🧐 Here's What Tata's Re-Entry Into the Telecom Space Means
Tata is once again entering into the telecom space but not as a telecom service provider. Here's what this means for India and Tata.
The way India is growing and spending right now, nobody would believe that the world was worrying about an impending recession.
All the major conglomerates in India are on a shopping spree, acquiring businesses to expand their empires.
And the latest conglomerate to hit the streets with shopping bags is the Tata Group.
The Tata Group is set to become India's first major telecom gear provider.
Wondering what that means for us? ReadOn!
🤔 Decoding Tata Group's Entry into the Telecom Space
The Tata Group has already burned its hands in the telcom space once with Tata Docomo.
It has no interest in competing with Jio once again in this competitive market. Rather it wants to join hands with Jio.
So, it is entering the telecom gear space. Huh?
You see, your telecom provider gives you a network connection to make calls.
But for this network to reach you, you need a lot of fancy equipment. That's the business Tata is getting into.
And its first contract is set to be worth Rs. 26,821 crores!
The contract is to build 100,000 4G sites for BSNL and MTNL and Tata is all but certain to get it.
Now, this is huge not just for Tata but for our entire country.
Most of these new towers are going to be set up in rural areas, giving small villages in India a much-needed digital boost.
Plus, this gives India a competitive edge in the telecom gear space.
Before Tata, India did not have a major telecom gear provider.
We depended on the global giants like Huawei, ZTE, Nokia, Ericsson and Samsung.
In fact, we still depend on them.
Jio has partnered with Ericsson for its 5G rollout and Airtel has partnered with Nokia.
But depending on these companies gives rise to two major problems:
Foreign companies may steal our data and share it with their government. That's what the US suspects that Huawei has been doing.
These companies usually charge exorbitant rates because of so little competition in their space.
With an Indian alternative, not only will our data be safe but prices will also get more competitive.
But the road ahead of Tata isn't all that easy.
🚧 The Roadblocks in Tata's Way
First some context: Tata didn't have the expertise to build phone equipment all on its own. So, Tata Sons acquired a controlling stake in Tejas Networks, one of India's major telcom gear firms in July 2021, soon after talks of it getting the BSNL contract began.
TCS had expertise in providing development and testing services to telecom vendors and Tejas built equipment that connected radios set up in telecom towers with the main network.
But neither of them could build the radios themselves.
So, Tejas acquired Saankhya Labs, a company that did have this experience.
Problem solved, then?
Nope. They are still competing with giants in this space who have had years and years of experience which has helped them develop advanced tech and build connections.
In fact, even BSNL wanted to give its contract to giants like Nokia or ZTE.
It was only when the government introduced clauses that made it difficult for foreign companies to take up the BSNL contract that Indian companies stepped up to take on this deal.
And when Tata was given the task of building a proof of concept network for BSNL (to prove that it has what it takes to make it in this sector), there were several mistakes, several troubles and several delays.
However, Tata seems to have finally managed to get a hang of things for now.
But its true capabilities will only be judged once it successfully and timely completes the project for BSNL and MTNL.
If Tata manages to do this, a lot of opportunities will open up for the company. That's because even though India is fast rolling out 5G now, several other countries are still struggling to launch even 4G projects.
This growth is exactly what most people are hoping for, which is probably why the shares of Tejas Networks have been on the rise for the past year.
This comes despite the fact that Tejas Networks has been making huge losses since Covid: investors are just betting that Tata Group will unlock the company's potential.
So, it seems a lot is riding on this one contract:
Investors are hoping to make huge gains
India is hoping that it will get its first successful homegrown telecom gear maker
BSNL is hoping that it will finally be able to get a 4G network
This is BSNL's last chance to survive in India. If it does not pivot to 4G fast, a lot of its users will ditch it for Jio, Airtel or Vodafone that have long adopted 4G and are moving towards 5G.
So, let's hope Tata is successful or a lot of people are going to get their hearts broken.
Do you think Tata will be able to make it?
⚡In a line: Tata is set to become one of India's first advanced telecom gear maker but this super special title comes with extra difficult challenges.
💡Quick question: What other company do you think has the potential to enter this space?
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