- The deal is crucial for Vodafone Idea, which has been losing its subscriber base because of its inability to upgrade its network
- Nokia will possibly replace gear by Huawei or ZTE
- Vodafone Idea expected to support Open RAN since it is known to have carried out a pilot with Mavenir but this deal, With this deal, the Indian telcos have completely ignored Open RAN
India’s third-largest service provider, Vodafone Idea, awarded a three-year $1.6 billion-deal to Finnish telecom vendor Nokia to modernize and expand its 4G network and to roll out a part of its 5G network.
As part of this agreement, Nokia will replace the incumbent vendor in the circles (service areas) of Chennai and Andhra Pradesh. Nokia will possibly replace gear by Huawei or ZTE. However, the Indian government has yet to grant Nokia a “trusted source” certification. In India, telcos are mandated to only use telecom gear from vendors that have a “trusted source” certificate.
While the press release doesn’t mention the financial terms of the deal, media reports say that Nokia has bagged orders worth $1.6 billion from Vodafone Idea. This deal is part of Vodafone Idea’s recent announcement of awarding deals worth $3.6 billion to three vendors, Nokia, Ericsson and Samsung, to expand its 4G coverage and deploy 5G network — however Nokia seems to have bagged the maximum share of the Vodafone Idea’s contract.
“Because of its weak financial condition, Vi has cut back dramatically on capex since COVID. Recent levels are well below what would normally be considered the level needed to support basic network maintenance,” Matt Walker, Chief Analyst at MTN Consulting, told Fierce Network.
As per MTN Consulting, Vodafone Idea had a telco capital intensity of just 3.8% in the first quarter of 2024, compared with 30.4% for Airtel and 42% for Reliance Jio. Vodafone Idea’s telco capital intensity has been consistently dropping over the last few years, coming down from 12.8% in Q4 of 2021 to 4.4% in Q4 of 2023.
A crucial deal for Vodafone Idea
This deal is crucial for Vodafone Idea, which has been losing its subscriber base because of its inability to upgrade its network and delay in launching 5G services. The telco was under a massive financial debt making it difficult to invest in modernizing the network.
“The company has been losing subscribers rapidly. Per TRAI [Telecom Regulatory Authority of India] data, it ended July 2024 with 215.9 million subscribers, down 5.5% from 228.3 million a year ago; meanwhile, total subscribers across all operators grew 2.0%. The company needed to make a big splash, reassuring subscribers that it was viable and worth committing to. Its recent announcements about fundraising, new spectrum, and this network upgrade are positive steps,” he added.
While Bharti Airtel and Reliance Jio launched 5G about two years ago, the Vodafone Idea deal is crucial for Nokia and other telecom vendors since the capital expenditure of Indian telcos flattened after the nationwide 5G rollout.
“Like Vi, Nokia has had a tough few years. At the start of COVID-19, in 1Q20, its share of the global telco network infrastructure (telco NI) market was 10.1% on an annualized basis. That dropped to 8.0% for the period ended 2Q24. It’s likely that Nokia committed lots of resources to winning this deal,” said Walker.
Vodafone Idea says no to open RAN
Vodafone Idea had been expected to support open RAN since it carried out a pilot with Mavenir. While Vodafone Group was one of the early adopters of open RAN, this deal seems to have snubbed the technology at least for the time being. Vodafone Idea was possibly the last hope for the open RAN vendors to do some business in India’s 5G market.
With this deal, the Indian telcos have also given a cold shoulder to Indian vendors. The Indian Government has been promoting the use of Indian gear-makers, however, they are not part of any 5G deals announced so far.
“The Indian government is working hard to develop indigenous vendors’ capabilities and commercial prospects. While there is currently no local vendor capable of playing the role that Nokia, Ericsson and Samsung play in Vi’s latest upgrades, the government is clearly eager to find opportunities for companies like Tejas, Wisig and VVDN in the Vi network. This is something to watch over the next 6-12 months,” says Walker. With a majority stake of 33% in Vodafone Idea, the Indian Government can potentially influence the procurement decision of the telco.
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