How appreciating dollar might affect Indian telecom?

Today, one dollar is equal to Rs 68.80 and it has appreciated by Rs 2.61 on a single day. Experts predict that the dollar will further appreciate in days to come as foreign institutional investors have pulled out close to $12 billion dollar in last three months.

The appreciating dollar is not good for telecom as operators do have lot of dollar exposure as majority of  equipment procured in the country is imported. Even handset vendors do import a lot of smartphones as they are not manufactured in the country.

“Depreciation of rupee will lead to high cost of import. It will have an impact on new orders whereas it will have no impact on old orders. So, no immediate adverse impact on BSNL,” says RK Upadhyay, CMD, BSNL.

According to industry journal Voice&Data, the Indian communications market is estimated to be Rs 119,553 crore in FY 2012-13 and has registered a growth of 5.3 percent. Of this the enterprise equipment market is valued at Rs 21,582 crore. The carrier equipment has grown by 1.6 percent to reach Rs 56,329 crore whereas user device has grown by 19.5 percent to achive Rs 41,642 crore.

A smilar view is shared by Sanjay Nayak, CEO of Tejas Networks.”Telecom equipment import is one of the largest item of our trade deficit. When the dollar appreciating, it will adversely hit the capex plans of Indian operators,” says Nayak.

Commenting on rupee depreciation CS Rao, president, Reliance Communications said, “Rising dollar would impact operational exposures considerably when industry is facing less growth.”

The falling value of the rupee against dollar is also expected to affect the end consumers as the vendors would have no other option that passing it on to the customers.

Speaking on dollar appreciation Deepak Mehrotra, CEO Micromax said, “The fall in rupee’s value is an important concern for us. It increases the input cost and hence puts a pressure on device sale price. It unfortunate that while the whole government machinery and industry is agog with CAD and other relevant data. The whole talk about CAD hereby widens by not controlling the USD-INR pricing and makes a case for further inflation. There should be a strong consideration (in the government finance authorities/bodies) to the control that they need to exercise on the free depreciation/appreciation of the USD/INR.”

“We are carefully monitoring the situation and are hopefully expectant of the trend to reverse, however if not, like the fuel prices, the device costs will also have to undergo price correction,” added Mehrotra.

The appreciating dollar is not good for imports but it is definitely good for domestic manufacturing and India should go with full throttle on domestic manufacturing.
“This is also an warning bell that we must focus on creating a strong domestic telecom product design and manufacturing industry. It is ironical that despite India having such a large talent base of R&D professionals and manufacturing talent and a large domestic demand, we have so far ignored this huge opportunity, and chosen a short cut by relying on imported telecom equipment,” said Sanjay Nayak.

We hope that with proactive and supportive government policies, as envisaged in NTP-2012, all stakeholders will nurture and promote the domestic industry, which will not only meet the local needs, but will also generate significant forex for the country in the form of telecom equipment exports added Nayak.

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