecom companies like Idea,Vodafone,Airtel would see their revenues and valuations crushed.

Telecom Industry in India

The Indian telecom industry is the world’s fastest growing industry with 792 million mobile phone subscribers as of February 2011. It is also the second largest telecommunication network in the world in terms of number of wireless connections after China. The industry will reach around $80 billion in revenues by next year showing an astounding CAGR of over 25% and will employ a stupendous 1 crore employees making it one of the biggest value creators in India in recent times.However the telecom companies in India after enjoying a boom period in the early 2000s have faced a couple of tough years with hypercompetition leading to a price war in auction of 3G spectrum.This was followed by one of the most high profile corruption scandals in the country which resulted in the jailing of the former telecom minister in the 2nd auction of 2G spectrum.Most of the telecom companies have been found to be implicated in colluding with sleazy politicians/bureaucrats in looting the Indian taxpayers.India Real Estate Sector is one of the most corrupt in the country and after the 2G Scam,the telecom sector is giving it close competition for the No.1 spot in corruption

Despite these problems,India is set to see another spurt of growth as 3G in India has the potential to bring Internet to India’s massively under penetrated population which has phones but not computers.

Reliance Acquisitions in the Recent Past due to Detente

The detente between the Ambani brothers which lead to the rescinding of the non-compete agreement has resulted in Reliance Industries  Ltd (RIL) being the biggest Winner in the win-win arrangement.While on one hand Anil Ambani’s Reliance Communication which was facing a liquidity problem has benefited by being free to sell a stake in the company,Mukesh Ambani’s RIL has gained even more. RIL has been a huge cash cow generating billions of dollars in free cash flow from its Energy businesses each year.However RIL was finding it itself hamstrung by the non-compete agreement which prevented the company from entering the areas in which ADAG ( Anil Dhirubhai Group ) operated in. RIL tried its hand at overseas acquisitions but was not finding much success.However with the Ambani Brothers burying the hatchet,Reliance find its hands free to enter the virgin territories of Telecom,Power and Financial Services which will be high growth areas in India’s booming economy

Reliance has firmed up its intentions in all Three Areas through acquisitions,JVs and greenfield expansion.

RIL’s 4G broadband to offer exclusive content & spectacular speed at dirt-cheap rates

RIL has also grabbed the lead in content. This week’s deal gives RIL preferential access to all of Network18’s TV, Internet and digital content, across languages and genres. RIL is also talking to other media and entertainment companies, including Walt Disney’s Indian venture UTV Software, for more gaming and entertainment content, say industry executives in the know. In November, it acquired 38.5% in Extramarks Education, a company focused on school education and digital learning, for an undisclosed amount.

And lastly, there’s the RIL philosophy of disruptive pricing. According to RIL executives aware of the development, the company is looking to bundle data services at about 10 per GB, which is one-tenth of current 3G prices. It is, they say, also planning to bundle this with entry-level tablets powered by Google’s Android operating system that would cost 3,000-8,000. That the demand for low-cost tablets is robust is evident from the 1.4 million bookings that Aakash, the 2,500 tablet made by UK-based Datawind and subsidised by the government of India, received in 14 days after it was put up for sale online. The RIL official quoted in the first instance says the company is also looking to offer online services in “security, health and education”. So, for example, by paying, say, 30 a month, a customer can access doctors online 24X7. He said the company was also talking to the government to link up with the database of unique IDs being created for every Indian, called Aadhaar.

Telecommunication Operators in India caught Swindling the Government again in 3G Fraud even as 2G Scam simmers

4 Jan, 2012 by
Telecommunications

Telecom Companies in India are in general an unscrupulous lot with the 2G Scam showing the whole telecom industry of India in a Bad Light.While a number of top executives of telecom companies spent time in jail,it seems that these companies have learned nothing.They continue to find loopholes to take both their customers and government for a ride.Indian Broadband and Telecom companies have made defrauding customers an art by illegally adding value added services and charging for them.They also burn millions of dollars in subsidized diesel to power their telecom towers since there is no restriction on that.Now these companies have been caught again in another manipulation trick in 3G services.

Indian Telecom Companies appropriating $500 million of Fuel Subsidies for Poor and generating > 5 million tons of Carbon through Massive Diesel Burning in Telecom Towers

Indian Telecom Companies are using more than $500 million in fuel subsidies meant for the poor and generating more than 5 million tons of carbon dioxide every year by using diesel gensets at telecom towers not connected to the grid.Note the Telecom Industry in India has not exactly covered itself with glory on other matters with the 2G Telecom Scam already putting top executives in jail and implicating top telecom companies as well.The issues of massive fuel wastage in telecom towers has been raised in the past in greenworldinvestor as telecom tower companies viom,gtl,airtel and others have tried to put lipstick on the pig by making a mockery of green initiatives by committing to convert only a miniscule number of total towers to renewable energy.

India’s Broadband,Telecom Companies – Bad Customer Care,Overbilling,Overcharging built into DNA as they Loot Millions of Dollars From the Very Poorest

It is a common practice amongst these companies to add value added services like caller tunes without the customer’s permission which is totally illegal.Since most of the customers do not know how the billing is happening and do not know how to turn it off,these companies make millions of dollars in illegal profits from such customers.Airtel,Reliance and other major telecom companies in India follow this practice widely and openly.Nobody is going to complain about 50c/month being charged wrongly by the telecom provider.However 50c multiplied by a 100 million customers is neat $50 million in profits for these companies.This overbilling of customers even extends to broadband customers as I recently found out .After a nightmarish experience with Tata Indicom whose pathetic customer service forced me to change to Airtel,I found a blatant case of overcharging of money in my very first bill.

The company Airtel had neatly added a Rs 100 extra charge for using a anti-virus software called “airtel pc secure” when i distinctly remember never asking for the software.The engineer who installed it and the salesperson who sold it never mentioned the fact and I never asked for it as I use a very good free anti-software and never in my dreams use a software from a telecom provider (why not go for Norton ). The customer care service is so bad at airtel that the number mentioned on the bill “121? for complaints does not work.The call centre operator says that the number works for prepaid customers even when the broadband bill mentions the number.Other numbers don’t work so I am forced to email the appleate authority (god knows what that means).After 2 days of not recieving a reply,when a mail says you should get a reply in 24 hours,airtel responds by saying they are removing the charge on my bill as a “Goodwill gesture”.The gall of the company is quite amazing,after having clearly committed a mistake (which I think is very widespread and not a mistake at all) the company acts descending on the customer.

Note most of these companies had to pay through their mouth in the 3G auction services.A number of them had failed to get 3G spectrum in most popular circles as the competition remains high in the Indian telecom sector with about 10 or more operators compared to 3-4 in most others.So what these companies have done is to offer 3G services to customer using roaming services.Note Roaming Services allow companies to give their customers communication options in regions where the companies don’t have their own services.It does not allow companies to offer services to new customers where they don’t have spectrum.These companies have made 3G Roaming a Farce by doing the same thing.Now the government is acting against this powerful telecom cartel,these companies are crying hoarse.

Read about Mobile Phone Companies in India

3G roaming: BSNL accuses telcos of illegally adding subscribers

In more trouble for private telecom players, BSNL today accused them of acquiring 3G subscribers by entering into “illegal” inter-circle roaming agreements in circles without having designated spectrum.
In an application filed before TDSAT, state-run BSNL has alleged that operators Bharti, Vodafone, Idea, Tatas and Aircel are providing 3G services by “misrepresenting” the public on the “strength of illegal arrangements /agreements” entered by them. “In some telecom service areas, without paying for 3G spectrum or investing a single penny in setting up telecom infrastructure, network etc are illegally acquiring and continue to acquire subscriber by misrepresenting that they can provide 3G services,” said BSNL in its application filed today.

Indian Telecom Companies appropriating $500 million of Fuel Subsidies for Poor and generating > 5 million tons of Carbon through Massive Diesel Burning in Telecom Towers

1 Jun, 2011 by
Climate Change,Oil,Renewable Energy,Telecommunications

Indian Telecom Companies are using more than $500 million in fuel subsidies meant for the poor and generating more than 5 million tons of carbon dioxide every year by using diesel gensets at telecom towers not connected to the grid.Note the Telecom Industry in India has not exactly covered itself with glory on other matters with the 2G Telecom Scam already putting top executives in jail and implicating top telecom companies as well.The issues of massive fuel wastage in telecom towers has been raised in the past in greenworldinvestor as telecom tower companies viom,gtl,airtel and others have tried to put lipstick on the pig by making a mockery of green initiatives by committing to convert only a miniscule number of total towers to renewable energy.

India’s Perverse Fuel Subsidy Scheme also to Blame as it allows massive corruption

India has around 300,000 Telecom Towers around the country , a large portion of which is not connected to the electricity grid.Another large portion does not have access to reliable electricity implying they have to install backup power systems in order to run without interruptions.Diesel Generators have been the choice of telecom operators despite their high carbon imprint.This is because of the ease  of buying and installing diesel generators as well as the lower fuel costs as the government in India heavily subsidizes diesel.Note India’s Fossil Fuel Subsidies have led to hundreds of distortions in the economy.Corruption,Pilfering,Adulteration is carried out on a large scale due to government subsidies.In fact a senior government official was burnt alive by the Kerosene Mafia a direct outcome of this  subsidy policy.But that is a separate issue.

Greenpeace takes up the issue against Diesel Burning by Telcos

Global environment group Greenpeace has taken up the issue and started a campaign against the biggest telecom operator Airtel.According to Greenpeace.Readers are urged to sign up as it still needs a lot of support to force the telecom companies to look for green solutions especially as it will help them in the future as well as the clean energy capex today will pay itself in the future years in the form of avoided cost of diesel which will only get more expensive.The government has formed a high powered panel to look into the issue of billions of litres of diesel being burned by the telecom industry but it does not seem to be doing anything with any urgency.

Telecom industry’s “diesel exploitation” exposed

Greenpeace released a report “Dirty Talking – A case for telecom to shift from diesel to renewable” today exposing how the subsidy on diesel has been aggressively exploited by the telecom sector, resulting in an annual loss of around Rs 2600 crore to the state exchequer (1).

The report builds on the previous industry and government research which show that at current growth rates, the sector would require 26 billion KWh of electricity and 3 billion litres of diesel by 2012, contributing to a much larger carbon footprint than previously estimated (2).

Key findings of the report can be summarised as:

  • The telecom sector in India emitted over 5.6m tonnes of CO2 in 2008 on as a result of diesel use (3).Emissions have since risen, and are likely to increase significantly with the sector’s predicted exponential growth over the next few years.
  • A shift in power sourcing to renewable technologies, such as solar photovoltaic, will result in a close to 300 per cent reduction in total costs (CAPEX + OPEX) for telecom operators, in comparison to a diesel generator (DG) based tower over ten years.
  • Failure of the industry in disclosing its carbon emissions and committing to reduction of emissions in a public and transparent manner on a consistent basis. Major telecom companies within the sector are particularly guilty of this (4).
  • Similarly, telecom operators have yet to shift the sourcing of their power requirements to renewable sources at scales of significance. The investment required to power the entire network towers in the country by renewable is approximately Rs 151000 crore, which is more economically feasible than diesel based network towers in the longer run (5).

    • Tatas paid Rs 25 lakhs to Kanimozhi NGO (Bribe?) days before 2G Telecom Spectrum Allocation

    5 May, 2011 by
    Telecommunications

    The Tata Group which is known in India for high standards of corporate governance and doing business ethically in a country steeped in corruption too seems to have fallen.Ratan Tata appeared blemished as tapes of his conversations with the now infamous millionaire corporate lobbyist Nira Radia were published in the media.He was caught at least listening and agreeing the the open manipulation of the Indian ministries in government formation if not the architect.Tata Teleservices which was a major beneficiary of the second round of 2G Telecom Auction during Raja’s tenure has now again appeared in the news for the wrong reasons.Despite denials by the Tata Group honchos,the Tata companies seem to be complicit in the billion dollar scam that has shaken the political and business roots of India.

    With CEOs like Balwa,Sanjay Chandra and politicians and bureaucrats already cooling their heels in jail,now its the turn of the big fish like Kanimozhi.Note the Supreme Court has taken the investigation itself as the government has tried to water down the case repeatedly and blatantly.The Income Tax Department has now been reprimanded by the Supreme Court for being tardy in going after powerful politicians and business houses caught red handed in tax evasion and breaking of the law.Most Indian telecom companies like Tata,Reliance Telecom,Uninor and others have been directly or indirectly implicated.

    According to a document filed by the Centre for Public Interest Litigation  several telecom companies which had made donations to Kanimozhi’s NGO were rewarded with the spectrum. Unitech paid Rs 50 lakh on January 5, 2008, and Tata Teleservices paid Rs 25 lakh on the same day. On January 7, 2008, Reliance Capital Limited paid Rs 25 lakh, Shaam Telecom Limited paid Rs 10 lakh and ETA Star Property Management paid another Rs 10 lakh to the NGO, the document said.

    India’s Broadband,Telecom Companies – Bad Customer Care,Overbilling,Overcharging built into DNA as they Loot Millions of Dollars From the Very Poorest

    25 Apr, 2011 by
    Telecommunications

    India’s Broadband companies have bad customer care,overbilling and overcharging built into the DNA as there are no fear of reprisals and fines.Coupled with horrific customer care,broadband service in India is a continuous bad experience with all companies uniformly bad.An examination by the regulator TRAI of the broadband providers email and records will surely reveal the fraud that takes place with customers.Note this is not confined to one company or sector.These companies do not leave out even poor prepaid customers most of them who are illerate and survice on less than $2 day.

    It is a common practice amongst these companies to add value added services like caller tunes without the customer’s permission which is totally illegal.Since most of the customers do not know how the billing is happening and do not know how to turn it off,these companies make millions of dollars in illegal profits from such customers.Airtel,Reliance and other major telecom companies in India follow this practice widely and openly.Nobody is going to complain about 50c/month being charged wrongly by the telecom provider.However 50c multiplied by a 100 million customers is neat $50 million in profits for these companies.This overbilling of customers even extends to broadband customers as I recently found out .After a nightmarish experience with Tata Indicom whose pathetic customer service forced me to change to Airtel,I found a blatant case of overcharging of money in my very first bill.

    The company Airtel had neatly added a Rs 100 extra charge for using a anti-virus software called “airtel pc secure” when i distinctly remember never asking for the software.The engineer who installed it and the salesperson who sold it never mentioned the fact and I never asked for it as I use a very good free anti-software and never in my dreams use a software from a telecom provider (why not go for Norton ). The customer care service is so bad at airtel that the number mentioned on the bill “121” for complaints does not work.The call centre operator says that the number works for prepaid customers even when the broadband bill mentions the number.Other numbers don’t work so I am forced to email the appleate authority (god knows what that means).After 2 days of not recieving a reply,when a mail says you should get a reply in 24 hours,airtel responds by saying they are removing the charge on my bill as a “Goodwill gesture”.The gall of the company is quite amazing,after having clearly committed a mistake (which I think is very widespread and not a mistake at all) the company acts descending on the customer.

    Note other companies are equally as bad if not worse because of the lax regulation by the regulator which are mostly favorable to the big companies.This is the reason why the broadband and telecom companies manage to get away with murder and massive profits.Next time you hear the most ethical company or best governed company goes to Airtel,Tata,Reliance or the others,think of the millions being looted from the very poorest.

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