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Nortel puts Indian investment plans on hold

A worsening US economy has prompted Nortel Networks, a major global telecom equipment vendor, to delay its investment plans in India and put the brakes on software outsourcing, its country head said.

"Our expectation was that we will be expanding our investment in India in additional resources, which is not happening," Joseph Samuel, managing director of Nortel Networks (India) Pvt Ltd, said.

Nortel last October unveiled ambitious investment plans for India and said it expects to spend up to $350 million over the next three years in projects linked to the Internet.

"The $350 million was involved in several areas. One of them was in software. We are more or less keeping the same level (of people) what we used to have," Samuel said in an interview late on Monday.

Samuel said Nortel is not looking at adding staff in a big way in India from the current 100 people. "Most of the growth was planned in the technology side. We are slowing down there."

Nortel, which has been in India for over a decade through a liaison office, set up its fully-owned subsidiary last year.

Nortel has also put on hold its plans to set up a research and development centre in India.

"Our plan was to have a couple of 100 people in the new lab in the next two to three years," Samuel said.

The R&D lab was expected to be set up by end 2001. Samuel said Nortel did not have a new time frame for the lab.

Nortel last year announced plans to hire an additional 500 research and development scientists in India over the next three years and expand software development activities.

SOFTWARE OUTSOURCING

Samuel said Nortel will withhold expansion in software development by Indian vendors but will not cut back existing work.

"We are not cutting down any work with companies," he said.

"But how fast we will increase or how much we will increase in the future, that's questionable," Samuel said.

Nortel along with its Indian partners including software giant Infosys Technologies and Wipro has about 1,500 to 1,600 people involved in software development.

Analysts have said big Indian software firms could face billing pressures or be hurt by slower business growth from their existing global telecom clients due to a spending cut by these firms amidst a slump in the US technology market.

"Based on today, we have enough funding to support and maintain our activities in India. Rates are not the big concern. It still costs less than what it costs us there (US)," Samuel said. Both Infosys and Wipro count Nortel among top customers.

GROWTH DRIVERS

Nortel expects growth in its Indian business to come from supplying optical products to the local market as major companies invest in creating bandwidth, and from the wireless market.

Samuel said Nortel sees huge business opportunities among optical products as private Indian firms link up the metros.

"Once they start the investment, that would be one of the fastest growing areas. In year 2001, some of them would be investing in the backbone," he said.

Many Indian firms have lined up mammoth investments to wire up the country with optic fibre to meet its hunger for bandwidth.

Rising Internet penetration in the country, currently at more than two million connections but forecast to be 15 million by end 2003, has been a major driver of these investments.

Nortel currently supplies optical products to Indian companies such as Bharti and wireless products to the BPL group.

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