ZTE needs to find newer businesses

Written by Geeta Nair | Updated: May 22 2013, 06:42am hrs
The US$13.8-billion Chinese telecom equipment maker, ZTE, is the fourth-largest mobile handset manufacturer in the world. ZTE Telecom India is a 100% subsidiary of ZTE. ZTE has sold close to 4 million handsets in the Indian market through telecom service operators and indirectly through Indian mobile phone brands. Now ZTE is going solo with the launch of five 3G handset models. ZTE plans to sell 1 million units in the first year and growth at 100% the year after. About a third of the current annual turnover of ZTE India currently comes from handsets, ZTE now wants to take this up to 50%. ZTE India CEO Xu Dejuns vision is to be among the top three mobile phone players in the Indian market. In an interview with Geeta Nair, Dejun played down the security concerns raised in India over the dependence on Chinese telecom equipment makers, and said they are not a security threat for India. Edited excerpts:

There are security concerns raised over the domination of Chinese equipment markers in the Indian telecom market...

Security issues always comes up, but I dont think there are any. Ten years before we came into the market, there were companies from US and Europe and these issues were never raised. We are offering similar or better quality at a lower price so security issues have been created. These are gimmicks. We are a company into business. We have build trust with the operators. The Indian government has not stopped us from doing business. About China and India some people always worry but I dont worry. These two countries must be friends. Premier Li Keqiang is visiting India. The two countries are very close friends. We are following all the regulations. The government policy requires all telecom equipment vendors to submit their equipment for testing. We will be the first one to get our equipment certified.

The telecom industry had a difficult time last year. How was ZTEs performance

Last year was difficult. Revenues were down to almost half of the peak. We had done a business of US$ 1.5 billion in 2010 in year 2012 the turnover was down to US$700 million. This year we are seeing a recovery but it will not be close to what it was in 2009. There will be no explosive growth. The operators have reached a health saturation point so they will not be pumping investments. We need to find newer businesses.

You are a late entrant to the mobile market in India

We have been selling our phones through the service providers. When they were under pressure the ZTE volumes came down. The last three years have seen operators volumes go down. We had big plans in 2010 but we could do only half of what we expected. The big operators have been under pressure and this year there are no purchase orders. So we have decided to do something in the open market. We had ignored the other channels in India till now but we had the products, the technology and manufacturing and only needed a channel to distribute in India. The market is so big and lot of people already know ZTE. Our handsets will be positioned in the middle between the premium smart phones and cheap smart phones. They will be better quality phones but not at reduced prices.

This segment cares about the brand, customer service and quality. We are now connecting with the Indian market and we will reach out to the youth and urban markets. We know the Indian phone users well as our R&D has been working on devices for the market and understand what the Indian buyer looks for in these phones.

Does ZTE have plans to open manufacturing facilities in India

We will be bringing phones from China where we have a manufacturing base. At present, the volumes are not so big for manufacturing in India. It is not possible to manufacture in India as costs will go up if we do it here. But we have dreams of manufacturing in India.

We have had a factory in India since 2005 that tests and repairs equipment. We started manufacturing transmission and FTTH (fibre to home technology) equipment. We see a huge opportunity in fibre and transmission and have upgraded our manufacturing in Gurgaon.