South Korean chaebol Samsung Corporation has called off its joint venture with domestic engineering giant Larsen & Toubro for manufacture of telecom switching and transmission equipment. This follows poor market demand for the products, sources said.
Samsung and L&T had formed the 50:50 joint venture company over a year back to manufacture PABX (private automatic branch exchange), switching and other multiplex equipment for use in optic fibre transmission systems in the telecom industry.
However, the partners have been forced to review their decision owing to the sluggish economic conditions and lack of any substantial activity in the basic telecom services sector in the country. Even after four years the government permitted private entry into basic telecom services, not a single project has been operationalised.
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Commenting on decision to part ways with L&T, a senior Samsung executive said, We have called off our collaboration with L&T as there is not enough market demand.
SD Kulkarni, managing director of L&T, also said that the joint venture project has been abandoned due to lack of market opportunities as was perceived at the time of forming the company. Where is the market? The basic telecom services sector has failed to take off. Our collaboration with Samsung is as good as over, he said to Business Standard.
In spite of the incorporation of the company last year, the joint venture had failed to begin any of its slated activities till date. It had earlier planned to manufacture telephone exchanges of 1000-line capacity, based on the anticipated demand increase in the basic telephony segment in the near future with the segment being thrown open to the private operators.
However, only a few of the basic circle operations have taken off till date, and with the department of telecommunications (DoT) remaining the only major buyer. Competition is fierce between existing players which include majors like Siemens, Fujitsu, AT&T, Alcatel, NEC and GPT.
Of the 20 circles that were put up for bidding in 1995, only six private basic telecom companies have signed up with DoT to start services. The companies are: Bharti Telenet (for Madhya Pradesh), Reliance Telecom (Gujarat), Hughes Ispat (Maharashtra), Tata Teleservices (Andhra Pradesh), Essar Commvision (Punjab) and Shyam Telecom-led Telelink Networks (Rajasthan). Another company, Usha groups Techno Telecom, is expected to sign the licence agreement with DoT soon.
Only two Bharti Telenet and Tata Teleservices of the six licensees have signed equipment supply agreements.