C U@Chennai

Some 80 km from Chennai, in a town made famous by Rajiv Gandhi's death, will come up telecom giant Nokia's first handset manufacturing plant in India. By next year, as the plant goes on stream, the global mobile subscriber base will cross two billion. The Indian share of it could be over 100 million.

A huge leap—considering India's mobile telephone industry is just over a decade old. And much of the growth has happened in the last five years. This year, mobile telephony share could touch 60 per cent!

The $150-million plant, Nokia's tenth in the world, will manufacture at least half of the over-37 million handsets expected to be sold in the country this year. As the number of telecom subscribers in India crossed the 100-million mark this month, the mobile base surpassed the fixed connections by four million. About 1.8 to 2 million new customers enter the mobile sector every month. Of the $2.5-billion Indian market, Nokia has roughly over 45 per cent—a meaty share.

As if on cue, Europe's leading handset and telecom equipment manufacturer, Finland-based Elcoteq, too threw open its 10-million handset plant in Bangalore five days after Nokia announced its decision. The company, which makes sets for Nokia, Sony Ericsson, Motorola and the like, will invest $100 million in 2006.

The two entries may well signal the beginning of a flood in India's telecom sector, whose galloping growth has made many global giants sit up. LG has already announced a plant in Pune. Communications minister Dayanidhi Maran claims that Alcatel and Ericsson have also shown interest in starting manufacturing units in India and some proposals may mature this year. The government expects $800-900 million FDI in telecom manufacturing in the current fiscal and $1 billion in the next. Compare this to the $2 billion the sector reaped in the past 15 years.

That's because, for one, with the mobile markets in the US and Europe nearing saturation, Asia is where the action is. Says Nokia president Pekka Ala-Pietila: "India's position at the heart of a rapidly growing mobile communications region makes it an attractive option for establishing our new manufacturing facility. The factory would be an integral part of our global manufacturing network."

Secondly, the beginning of global manufacture of hardware brings the telecom sector to a full circle. Nokia has been in the Indian market for ten years but it decided to manufacture here only now. It already has three plants in Asia (China and Korea) where most of the handsets sold here are sourced. At present, India imports as much as 80 per cent of its telecom hardware needs.

Says Maran: "Nokia and Elcoteq should have done this three years ago. Efforts are being made to attract leading manufacturers in this field. The budget has rationalised duties for this purpose. We will see more activity." He also indicated that to push manufacturing, BSNL, the biggest state-owned service provider, may insist the equipment it buys is made in India.

India may still be a nascent market for the global industry, but it's one they're unsure of. Says Hannu Keinanen, president, Elcoteq Asia-Pacific: "Most numbers in India are underestimates. The market is much bigger."

Elcoteq is also looking at an R&D centre here. According to Elcoteq president and CEO Jouni Hartikainen, "(we're) considering India for our fourth research centre as well as a new product introduction destination".

Maran feels local manufacturing will ultimately bring prices further down and drive growth. Companies agree. With rock bottom tariffs, mobile customers can look forward to truly becoming king.