Tejas Networks Strengthens Ties with BSNL in Telecom Infrastructure
Source and Citation: Excerpts from “Tejas Ramping Up Shipments of 4G RAN to BSNL: COO” published in The Economic Times on January 27, 2024.
Analysis of this News for a Layman
Tejas Networks, an Indian telecom equipment company, is making significant strides in the telecom sector by supplying 4G mobile network equipment to state-owned telco BSNL. The company has secured contracts worth over ₹1,000 crore to provide 4G radio hardware, and it has already shipped thousands of these units under the initial agreement. These radios play a crucial role in transmitting wireless signals and are installed on mobile towers to facilitate high-speed data services.
The recent development includes an additional order from BSNL for ₹107 crore, indicating the expansion of coverage as the telecom company broadens its footprint. Tejas Networks is not only providing 4G radio equipment but also backhaul routers, which play a key role in transferring network data traffic. This sustained business engagement underscores Tejas’ position as a key indigenous supplier for PSU (Public Sector Undertaking) network modernization initiatives, aligning with the nation’s self-reliance policies.
Impact on Retail Investors
For retail investors, this order flow from a Public Sector Undertaking signifies the effectiveness of import substitution policies in network infrastructure programs. Telecom equipment manufacturers like Tejas Networks, HFCL, Sterlite Technologies, and ITI stand to benefit from these contracts, particularly under production-linked incentive schemes.
This also indicates a positive trend for 5G-ready infrastructure investments, even amid market challenges. Beyond BSNL, the rollouts by other entities such as Railtel and Powergrid bode well for the development of networked sensors and IoT applications. Investors should evaluate the growth impact of these projects on Tejas Networks, especially in the context of its consistent execution of large turnkey projects.
However, the limited Capex (Capital Expenditure) by private telecom operators could impact the scalability potential of such projects. Additionally, the dependence on exports for growth acceleration and margin stability remains a risk that investors should consider.
Impact on Industries
Locally produced 4G and 5G network rollouts have positive implications for associated industries. Tower companies like Infratel, power backup suppliers like Delta, and software partners providing gear integration services are among the beneficiaries as deployments gain momentum.
Chip designers, particularly those involved in signal processors, also benefit from the increased demand for access radios in public infrastructure projects. Initiatives like the National Fibre Network and India Semiconductor Mission receive a boost if success stories emerge.
Within the telecom operator landscape, BSNL’s network upgrade post 4G launch is expected to enhance customer retention, thereby positively impacting the financial viability of the public sector undertaking. However, the ongoing challenge of market share loss remains a concern.
Long Term Benefits & Negatives
Over the long term, the proven supply of high-value equipment at scale by indigenous telecom technology companies contributes to credible import substitution across various technology domains. This aligns with India’s ambitions in electronics, software, and semiconductors while keeping pace with evolving network technologies like Open RAN.
Wider manufacturing employment prospects are expected to improve, particularly in domains like electronics system design and assembly, software-defined networking, and testing automation. However, long-term R&D competitiveness relies on consistent design-led innovations, and potential risks include uneven export formulations across market slowdowns.
Short Term Benefits & Negatives
In the near term, equipment vendors gain elevated revenue visibility from public capex commitments, providing investor confidence. However, BSNL’s financial situation may limit large private outsourcing benefits in the initial years until subscriber numbers scale up.
The order book clarity for gear makers aids working capital comfort, but outpaced network demand growth post-launch requires careful contingency handling. Calibrated execution by both BSNL rollout teams and supplier delivery capacities is vital to harness instant capacity without resource overloads. Essential performance testing and integration timelines must be met before citizen services are opened to ensure a smooth transition.
Companies Impacted by Tejas’ Increased BSNL 4G RAN Shipments
Indian Companies that will gain:
- Tejas Networks (NSE: TEJASNET): The additional purchase order from BSNL strengthens Tejas’ position in the Indian 4G RAN market, boosting their order book and potentially leading to increased revenue and profitability. Positive market sentiment is likely with potential share price appreciation.
- Other Indian Telecom Equipment Manufacturers: Increased focus on domestic telecom equipment providers like HFCL, STL, and Saankhya Labs could benefit from the government’s push for Atmanirbhar Bharat in telecom. Positive sentiment for these companies due to potential spillover effects and increased opportunities.
- Companies associated with BSNL network expansion: Increased network rollout activities could benefit infrastructure providers, tower companies like Bharti Infratel and Indus Towers, and fiber optic cable manufacturers like Sterlite Technologies. Potential for increased contracts and business opportunities.
- Indian IT Services Companies: Companies like Infosys, TCS, and Wipro could see opportunities in providing network integration, managed services, and application development support for BSNL’s 4G network. Positive sentiment due to potential project opportunities.
Potential Market Sentiment: Positive for these companies due to increased business opportunities, improved order book visibility for Tejas, and the overall momentum of the domestic telecom equipment market.
Indian Companies that might lose:
- Foreign Telecom Equipment Manufacturers: Increased success of Tejas and other domestic players could challenge the market share of established foreign players like Ericsson, Nokia, and Huawei in the Indian market. Potential for negative sentiment due to increased competition and pressure on margins.
- Smaller Indian Telecom Equipment Companies: Tejas’ strong presence in the 4G RAN market could make it difficult for smaller players to compete, potentially hindering their growth prospects. Neutral or slightly negative sentiment for these companies.
Global Companies:
This news primarily impacts the Indian telecom market and domestic companies. However, global players involved in network technology and related services could indirectly benefit from the overall growth of the Indian telecom sector.
Overall, Tejas’ increasing presence in BSNL’s 4G network rollout strengthens the position of domestic telecom equipment manufacturers and creates opportunities for other related sectors. However, foreign players might face increased competition and smaller Indian players could struggle to compete with Tejas’ momentum.
Remember, this analysis is based on the provided information and broader market factors should be considered before making any investment decisions.