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June 22, 1998
Swedish Telecom major Ericsson will down the shutters on its switch manufacturing facility at Jaipur.
The Swedish multinational is also closing down one of the two lines of production at a GSM phones plant in Rajasthan.
For the last two years, the largest traditional buyer of telecom equipment, the Department of Telecommunications, has more than halved its purchases.
Besides, the private networks are in the throes of financial crisis and hence, unable to place purchase orders.
Along with these factors, there are significant number of dropouts from basic and cellular services, which have caused the demand projections of the equipment manufacturers to go haywire.
Ericsson's strategy to cope up with the slowdown also includes sending back 80 per cent of its expatriate staff and lay off some 2,000 personnel.
It will also be closing down 10-12 of its 19 offices across the country.
Already the company has sent back a few top expatriate officials.
The layoff exercise is expected to get underway as soon as a package deal is evolved.
The company officials are working on a deal, which will include voluntary retirements and compensation for those who will be retrenched.
According to sources, once the layoff strategy is put into operation, the switches and GSM phones plant would be closed and downsized respectively.
The Indian arm of the Swedish major may also withdraw from some of the deals it has struck with cash-strapped cellular operators.
According to sources one such deal the company now finds "unsustainable" is the one with JT Mobile, the licence holder for cellular services in Andhra Pradesh, Punjab and Karnataka.
The Swedish company is apprehensive of recovering the supplier credit extended to JT Mobile as the cellular operator is in a big financial mess.
Sources say that the Swedish major is also trying to change the terms of its agreement with Bharti Cellular.
Ericsson has an agreement with Bharti to supply equipment on credit for the Himachal Pradesh cellular circle.
So far, in almost all the cases where Ericsson had supplied equipment to the private operators, the repayment has been delayed.
In some cases, the operators have expressed inability to pay back the bridge loan extended by the supplier.
Ericsson had adopted a very aggressive marketing strategy for its products and was on the forefront to extend supplier credit to the operators but now finds itself mired in bad deals.
Not only are its funds locked in but also the demand for the equipment has suffered because of DoT's penchant for waiting for the latest technology.
According to sources, DoT is deliberately delaying its purchases because its brass thinks that by adopting this strategy they would be able to buy the next generation technology. And equipment suppliers have been deprived of their largest buyer.
- Compiled from the Indian media
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