Huawei has become the poster boy or rather the whipping boy of the US-China trade war with the USA going hammer and tongs against the Chinese giant and the way it operates. USA has almost banned Huawei from supplying its telecom equipment in the USA and is also trying to persuade other countries to stop or ban Huawei in supplying equipment for the 5G technology.

It is putting huge pressure on Huawei by applying strong financial and physical sanctions that bar US entities from working with Huawei which means that software companies such as Google can’t supply Android software for Huawei phones and semiconductor companies who supply critical chips for Huawei’s hardware equipment. Huawei is close to the Chinese government and in the last few years has become the dominant supplier of telecom equipment to a large number of countries. The company along with ZTE supplies telecom equipment at a much lower cost than western suppliers such as Nokia and Ericsson. This has led to rapid market share gains in the global telecom market. With revenues of billions of dollars, Huawei and ZTE have also become strong as technology innovators with large R&D budgets.

Also, read Chinese Solar Inverter makers take 3 out of the top 5 Global Ranks

The USA thinks that the Chinese company would supply critical communication information to the Chinese government and in case of hostilities might disable the communication infrastructure. This could happen not only to USA but also to its allies. After telecom, USA Senators also want Huawei to stop supplying its inverters for USA solar projects. In the last five years, Huawei has become one of the largest suppliers of inverters to solar projects using its expertise in electrical equipment and its low cost base to sell inverters to solar developers around the world. The USA fears just like in telecom, Huawei could disable crucial power infrastructure in the case of war with China. This measure if followed through could put further pressure on Huawei which is already seeing its revenues and profits hurt in its mainstay telecom equipment and mobile divisions.

Read about Huawei Solar Inverter in India

Bharti Airtel Ltd

Bharti Airtel Ltd needs no introduction of its own as the company is one of the world’s leading providers of telecommunication services with presence in 19 countries including India & South Asia and Africa. The Company is the largest wireless service provider in India, based on the number of customers. The Company also offers Digital TV and IPTV Services with all its services rendered under a unified brand ‘airtel’.

The company operates in four strategic business units, namely:

  • Mobile
  • Telemedia
  • Enterprise
  • Digital TV

The company offers its services across wide number of cities. Some of the key facts are mentioned below:

  1. The mobile business offers services in India, Sri Lanka and Bangladesh
  2. The Telemedia business provides broadband, IPTV and telephone services in 95 Indian cities
  3. The Digital TV business provides Direct-to-Home TV services across India
  4. The Enterprise business provides end-to-end telecom solutions to corporate customers and national and international long distance services to telcos.

Apart from the telecommunication services, the company also deploys, owns and manages passive infrastructure pertaining to telecom operations under their subsidiary Bharti Infratel Ltd.

Read more about Mobile Phone Companies in India.

Bharti Infratel proudly owns 42% of Indus Towers Ltd thus making both Bharti Infratel Ltd and Indus Towers Ltd the largest passive infrastructure service providers for telecom services in India.

Services Offered by Bharti Airtel

Today, Airtel is the largest cellular service provider in India and the third largest in the world.

1.Airtel Mobile Services

Airtel operates in all telecom circles of India and is present in 5,121 census towns and 457,053 non-census towns and villages, covering approximately 86.6% of the country’s population as of September 2012.

2. Airtel 3G

With the 3G auctioning in 2010, the company agreed to pay the Indian government Rs. 122.95 billion (US$2.24 billion) for spectrum in 13 circles, the most amount spent by an operator in this auction. Airtel 3G services are available in 200 cities through its network and in 500 cities through intra-circle roaming arrangements with other operators. Airtel has about 5.4 million 3G customers of which 4 million are 3G data customers as of September 2012.

3. Airtel 4G

On 19 May 2010, the broadband wireless access (BWA) or 4G spectrum auction in India ended. Airtel paid 33.1436 billion for spectrum in 4 circles: Maharashtra, Karnataka, Punjab and Kolkata. The company was allocated 20 MHz of BWA spectrum in 2.3 GHz frequency band. On 10 April 2012, Airtel launched 4G services using TD-LTE technology in Kolkata, becoming the first company in India to offer 4G services.

Read more about Telecom Industry India.

4. Airtel Money

Airtel has started a new mCommerce platform called Airtel Money with collaboration with Infosys and SmartTrust (now Giesecke & Devrient). With the help of Airtel Money, users can transfer money, pay bills and other financial transactions using mobile phone.

5. Airtel SmartDrive

SmartDrive is navigation app exclusive to Airtel customers. The app features voice-based turn by turn navigation, real time information update on traffic, approximate time of the travel on the basis of the traffic situation on the various routes and also lets users see their location on the map and plan the journey accordingly.

6. Airtel Network Experience Center

Airtel has a Network Experience Center (NEC) which observes end to end customer experience, in near real time, along with the standard network elements on Airtel’s operations. The NEC is located in in Manesar, Haryana and went live on 31 October 2012. It is the first such facility in India and will be able to monitor Airtel’s network performance across mobile, fixed line, broadband, DTH, M-Commerce, enterprise services, International Cable Systems and internet peering points from a single location.

Airtel’s Financials as on January 3, 2013

1,24,464.05 16.46
19.91 26.5
130.16 2.52
20.00% 0.31%
P/C Mkt Price
10.23 327.75


Airtel Detailed Financials and Key Ratios

Mar ’12 Mar ’11
Investment Valuation Ratios
Face Value 5 5
Dividend Per Share 1 1
Operating Profit Per Share (Rs) 36.14 35.29
Net Operating Profit Per Share (Rs) 109.55 100.11
Profitability Ratios
Operating Profit Margin(%) 32.98 35.25
Profit Before Interest And Tax Margin(%) 18.65 24.12
Gross Profit Margin(%) 18.76 24.22
Net Profit Margin(%) 13.69 20.21
Liquidity And Solvency Ratios
Current Ratio 1.01 0.7
Quick Ratio 1.28 0.77
Debt Equity Ratio 0.29 0.27

Source: Capitaline Database

If we look at the ratios we see that the company continues to maintain a good D/E ratio and have improved on its Net Operating profit per share as well. Despite the fact that the company has declined heavily on its Margin as compared to the year 2011, the outlook of the company remains stable for the fact that it has huge market share in India and is the only provider of 4G services in the country as well.


Indian Telecom Industry

929 million – the number of subscribers, the Indian telecom sector has achieved to become one of the major indicators of and contributors to the economic growth of India. Indian telecom sector is one of the fastest growing telecom sectors in the world, with over 16 million subscribers being added every month.

The recent technology like Mobile Number Portability and auction of 3G spectrum gave a new impetus for growth in the sector. However if we talk about the current status of the sector, we see that in recent times, the sector has hogged limelight and media attention for all the wrong reasons.

Power of compounding was actually seen in the sector, when one actually counted the number of zeros in the size of the scam that not only rocked the telecom sector but the entire Indian economy. Indian companies like Uninor (JV of Telenor and Unitech), Tata Teleservices, Idea and many others came into the limelight of using unfair means for the auction. But if we talk of the Indian telecom sector, keeping aside the scams, we can very well see that the Indian Telecom sector witnessed tremendous growth. Probably, one of the biggest growths of all time the sector ever experienced.

Read about the Mobile Phone Companies in India.

Reasons for the growth of Indian Telecom Sector

The growth of the sector can very well be attributed to the facts like:

  • Advances in technology
  • Regulatory reforms
  • Policy changes and
  • Dynamics of the private sector in fiercely competitive environment.

Concerns of the Telecom Sector in India

1) Digital Divide – Recent years have seen many changes in the telecom sector; specially from the point of customers. Customers are blessed with one of the lowest mobile tariffs in the world. Scheme like one paise per second etc was rolled out by the telecom companies to invite huge number of consumers so as to build consumer base and boost revenue. Exponential growth in the sector undoubtedly gave a new energy to the economy but unfortunately the Telecom Sector has failed to bridge the digital divide.

2) Rural Tele-density – Talking about the rural India which has the maximum of its population concentrated we see, rural tele-density to be very low even till today and about 40% of the country has either no or poor wireless coverage.

3) Internet Usage – Despite the fact that the number of internet users in the economy has increased manifold over the years, still the broadband penetration is equally inadequate adding to the woes. It was a decade back in 1999 when the government formulated the New Telecom Policy that triggered the growth of the sector to huge extent. But again the sustainability of that policy is achieved and it’s time for the government to formulate new policies to change the state of Telecom industry, so as to ensure that the rural tele-density is maximized and broadband connection and other facilities like Wi-Fi, Wi-max, 3G, 4G is executed in major parts of the Indian Territory.

4) Spectrum – Also it needs to ensure that the spectrum which is a natural asset for the economy should be prevented from being exploited as done in the past, by the caretakers to fill their own pockets instead of utilizing the revenue generated for the growth of the nation. In the case of 2G scam defaulters were punished and beneficiaries were penalized, but still a lot remains to be done so as to ensure that any such act could be prevented in the future.

Read about List of Telecom Companies in India.

Some of the major telecom companies operating in the Indian Territory are as follows:

  • Bharti Airtel
  • Vodafone (Formed by the Hutchison Essar buyout by Vodafone Group)
  • Reliance Communications (a ADAG group company)
  • Uninor (Telenor+Unitech)
  • Idea (Aditya Birla Group)
  • Aircel.

Indian Telecom Industry

The Telecom Industry in India has been facing multiple problems of 1) massive 2G scandal in which many telecom companies in India lost their licenses to operate 2) hyper competition with many new companies entering and starting a price war and 3) high spectrum fees imposed for 3G spectrum.

1) India has been rocked by numerous new corruption scandals and scams in the recent past. One of the biggest was the 2G Telecom Scam in which top ministers and leaders of the ruling party were involved. The 2G Scam resulted in cancellation of licenses of a number of companies which included foreign telecom giants like Telenor, Etisalat and others. While the guilty have managed to get bail in the cases as is the norm in India, thousands of job losses are happening as a result of the court rulings. Some of the companies have shut their operations while others are drastically reducing their operations.

2) The Indian 3G and Broadband Wireless Auctions resulted in a Massive Windfall for Government Coffers. The combined value of both auctions is around $23 Billion, which is more than double what the Government was initially expecting. Predictably it has left the Telecom Operators in the Red, with the Companies having to spend much more than what they had budgeted for. The Indian Telecom Market is Hypercompetitive with 10-12 Operators fighting for a share of the the world’s fastest growing market. The earlier 3G Auctions had depleted the Telecom Operators so severely that most of them dropped out of the Broadband Wireless Auctions. Idea, Vodafone and Reliance Communications dropped out of the race , with even market leader Airtel only winning 4 out of the 22 circles on offer.

3) The competition which used to be benign earlier with 4-5 big telecom operators turned into a hypercompetitive one, with the advent of new telecom operators like TataDoCoMo, MTS,Maxis,Etisalat and others. The newcomers totally changed the market through Extremely Low Priced plans (as low as 3c/minute) to lure customers from existing operators. With price being the only differentiator between the the 10-12 operators, it quickly descended into an All out Price War between the telecom companies with everybody a Loser except the Indian Customer.

This has all come to a head with some companies completely exiting the market and some like Telenor and Aircel reducing their operations in some states in India. The Indian market has nearly reached saturation with upwards, of 900 million connections for its one billion population. With its customers in stress, telecom tower and telecom equipment companies are too being forced to reduce, as their revenues drop sharply. Viom Networks a tower company has fired hundreds as one of its main customers shut shop.

Now telecom equipment companies like Alcatel-Lucent, ZTE and Huawei are also firing employees or cutting pay as their customers reduce their order sizes. Alcatel is going to fire almost 9% of its workforce of 1000 employees from its managed services division. Note Western equipment companies are facing a major challenge from the rise of the Chinese globally. They have already announced thousands of job cuts as losses mount. 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.


Struggling French telecoms gear maker Alcatel-Lucent will lay off nearly 1000 employees, or 9% of its India workforce as part of a global restructuring drive to cut costs as deals dry up and demand for network equipment plunges, two senior executives aware of the matter told ET.

Bulk of the cull is likely to impact Alcatel-Lucent India’s key business support functions and its people-centric managed services vertical where nearly 7,000 employees are engaged primarily in maintaining and managing Reliance Communications’ countrywide CDMA and GSM networks and Bharti Airtel’s landline & broadband networks. The world’s largest gear maker Ericsson’s India revenues fell 39% in the April-June quarter to Rs 1,340 crore compared to the year ago period. Of the two Chinese gearmakers, ZTE has implemented a 20% temporary salary cut in its India unit to optimise resources while Huawei India has relocated 350 employees to work on foreign projects in absence of adequate business.

Under pressure from the Government, telecom tower companies in India have banded together to float a contract to buy green power from privately owned green companies in India. Note these fierce competitors have formed a cartel to drive down the prices of buying renewable energy from small suppliers. Telecom towers manage to get subsidies of thousands of crores each year by burning subsidized diesel to power their towers. They not only manage to get massive subsidies but contribute heavily to global warming. The companies have been under pressure from Greenpeace to reduce their carbon footprint. The Government had finally acted by mandating that 50% of the power supplied to the towers must come from renewable energy sources. The companies starting under the new government regulation had floated the EOI in response. However they are not happy to loose the massive subsidy as green power will raise their cost.

Telecom Tower Companies in India put lipstick on Diesel Pig

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.

Telecom Towers are estimated to burn 2 Billion Liters of Diesel ( around 500 million barrels) annually at a cost of Rs 7000 crores. While the Government has been trying to convert these towers to renewable energy forms, most of the tower operators have been very slow to implement this change. Indus Towers the largest one plans only 2.5% conversion while the others like GTL, Viom and American Tower are doing only marginally better. Note there are easy solution to this problem with alternatives like Fuel Cells, Small Wind and Bio Diesel. But the private operators are only interested in the money and without serious Government prodding would not move. Diesel Prices can easily move up 30-40%, if the Government removes the subsidy. This will really make these Telecom Operators move quickly towards renewable energy instead of the their putting Lipstick on the Diesel Pig. Note most of the telecom expansion will now happen in rural areas where almost every tower will burn more Oil.


At least 25 Renewable Energy Service Companies (Rescos) have expressed interest in supplying energy to telecom tower companies.

Tower companies, including Indus, Bharti Infratel, American Tower Corporation and Viom, had floated a joint proposal for the project.

Under this project, the Rescos will set up renewable energy-based power plants near the telecom towers and sell power to the telecom company at a predetermined cost on a pay per use model.


Smart Phone Industry

When you talk of the smartphone market, the talk is all about Apple and Samsung who have cornered over half of the global smartphone market making billions of dollars in net profits in the process. Erstwhile leaders like Nokia and Research in Motion are now fighting for survival as they failed to keep up with the rapidly changing market trends and technology. Some of the other big mobile phone leaders like Motorola, Sony Ericsson, LG have either been gobbled up or have become non-entities with little market share or influence.

However just as Apple brought a paradigm change to the smartphone market, Chinese telecom giants ZTE and Huawei are slowly and invisibly bringing another radical change to the market. They have converted smartphones into commodities like PCs and are selling dirt cheap smartphones. These mobiles are great value for money running on free Android and have good basic hardware. Huawei is already the 3rd largest smartphone vendor and ZTE is growing rapidly as well. Note there exists a large number of mobile phone companies in India and China that sell smartphones but they lack the marketing and financial power of Huawei and ZTE. These two companies have built a massive telecom equipment business which is threatening the likes of Alcatel Lucent (Fired 5000 workers recently), Nokia, Siemens, and Ericsson. Now, these companies are targeting smartphones using the synergies of their existing telecom business.

Almost 2 billion consumers in China and India are hungry for smartphones like Galaxy and iPhone but they lack the buying power. ZTE and Huawei are providing them with almost 80% of the functionality at 30-40% of the price. Like PCs, smartphones could become commodities as ZTE and Huawei use increasing scale to further lower costs and prices.

How Nokia & RIMM Went Downhill Due to Apple

The once-dominant Nokia with a 40% global market share of the mobile phone market, continuously declined as was evident in its share price. Despite numerous restructurings, management, and strategy changes, nothing seemed to work against the onslaught of Apple and Android. Nokia’s trajectory went downhill from the peak. Its market share has been steadily coming down. More importantly, its share in the lucrative high-end smartphone market is falling faster. It is concentrating on the other segments of the mobile market to defend its units where it is also getting hammered by competition from Samsung, LG in the middle segment, and local players at the lowest segment. Nokia forms a classic case study of a Technology Company which failed due to the failure of its R&D though Marketing also played a role. It tried shuffling the management and creating a new “smartphone” division to bring new ideas into its staid mobile division. Nokia has been losing market share, brand appeal and pricing power as Google and Apple capture the hearts and minds of the smartphone consumer. Apple has radically changed the mobile industry with the introduction of the iconic iPhone. At over 200 million units sold, the iPhone 6 and 6 Plus are the highest-selling iPhone models ever.

Research in Motion, the maker of BlackBerry smartphones used to be a stock market darling, not even a couple of years ago. However, in the last few years, things have dramatically changed in the smartphone market with the advent of Apple and Google. RIMM’s stock price has crashed down to all-time lows even as Apple has become the largest company by market cap in Nasdaq. There is no Future for RIMM as an independent entity as it continues to lose the brand appeal, market share, and revenues to bigger and innovative rivals. Like Palm being taken over by HP, it seems destined to be bought by a bigger tech company. Nokia and RIMM seem to be the best fit because of their complementary strengths. Both have been bruised by the Apple-Google juggernaut and are now trading at very low valuations. Nokia is strong in low-end phones while RIMM is great at smartphones. RIMM is strong in the USA market where Nokia is extremely weak.

The New Smart Phone Powerhouse

Sales of smartphones are booming, though very few phone makers have been rejoicing. Nokia (NOK) and Research In Motion (RIMM) have seen their once-formidable businesses collapse into a mess of red ink and layoffs. HTC’s sales have tumbled. Once-proud Motorola Mobility has been acquired by Google (GOOG). Sony (SNE) and LG Electronics (066570) are confirmed also-rans.

Feasting on this wreckage are, of course, Apple (AAPL) and Samsung Electronics (005930), which between them have 54 percent of the global market. The other big winner: Huawei Technologies. A company many Americans haven’t even heard of may well have passed Nokia last quarter to become the third-largest smartphone maker, according to Horace Dediu, founder of equity research firm Asymco. That’s up from No. 7 at the end of last year. “They’re the guys that don’t get a lot of respect because they’re not big in the U.S.,” says Dediu. “But they’re looking at big numbers.”

After it was founded in 1987 by civil engineer Ren Zhengfei, Huawei quickly became China’s high-tech success story by selling telecom gear to phone companies, routinely beating rivals such as Alcatel-Lucent (ALU), Ericsson (ERIC), and Cisco Systems (CSCO) with good-enough products and great prices. Only in the mid-2000s did it start making cell phones. The Shenzhen-based company’s inexpensive, often unbranded models gained traction in China, the Middle East, and Africa.

Huawei kept this low-cost approach as it got serious about smartphones in 2009. The company didn’t try to build its own software operating system like Apple, Microsoft (MSFT), Nokia, or RIM. It used Android. And unlike Samsung, HTC, or Motorola, it didn’t try to differentiate Google’s mobile software with its own tweaks. “Huawei just slapped Android on some hardware and shipped it,” says ABI Research analyst Michael Morgan.

This year, the company expects to triple its smartphone sales to 60 million units, in part by taking a bigger chunk of the U.S. market. Until now, it’s sold handsets costing less than $200 to carriers such as MetroPCS and Cricket that offer pay-as-you-go plans, mostly to lower-income consumers. Last November it landed a deal with a top-tier U.S. carrier when AT&T (T) started selling Huawei’s Impulse phone for $29. On July 11, T-Mobile announced that Huawei would be building two models in the carrier’s MyTouch line of handsets. “We essentially made the market for affordable smartphones,” says William Plummer, Huawei’s U.S. vice president for external affairs. “We’re in a good position because we’ve established ourselves as a trusted partner to carriers.”

Not completely trusted, however. On Capitol Hill, the House Permanent Select Committee on Intelligence has been investigating whether efforts by Huawei and ZTE, another fast-growing Chinese telecom equipment and phone maker, to sell to U.S. carriers present a security risk, because the companies may have ties to the Chinese government. The Australian government has banned Huawei from bidding on a national broadband project. Congress has asked the State Department to investigate whether Huawei illegally exported embargoed technologies to Iran. For years, industry insiders have believed that Huawei has access to low-interest loans from the government. Huawei spokesman Francis Hopkins says the company is cooperating with the congressional investigation, gets no favorable loans from the Chinese government, and denies wrongdoing in Iran. It definitely has benefited from huge domestic broadband buildouts, says Jeff Heynen, an analyst with consulting firm Infonetics.

Succeeding in smartphones is not optional for Huawei if it wants to remain a fast-growing company. Its $23 billion-a-year telecom equipment business grew only 3.5 percent in 2011, before tumbling due to the slowdown in China’s economy this year, says Heynen. The company reorganized last year to create a separate Huawei Devices unit to drive what executives say is the company’s best growth opportunity. The division also makes laptop modems and other less-sexy gizmos.

Huawei’s growth rate may make it a plausible challenger to Samsung in smartphone sales, says Asymco’s Dediu. He argues that the Korean giant has prospered largely because of vertical integration; it makes many of the chips and screens that go into its devices. Yet he doubts Samsung has built up enough brand loyalty to withstand a much cheaper alternative. “Let’s not forget that Samsung itself was No. 4 or 5 just a few years ago,” says Dediu. “Samsung ought to be looking over its shoulder.”

As smartphones evolve from novelty technology into just another gadget, Huawei will be well positioned to benefit. “Their devices don’t have to have jet packs to do 90 percent of what most people need,” says Morgan of ABI Research. “The market is coming to them.”

The bottom line: Late last year, Huawei was No. 7 in smartphones. Now it may be No. 3—and is pushing hard to sell its inexpensive handsets in the U.S.