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Sector Focus : Telecom Equipment

Telecom equipment industry: Post-budget

Telecom equipment: State of the industry (2000-01)

	Customs		Excise		Abatement rate
	2000-01	2001-02	2000-01	2001-02	2000-01	2001-02
Cellular phones	9.2	9.2	16.0	16.0	40.0	40.0
Pagers	9.2	9.2	16.0	16.0	40.0	40.0
Electronic push button telephones	30.0	19.6	16.0	16.0	-	-
Switching equipment	32.6	19.6	16.0	16.0	-	-
Microwave radio equipment	32.6	19.6	16.0	16.0	-	-
Import of specified categories of telecom equipment by operators1	5.0	5.0	16.0	16.0	-	-

WiLL: Wireless in local loop

1 Applicable for the import of the following equipment - For cellular mobile services: Switching apparatus, base station controllers, base transceivers stations, network management solutions, etc. (excluding handsets)
- For internet services: Routers, ATM switches, frame relay switches
- For VSAT communications: Equipment (other than customer premises equipment) and network management system
Source: CRIS INFACŪ

• In 2000-01, the telecom equipment sector is expected to increase by over 20 per cent, due to high growth in the demand for telecom services, and an increase in the investments made by incumbent service providers and private sector participants.
• Following its corporatisation in October 2000, the Bharat Sanchar Nigam Ltd. (BSNL) is expected to make increasing equipment purchases in deferred payments, rather than on cash terms. BSNL is expected to invest largely on modernising its network. As a result, demand for new categories of equipment, such as dense wavelength division multiplexing systems, is expected to increase significantly.
• Demand for equipment is expected to increase due to increasing private participation, corporatisation of BSNL, and demand for newer categories of equipment. Only vendors who can provide equipment on credit, undertake turnkey contracts and have technological capabilities or collaborations, would be able to maintain or increase their market shares.

Telecom equipment: Budget impact

Impact factors

Company name	Impact	Impact factors
Bharti Telecom	Neg.	A, B
(Not listed)
HFCL	Pos.	A, B
(578.35, 670.40)
ITI Ltd.	Neg.	A, B
(24.45, 26.40)
Tata Telecom	Neg.	A, B
(71.25, 78.45)

Note
Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
Pos= positive Neg= negative Neut= neutral
Source: CRIS INFACŪ

A: The reduction in customs duty on specified categories of telecom infrastructure and terminal equipment is expected to have a negative impact on equipment manufacturers, due to the lower import costs of such equipment. However, providers of turnkey installation services, such as HFCL are expected to benefit due to the lower costs of equipment imports.

B: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on the manufacturers.

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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