Ericsson pledges to invest million in India

Ericsson pledges to invest million in India

Ashok Bhattacharjee and Saikat Chatterjee, Bloomberg, New Delhi

Ericsson AB, the world's biggest maker of wireless networks, will spend "several hundred million dollars" in India a year, an investment that will include building a research center in the southern Indian city of Chennai.

The company is investing about US$100 million in the country at present and future spending will be linked to the growth of the market, Mats Granryd, managing director of the Indian unit, told reporters in Mumbai today. A "global services delivery center" will also be built in India, the Stockholm-based company said in a statement today, without mentioning the location.

Ericsson and rival equipment makers including Nokia Oyj and Alcatel SA are banking demand in emerging markets such as India to grow. India needs more than $20 billion of investments to boost the number of mobile phone users to 200 million by end 2007, telecommunications minister Dayanidhi Maran said in February. Researcher Gartner Inc. estimates mobile-phone users in India may surge almost five times to 300 million by the end of 2009.

"India is one of the most exciting markets," Chief Executive Carl-Henric Svanberg said in the statement. "We see immense potential in this region and we are committed to partner with India in this growth."

Ericsson follows telecommunications companies Cisco Systems Inc., Alcatel and Motorola Inc. in setting up research centers in India. Overseas companies are taking advantage of India's lower wages and a large pool of technically skilled manpower to set up research and development units.

Ericsson, Nokia and Cisco are increasing their investments in India to get more orders. State-run Bharat Sanchar Nigam Ltd., which plans to spend $18 billion in three years to expand its network, said it will prefer to buy equipment from companies that manufacture locally.

In March Ericsson said it will spend an additional $50 million in two years to upgrade its Indian manufacturing plant. It employs 1,500 people in 22 locations in India.

Cisco, the largest maker of equipment that directs Internet traffic, said on Oct. 19 it will spend $1.1 billion in India, its biggest investment outside the U.S., to expand research and sales.

Nokia, the world's biggest mobile-phone maker, will start making network gear in Chennai next year to cut costs and boost sales. The Espoo-Finland-based company also plans to make handsets in the Chennai plant.

Ericsson forecast "moderate" industry growth next year, which it defines as "high single-digit" growth. Gartner, based in Stamford, Connecticut, in July raised its forecast for global mobile-phone sales in 2005 for a second time to 779 million units, compared with 674 million units sold last year.

Ericsson's Asia Pacific sales rose 20 percent in the third quarter ended Sept. 30, led by "particularly strong" growth in Australia, India, Indonesia and Japan.