Not all revenue is created equal
The pricing pressure in Indian wireless infrastructure market is notoriously intense driven by low ARPU earned by local operators. ERICY,
BSNL has a 60-70 million lines tender worth more than $4 billion out for proposal out of which about 25% is reserved for a Indian equipment maker. The NT episode has put other bidders into a defensive tizzy. ERICY, which has over 40% market share in Indian wireless infrastructure market, proclaimed on their earnings conference call “we are not going to lead prices down”. According to my sources BSNL has banned Huawei from bidding. What were they thinking by banning the lowest price bidder? With Huawei missing the pricing might not be as bad this time around. BSNL management has indicated that it would not squeeze suppliers as it was not interested in just buying cheap equipment.
Investors should always pay attention to margin each incremental dollar in revenue brings. Remember, value is created on the margin. After the dotcom bust winning market share by losing more money is not in fashion any more.