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June 2, 1998


Ericsson may hang up on India

Email this story to a friend. Swedish telecom major Ericsson is downsizing operations in India and has deferred major investments, a company officer has said.

The decision to tighten the purse strings was taken in the wake of uncertain telecom scenario prevailing in the country, Anil Raj, vice-president and general manager, sales and marketing of Ericsson Communications has said.

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As part of the cost cutting measures, the company has decided to close down a few of its 19 offices across the country as "many of the have little or no work" he said.

However, he refused to disclose which offices would be shut down. "We are also looking at the possibility of retrenching our staff and will now watch the situation in the country."

Reiterating Ericsson's commitment to India, Raj assured his company is ready to invest in a "big way" and view the investments in a long-term perspective.

On the financial performance of the company's Indian arm he said it is not a profitable affair so far and hoped to break even within three to four years.

"We are from being profitable now and a lot hinges on the way the market changes. If it continues to behave like this, our breakeven may be delayed further," he said.

"Things will become quite clear in the telecom sector next year as private operators license fee is due that year. It is going to separate boys from men as a shakeout and consolidation is underway," he added.

The company has pigeonholed all major investment plans for the country until the telecom sector shows signs of picking up, he said.

"Right now, we are focussing on carrying out our present commitments. Though Ericsson is introducing new products the world over and technology like the diminutive Maxite radio base station, it does not propose to bring them to India in the near future as the domestic market is not yet mature enough for such technology," he said.

Referring to the retrenchment, Raj said, Ericsson has decided to get rid of its expatriate staff to begin with and about 80 per cent of them have already been repatriated.

Ericsson, operating in India for almost 100 years in areas like telecom infrastructure equipment, set up a fully owned subsidiary in the early Nineties.

Regarding the cellular phone segment, Raj admitted that his company's calculation about the country went awry as customers were more inclined towards the low-end models.

"We had assumed that Indians would have a penchant for the expensive models. We never expected that 90 per cent of our sales would be the cheapest models," he said.

Though the market for mobile phones in India has been a successful one for the companies so far it is no where near its initial projections, he said.

- Compiled from the Indian media

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