Ladies and gentlemen, good day and welcome to Tejas Networks Limited Q1 FY25 Earnings Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashvik Jain from ICICI Securities. Thank you, and over to you, sir.
Thank you. Good evening, everyone. Thank you for joining on Tejas Networks Limited Q1 FY25 results conference call. We have Tejas Networks management on call, represented by Mr. Anand Athreya, Chief Executive Officer and Managing Director. Mr. Arnob Roy, Chief Operating Officer and Whole Time Director. Mr. Sumit Dhingra, Chief Financial Officer. Dr. Kumar N. Sivarajan, Chief Technology Officer. I would like to invite Mr. Anand, sir, to initiate with opening remarks, followed by a quarterly update, post which we will have a Q&A session. Over to you, sir.
Good evening, guys. Thanks for attending the Q1 FY25 Tejas Networks earnings call. I have my colleagues here, Arnob Roy, CEO and Executive Director; Kumar N. Sivarajan, CTO; and Sumit Dhingra, who is our CFO, with me in the room. I want to give you some key updates for Q1 FY25. I'm happy to inform you that this has been the best quarter ever for Tejas. Our Q1 FY25 net revenue was INR 1,563 crores, which was an 8.3x YoY. The profit after tax in Q1 FY25 was INR 77 crores, and we ended Q1 with an order book of INR 7,091 crores. Let me talk briefly about our business. We have primarily two segments: wireless and wireline. On the wireless business, our 4G/5G RAN installations for the BSNL's Pan India network, it's progressing well.
We have cumulatively so far shipped approximately north of 27,000 sites as of end of Q1. We also have significantly scaled up our manufacturing capacity of the RAN equipment. We have also, in addition to the B1, Band 1, Band 28, and dual-band radios, we have also made production releases of additional 4G radios, which are mostly kind of globally used bands also, which is Band 3, which is 800 MHz, Band 5, 850 MHz, and Band 41, which is 2,500 MHz. We are also engaging with several wireless providers for proof of concept who could become our potential customers both in private and utility verticals. Now, I'll go on to the wireline business.
As we talked about engaging with international customers, so I'm happy to inform you that we've won a strategic deal with a Tier 2 operator in the US for their network modernization project, and also another telecom operator in Southeast Asia for a broadband rollout. We're also seeing repeat orders of our GPON, DWDM, and packet equipment from our existing customers, right, both in India, Southeast Asia, and also in Africa. As you know, we also had one of the largest deployments of IP/MPLS routers in India called the BSNL MAN, and we have made good progress on the installation commissioning. We delivered a lot of equipment last quarter, and the installation commissioning is happening as we speak. One corporate update I want to give you is the merger of Saankhya Labs with Tejas. It's in an advanced stage, and NCLT has resolved the matter for orders.
So now I think it's a matter of time when these things come together. Now, I'll hand it over to my colleague, Sumit Dhingra, to talk about the financials. Thank you.
Thank you, Anand. Good evening, everyone. For the quarter one financial year 2025, we had our total revenue from operations of INR 1,563 crores. This constituted revenue from sales and service of about INR 1,496 crores. This is an 8x revenue growth over the previous year and 28% growth over the last quarter. Other operating revenue, which consists primarily of PLI incentive, was INR 67 crores for the quarter as compared to INR 156 crores in the previous quarter. I would like to clarify that the previous quarter included PLI receipt for FY 2023 and for the full year FY 2024.
Compared to that, Q1 recognition of revenue for PLI includes only the Q1 2025 component. On an aggregate basis, the revenue grew at 18% growth over the previous quarter. Our EBITDA for the quarter was INR 167 crores as compared to negative INR 80 crores the previous year and INR 258 crores in the quarter before that.
However, as I mentioned, this also had the impact of other operating income in the two quarters. So if I take that out, quarter four, previous quarter EBITDA was INR 101 crores, and compared to that, we are at INR 100 crores for this quarter. PBT for the quarter is INR 122 crores compared to INR 233 crores for the quarter before that and INR -66 crores for the quarter one for the previous year. Profit after tax for the quarter is INR 77 crores. This is compared to INR 26 crores on previous year's quarter one and INR 147 crores for the quarter four. Our full year profit after tax for the last year was INR 63 crores.
Compared to that, in the current quarter itself, we have INR 77 crores of PAT. We can move to the next slide, which talks about key financial indicators. Our inventory increased from INR 3,788 crores- INR 3,853 crores in the quarter.
This increase is predominantly due to ramp-up of wireless shipments, and this will get converted over the next months into finished goods and get shipped. Trade receivables grew from INR 1,458 crores- INR 2,052 crores. This, again, is increased due to higher shipments in Q1. But we made progress in terms of collections as well, and we collected about INR 1,170 crores during the quarter. Payables have come down from INR 1,839 crores- INR 1,376 crores. But at the same time, the borrowings have gone up from INR 1,744 crores- INR 2,844 crores, which implies a net debt of about INR 2,200 crores at the end of the quarter. Our cash position stands at INR 612 crores. With this, I'll hand it over to Arnob to take care of the next slide.
So in the next few minutes, I'd like to give you a color of the business that you have done in Q1 and also the outlook for our business going forward. As far as Q1 is concerned, the revenue mix, as we report our business into three sectors: the Indian government, India private, and international. The Indian government saw about 7% of our overall revenue for the quarter and saw a significant growth. It had the growth of 2.5x YoY. This growth was led mainly by the network wins in the utility segment. The India private consisted of 90% of our business, and as you know, we categorize the BSNL 4G shipments since it goes to TCS. We categorize that as India private.
But for the India private business, 90% of our revenue for Q1 had a very strong growth, over 49% of Q1 of FY24, and mainly dominated by the BSNL 4G shipments. International business was largely flat with a slight decline, and it was 2% of our overall revenue for the quarter. As we mentioned earlier, this is an area that we have our significant focus on, and we are increasing our sales and marketing presence in international territories. We are into a lot of engagements in the international territories as well, and I'll talk about that a little bit. In this quarter, we had for international shipments, our key shipments happened to customers in Africa and in South Asia. We closed the quarter with a backlog of INR 7,000 crores, INR 7,091 crores.
This was lower than the backlog that we closed in Q4, and largely because a lot of the wireless shipments happened as we expanded or increased our wireless shipments in the quarter. That's part of the reason some of the backlog went down. And as part of the backlog, India still has a significant amount, which is INR 1,800 crores, the dominant part being our BSNL 4G backlog, and then international of INR 260 crores. So going forward, some of the key opportunities being targeted, and this is beyond, of course, our regular run rate business with our existing customers. We still will keep on buying on the multi-year contracts.
The key large opportunities being targeted is, one, the expansion of BSNL's 4G network. We know that they have to build out for saturation sites, as they call it, and its corresponding backhaul network, which is an extension of the MAN network.
And then BharatNet phase III, which has the tenders this week have come to an advanced stage, and I think the bidding, the tender timeline's got a bit pushed out, but this is also some of the big opportunities that we're targeting. And then the Kavach project of Indian Railways for the collision avoidance systems based on where our 4G technologies are a key part of the communication infrastructure. We have done successful POC over here, and we are waiting for the tender process to get through. Then expansion of the network backbone in the utility segment. I mean, this segment, we are seeing a strong demand in this segment, both for their captive network requirements as well as their telco business, their wholesale bandwidth business.
We see a lot of opportunities during the year where they will scale up their backbone network several times based on our optical transmission technologies. We are also internationally, we are also engaged in several broadband opportunities with Tier 1, multiple Tier 1 opportunities in the Middle East. We are in a good position with the network, but it will take some time to close. But we're in advanced stage with trials and other engagements and commercial engagements there as well. And then in South Asia, we are also engaged in a wireless and a metro aggregation opportunity with the Tier 1 operator. And in both of these, include our 4G, 5G equipment, our packet transport equipment, as well as our metro DWDM equipment. So this is also one of the large deals that we're working on, where we're in the advanced stage.
We're looking forward to winning a significant part of these deals to be able to create our business backlog for the future. I will let go on to giving you some color of our business outlook that we see over the next few years. As you all know, the network traffic worldwide continues to grow rapidly, and right now, we are on the cusp of a significant growth driven by newer generation applications like generative AI. These are now the key drivers, one of the key applications driving the building of AI data centers and the interconnectivity, and that's generating a huge amount of traffic. Also, applications like virtual reality and spatial computing, which is processing a high amount of 3D data and doing a huge amount of computing, as well as exchanging data with servers located in remote locations.
Then multiplayer gaming are consuming a high amount of bandwidth because it's working with high-definition video, high-definition graphics, and that's also causing a huge amount of network growth. And then the growth of streaming video that we are all familiar with. So all of this growth in the technology and the network traffic is driven by enablers of advanced communication technologies, the kind of stuff that we build, whether it's 4G, 5G mobile broadband, multi-gigabit fiber broadband, and transmission technology, and then its computing devices at the edge of the network. So all of this is leading to newer investments, driving fresh investments in the fixed and mobile networks worldwide. So some of the things that are happening are the transformation in enterprises and clouds, AI data centers, and their connectivity, high-bandwidth connectivity. We see a long runway of deployment of 4G and 5G globally.
4G is primarily in a lot of the developing countries where deployment is at an initial stage, and 5G in many of the developed economies. And then massive investments in broadband connectivity that's happening the world over, including developed economies like Europe and the U.S., where there are massive investment programs going on. There's a modernization of utility networks, which is demanding the transition from the old TDM to IP networks, and that has been happening for a few years, and we are seeing an acceleration of the adoption of this transformation. Digitalization of cities and economies, building out of smart and safe cities across the world. So these are some of the many phenomena that we have that's happening, and the outlook for our business over the next few years still looks strong.
All of this is driving our development of key technologies for wireless RAN and crosshaul, our multi-terabit packet and optical transmission technologies, and high-speed broadband access using GPON and XGS-PON and associated technologies. So in summary, the business outlook looks strong. There are many new generation applications which are driving our business going forward. And so I think that is what is also driving our investment in technology, in R&D, in catering to the requirement driven by this evolution. So with this, I'll pause over here, and we'll open the floor for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Rishabh Garg from Sancheti Family Office. Please go ahead.
Hello, sir. Am I audible?
Yes, you are. Please go ahead.
Yeah. Set of numbers. Wanted to understand what is the total universe of sites which are eligible for 4G, 5G RAN. I understand for BSNL, we have done 100,000 sites as of now. So what is the universe for BSNL? Above that, how much percentage is eligible for a 5G RAN? What is your best estimate? How much sites will go to 5G upgrade? And what is the kind of cost which will be incurred? Let's say INR 100, it costs it for 4G RAN equipment. So how much would it cost for the 5G upgrade? And regarding the 4G, 5G RAN, for the private telcos, like GO and Airtel have done a good amount of capex some years ago. So when do you think the replacement cycle will come from the private telco side? Yes, sir.
Yeah. So as far as BSNL is concerned, we are still, first of all, we are seeing a lot more investment that still needs to be done in 4G. And I talked about a good network expansion in terms of the saturation sites that are going to come up in BSNL. There are some of the remote sites across the country. So the 4G expansion is a key part of our upcoming wireless business. As far as 5G is concerned, there are two parts, portions to it. One part is 5G upgrade in the existing 4G bands, right? And so that's part of the existing tender that we are executing right now. So that's going to happen, and that's the business that is part of the tender that's going to be executed later on.
Apart from that, BSNL is also going to come up with a nationwide tender for 5G in the performance band, in the high-speed band, which is called the 3.5 GHz. So that is still in the works. There will be a process of POC of equipment and all those kind of things. So that's going to be something that a nationwide build-out, which depends on the scale at which they deploy 5G. And it is certainly going to be on the scale of what the private operators have done.
Can you draw some comparison between the 4G spends per site and 5G spends per site? I want to have some numbers. Or some percentage.
Yeah. So absolute numbers are difficult to give, but if you see the kind of spend that has happened in 4G, and if you take another 20%-30% more spend that's going to happen in 4G, then 5G is going to be not of that scale. It will go to be smaller because a lot of the initial 5G deployment happens in urban areas, right, initially. So it's going to be in a smaller percentage of that. And then when 5G adoption happens and 5G monetization happens, then like the rest of the operators, I think a lot of increase in 5G deployment will also happen across the length and breadth of the country. So it's going to happen in phases.
So how much does an upgrade cost? Let's say INR 100 is the 4G cost. So how much is an upgrade for 4G to 5G?
So as I said, there are two parts. Upgrade for 4G- 5G in the existing 4G band, that's a fraction, right? I mean, that's a smaller fraction because it comes with a small amount of hardware and software upgrades. But 5G deployment in the newer bands, in the performance bands, that spend is as much as that, if not more, than that of 4G band, right? Because especially if he's deploying things like massive MIMO with 8T8R, 8 connectivities of 2x2 MIMO and stuff like that, advanced technologies which use very high-performance radio capabilities, those costs are obviously higher. But on the average, you can look at 4G site plus kind of a thing, right, as a per unit site cost.
Got it. On the private telco side, can you give some idea on when did the 4G, 5G CapEx actually started for players like GO and Airtel? And when do you think the replacement cycle will come? And some idea on how much sites can come? Yes.
I mean, so 4G, as you already know, the 5G deployment that these operators have done. Going forward, as 5G usage goes up and 5G monetization goes up, I mean, we expect to see a lot more deployment to happen because this network is still small compared to the overall 4G network. And 4G is still the backbone of the mobile data network for these operators. But as 5G becomes more and more popular, more cost-effective, and more newer applications come in, I think 5G network will go up as well and kind of cover the entire country and maybe over time replace the 4G network.
What is the useful life of such equipment?
Well, useful, I think you have to look at how the 2G network has been deployed and living, and then how 3G got deployed. So depending on the success of a particular technology, if a particular technology can keep it live for 7, 8, 9 years, if the technology is successful, if the transition happens sooner, then it can happen in 5 years. So I mean, you have to just look at how things evolve in India to get an idea of that.
Got it. Very interesting. Sir, as we compete with players like Nokia, Cisco, and Ericsson, right? So I wanted to ask, how much cost advantage do we actually have against these players? And how much of the cost advantage is taken away when these players have an Indian R&D and manufacturing setup? Because I believe all of these three players have R&D and manufacturing setup in India. So do we really have a cost advantage then?
Rishabh, I really suggest in the interest of time, we should give an opportunity to other people for asking the questions. I'm sure your questions will be covered during the call. I'm sure people will have similar questions. If not, I'll come back and answer before the end of the call.
Got it. Thank you so much, sir.
Thanks, Rishabh.
Thank you. Next question is from the line of Aasish Sriram Thakur from JM Mutual Fund. Please go ahead.
Yeah. Thanks for the opportunity. Sir, could you kind of elaborate on the data center side? Do we have a role? Obviously, you in your opening commentary did mention the play. But are these L1, L2 switches probably either going to be some differentiation on our part? And also, is there potentially by what timelines are you targeting some of these players?
Yeah. So I think there are two parts to the question. What is our role in data centers? So our communication equipment is applicable for the data center connectivity, right? We don't sell equipment inside the data center. It is mainly the high-bandwidth connectivity that is required between data centers as they exchange traffic, sometimes to build backups and all those kind of things. So the data center interconnect is the market that we play in. I also talked about you also raised the question about our switches, layer-to-layer switches. So the switches that we have is mainly for building campus networks and enterprise networks. And the application is not inside data centers. We know the top-of-rack switches and all those kind of things. That's not where we play in. Our switches are used mainly for building campus networks.
Okay. Excellent. Sir, Ericsson, they recently said that the telcos in the North American region have depleted all the excess inventory. And since we are now also deploying our investments to tap those markets, and obviously, we have won one of those deals, how do you see the landscape evolving, especially in the US now?
Yeah. I didn't get the point on excess inventory in the U.S. I didn't quite understand that. But in general, I think there's a lot of investment that is happening in the U.S., again, driven by the same thing, driven by the cloud, driven by AI, AI data centers, and so on. I mean, I think the data is for everyone to see, right, how the AI component suppliers, how their business is going. So all of that is going into building AI cloud centers and more and more applications running over there. So the phenomenon that I talked about of interconnectivity, that is also there very strong in the U.S., right?
Apart from that, we are also seeing a huge investment happening in the government, what they call the BEAD program, for rural connectivity across all of the U.S., because the U.S. is a very large country and population well spread out. So there's a lot of investment going on in those markets for providing broadband connectivity. So all of these provide us opportunities. The initial opportunities that we are, apart from these being some of the interesting opportunities that we are targeting, is modernizing of very old networks in the U.S. As you know, U.S. is a very advanced economy with telecom networks which have been built over a long period of time. So a lot of it is legacy networks which are getting transformed as we speak. And so we have very interesting technologies in the area which we are engaging with several customers for that.
Yeah. Fair enough. So lastly, the entire BSNL execution that will happen in FY25, that's first. And second, the EBITDA margins that we reported this quarter are around 15%. Is this a sustainable number for the entire year?
I didn't get your question fully, but the first part I got, which is that, yeah, the current PO that we have, the current opportunity that we expect to complete in FY25.
You put an EBITDA margin for 15% this quarter that we did. That's a sustainable number to assume going forward?
See, we don't give any guidance on our margins and financials. But I think you can look at the trend and make your assumptions about that. But as such, we don't give a guidance on these numbers.
Yeah. Thank you. Thanks a lot for the test.
Thank you. Next question is from the line of Vimal Jamnadas Gohil from Alchemy Capital Management Private Limited. Please go ahead.
Sir, thank you for the opportunity. I have two questions. One is on our visibility post FY25 in terms of our GPON and DWDM, which is our cash cow, so to say, for our customers ex-BSNL, which is Indian private and international customers. So what's the visibility looking like? Since we have sort of increased our manufacturing capacity, how do we sort of make sure that as and when the BSNL contract ramps down, we utilize our manufacturing capability to the most efficient possible extent? So that's question number one. The second question is for Mr. Dhingra. Sir, on the wireless margins, how do you see the wireless margins panning out over a period of time? I do understand that you don't give out forward guidance.
But as and when the BSNL contract comes into our numbers, do you expect the wireless piece to sort of come in line with company average post FY25? Thank you so much.
Yeah. So I'll address the first two questions about GPON and WDM outside of BSNL. Yes. I mean, most of our GPON and WDM business right now is outside of BSNL, most of the private operators from the utilities and from our international customers. And as I mentioned, there's a huge demand for broadband connectivity and for upgrading of backbone networks. And these are the places where our equipment is very applicable and very relevant. So as and when we win additional deals based on the increasing demand, I mean, that business looks healthy and will continue to grow. I mean, that's what our expectation is.
As far as manufacturing capacity is concerned, so as we have mentioned earlier, that we have a very asset-light manufacturing model, right, where in the back end, we work with large EMS vendors off-scale, right, for building our what we call as the PCB assemblies. There's a hardware block that goes into assembled into our systems. So as we scale up our manufacturing capacity in the back end, we just sign up with multiple EMS partners, and they have a lot of capacity. For us, all we have to scale up is our system assembly and test capacity in our factory in Bangalore. So as we scale up our manufacturing capacity, the largest scale-up happens in the back end, which is EMSs. So it's a low effort or low-intensity investment for us to really scale up and scale down our manufacturing because of the model that we follow.
But the reason we have also scaled it up is not only for the BSNL business, but over time, over long term, we are bullish about how our business is going to grow, both in wireless and wireline. So a lot of the preparation and the investment that will happen is to address opportunities in the future as well. Right? So wireless market. Yeah. See, as I mentioned earlier as well, this is the first wireless project that we're executing. And as we go along, as we add more wireless orders going forward, we would expect the margins to improve. There is no particular reason to suggest that the wireless margins would be very different from wireline margins in general.
As we ramp up our businesses and as we ramp up our, let's say, foreign or international orders, you'll see the margins improve and potentially be at the same level for both wireless and wireline products.
Sir, how does the visibility look for international orders for our wireless products?
So we have.
Post FY25.
Yeah, yeah, yeah. So as I said, we are engaged very deeply with many opportunities in international markets. And these deals take some time to convert because they go through extensive trials and commercial cycles and all those kind of things. So we are at the initial phase of international engagement with our wireless products. And they will close over a period of time. But we do see a lot of opportunities given the huge amount of 4G build-out that is happening in a lot of the emerging markets. And also the 4G replacement that will happen of very old 4G gear that's going to happen in those markets as well, as well as 5G expansion in the developed market. So all in all, it's a good opportunity space for us, and it's for us to execute.
All right. Sir, thank you so much. I'll go back to the queue.
Thank you. Next question is from the line of Khush Gosrani from InCred Asset Management. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Sir, I wanted to understand how much we would have bid for the BharatNet phase III. What would be our opportunity sense over here?
Could you please repeat the question? I didn't understand.
Sir, for BharatNet phase III, stage 3, what kind of order size opportunity is there for us?
Okay. See, the BharatNet phase III for us, as far as the equipment is concerned, consists of two parts. One is the GPON equipment, ONTs and OLTs. The other part, a larger part, are the IP/MPLS routers, which are going to be used in BharatNet. So for both of them, they are very relevant products. We are going to be actively working with customers and our system integration partners to bid into this project. Initially, as you know, the BharatNet, the budget is quite a large one, right? I mean, INR 130,000 crore, and the equipment budget is roughly 9%-10% of that. In the first phase, we see around anywhere between INR 4,000-INR 5,000 crore of equipment, which is getting addressed in the initial tenders. That is the overall landscape, and we are going to—we hope to win a significant part of that.
Sure. And this would be for how many GPs? 167,000?
I am not sure about the number of GPs that are getting covered. I don't have the number up front.
Got it. And one last question, sir. What kind of debt numbers we would have to take more debt now going ahead for working capital purposes? What kind of peak debt we would have?
See, again, difficult to give guidance on future numbers. But as a trend, this increase in borrowings is essentially for working capital purposes, which is predominantly led by the wireless project that is getting executed. Now, as mentioned earlier, this project we are expecting to complete this year. And as shipments progress, working capital intensity would increase a little bit from here, and then thereafter keep coming down. So I think within this year, you would see that with project execution, that the working capital would spike up and then gradually come down.
Sure. Got it, sir. Got it. I'll take that. Thank you.
Thank you. Next question is from the line of Kushal Kedia from Wallfort PMS . Please go ahead.
Yeah. Sir, thank you for taking my question. My first question is, what kind of an order book pipeline are we looking at? On the opportunity front that you mentioned that the BSNL 4G network, the BharatNet phase III coverage for railways expansion of utility networks, what is the kind of order book pipeline that we are looking for?
So it is, see, these are not orders that we have won as of now, right? I mean, we have talked about we have an order book of INR 7,000 crore, and these are some of the new opportunities, new large opportunities that we are targeting, right? So I'll give a flavor of what is the size of expansion of the BSNL 4G network of BharatNet phase III. I just talked about that right now. But similarly, I mean, the Indian Railways as well as broadband DTH and operators, they're all quite large opportunities which will enable our growth for the future and create our business pipeline as well as backlog for the future. But it is hard for me to quantify and say that this is going to be the number going forward quarter after quarter. I just wanted to give a flavor of what's coming.
Sure. Okay. So sir, one more thing. In the previous participant's question, you answered that BharatNet equipment budget is around INR 4,000 crore-INR 5,000 crore in phase I.
Yeah. This is actually called BharatNet phase III. But yes, I mean, the overall equipment budget is actually the sanctioned budget is much more than that. But initially, what we are seeing in this current phase, what is being tendered would be in the range of INR 4,000 crore, I would say, of the equipment.
Okay. Okay. Thank you. That's it from my side. Thank you.
Thank you, Kushal.
Thank you. Next question is from the line of Sachin Jain, an individual investor. Please go ahead.
Am I audible?
Yes, you are.
Yeah. Actually, see, my question is the POCs which we are doing for a lot of private telcos and utilities. The first is, are there international players that we are doing this POC? And where are we on these POCs? What would trigger this success of BSNL to get a confirmed order? And what is our right to win over there? Essentially, we are fighting with Nokias or Ericsson of the world. So can you give more qualitative color on these aspects?
Yeah. So I guess your question was specific to wireless to 4G, 5G, right? So the POCs which are ongoing are across deployment across a few sites, right? It could range anywhere from 5 to 10 sites to even more than that. And it goes through an extensive field trial, which also improves interoperability with the software, with the core, and also interoperability with other radio equipment which is deployed out there because a lot of tests, including handovers and all those kind of things, are done. So POCs for wireless equipment is of this kind of a nature. Now, the question is that how do we compete with Nokia and Ericsson and all those kind of people? So there are a few areas. There are more modern 4G equipment with support for many different bands which are deployed by operators.
And then we also have a lot of efficient technology which are built in. For example, our RAN equipment comes with architecture to come with integrated backhaul, integrated transport, right? So with technology like that, what it saves a lot of CapEx and OpEx costs for the operator because typically, RAN equipment is back-ended with a separate backhaul equipment, a router, or an equivalent equipment like that. But what we have done is we have integrated a lot of this technology into our RAN equipment, into our CPO. So as a result of which, it's a significant saving to the customer for building his backhaul network, both in terms of not only in terms of CapEx, but also in terms of OpEx in having to manage a different backhaul network, right?
Apart from that, I mean, our baseband unit , which is part of the RAN, is also what we call the ultra-converged broadband access equipment, right? Wherever you deploy our BBU, there is the equipment architecture such that you could also insert hardware modules from where you could launch your broadband services for homes and enterprises, right? This huge amount of technology integration that we have done in our RAN equipment and specifically the baseband unit , these are some of the big differentiators that we actually project and our customers also appreciate, which helps them in optimizing their network costs. These are some of the areas. Of course, there are many other smaller details that we have to perspective, right?
Sir, how big these opportunities would be? Some of these opportunities, each being to.
Yeah, yeah, yeah. So obviously, it is not going to be one shot as big as a large BSNL deployment of 100,000 sites, 100,000+ sites, right? If you look at the expansion, it's going to be even more. So these are definitely not going to be one-shot deals like that. Even if it is a greenfield deployment, a lot of the emerging economies are smaller countries, right? So each of them would be in several thousands of sites or tens and thousands of sites, but not in the scale of what you see in India. That would be there. But on the aggregate, there would be many opportunities like that. So that's how we see at least the international opportunities. And these are all the greenfield networks.
But whenever there's an existing 4G, 5G deployment and they are trying to upgrade and stuff like that, it is again going to be a portion of the network, a fraction of the network which they want to upgrade, either with a different band or replacing old 4G equipment and things like that, or replacing old 4G equipment with our kind of 4G, which is 4G upgradable to 5G, right? I mean, that's the refresh of 4G equipment that we can do, right? So all of this will be portions of the network and will not be as large as one large BSNL network of 100,000+ sites.
Opportunity for you in India—the relevant opportunity sites for you. Can you give some idea on that also?
Relevant opportunity for India or in the global?
In the railway coverage, the project.
In the railway coverage. From what I know, it's like around 15,000 sites which is covering the entire railway network. That's our initial estimate of what's coming and where they're going to be tendered.
So opportunity for you, if you can highlight?
Yeah. So I think the overall scale is 15,000, and it depends on how it is tendered and whether it goes to a single party or it is divided and all those kind of things. We don't know all those details yet. But that is kind of the scope of the railway opportunity.
Do you have to provide an entire coverage system?
Sorry. I didn't understand the question, but.
So on Indian Railways coverage, what part of opportunity you are addressing is only connectivity part, or you are providing the entire solution?
Only the connectivity. Only the wireless.
Only connectivity. Yeah. Understood. Sir, my last question is, post-2020.
I can give opportunities to the others also, and you can maybe get it.
Perfect. Perfect.
Yeah. Thanks. Thanks, sir.
Thank you. Next question is from the line of Praveen from Ratnabali. Please go ahead.
Thank you, sir, for providing me the opportunity. I have a couple of questions. But so far, you have received the highest order in terms of BSNL 4G. So now, is it fair to assume that in the next few years, the large two orders that you are expecting are BSNL 4G to 5G and BharatNet is number one? Related to that, are we going to see the similar kind of execution cycle that we have seen for BSNL 4G in terms of in case of this 5G as well as BharatNet just 12- 15 months?
So these projects have been roughly, you're right. It's going to be not 12 months. It is going to be more than that based on the size of the networks that they're going to come up with because there are going to be tenders and also when the tender is going to happen. But once it is decided and once the execution happens, yes, I mean, each of these opportunities is going to be between 18-24 months, I would say, given the scale of things that are going to happen.
Sir, what we have understood, in case of 5G, the number of base stations, am I correct if you tell me that the 5G stations are more because the frequency is high, wavelength is low compared to 4G? The base stations will be smaller and the number will be much bigger. Can we assume that as the numbers are bigger in the 5G, the order potential will be bigger also?
So if you look at 5G deployment, I think initial 5G deployments have been focused more towards the metros, right, towards the high-usage and high-paying customers. So initially, if you look at the 5G deployment that will happen on the private operators, it is smaller than the overall 4G network. But that's for a reason. That's because they wanted to focus on the customer who would be using it. As 5G becomes more popular and becomes widespread, the network would definitely become as big as the 4G network. And also, what will happen is that as more advanced technologies, advanced radios of massive MIMO and all those kind of things come in and the performance goes up, I think the cost of those radios will also be higher as the advanced technologies are coming up.
So that's the way to really look at it, that over time, the initial 5G deployments are small, but they're going to go and cover a lot of the geography as we go forward as the business matures. And also, a lot of the high-performance radios are going to come in, which is also going to drive a lot of CapEx purchases for that equipment.
Okay. Sir, in July of this year, we have come across even news that Chinese equipment makers like Huawei or ZTE, they're planning to make some JVs with Indian companies. So do you see more competition is coming? Because when there will be a JV with Indian companies, so they can be considered as an Indian entity and they can bid also in Indian projects?
No, I think all the policies about JVs with Chinese companies, I think that is not yet clear how that's going to happen. But as far as Indian products are concerned, I think there's a very clear definition of what Indian indigenous products are. And that is not only designed and manufactured in India, but also the IPR has to exist in India, has to be owned in India, registered in India. And there are other rules in terms of where the profits of the companies have to live, where the headquarters are going to be. So there are very well-defined type rules in terms of what defines the true Indian company making indigenous technologies. So we don't see joint ventures or anything like that diluting that kind of a thing, right?
I mean, joint ventures maybe, if at all, if it happens at all, then it might be a facilitative business in India. But as far as true blue Make in India is concerned, I don't think the current rules will enable that for technology which may be imported or done technology transfer from somewhere else.
Okay. So my last two questions, sir, if you can help us understand the potential of data center business and the margin that you have reported this quarter, which is around the EBITDA margin I'm talking about, around 15%, will this be a sustainable margin going ahead? Thank you, sir.
So data center, as I said, the growth of data centers enables our business. So even though we do not sell inside the data centers, the data center interconnectivity is what drives our business. So with the growth of data centers, with the growth of the traditional data centers as well as the AI cloud centers and so on, the interconnectivity gives us a huge opportunity for our communication equipment. And as far as EBITDA margins are concerned, I think as it's cleared, clarified earlier, we don't give a guidance of margins and profitability. And I think we have to really make our estimates from the trends that we see, right?
Thank you.
Thanks. Thanks, Praveen.
Thank you. Next question is from the line of Abhishek, an individual investor. Please go ahead. Abhishek, your line is unmuted. Please go ahead. As there is no response from the current questioner, we will move to the next question from the line of Pavadram Kaushal , who is a retail investor. Please go ahead.
Hello, sir. Can you hear me?
Yes, you are audible. Please go ahead.
Okay. Sir, may I know when would the international orders come to the scale of Indian orders in terms of, I mean, scale?
Yeah. So I think, as you mentioned, that our ambition is to become a global OEM in telecom. So a lot of our new investments in sales and marketing are happening in global markets. Earlier, they were in markets in Southeast Asia and Middle East and Africa, neighboring countries. Now, we are making a lot more sustained investments in advanced economies like the U.S. and Europe and all those kind of things. There is a lot of opportunities and also relevance for the kind of products and technology that we have. But these cycles are long. This takes a lot of patience, a lot of trials, a lot of investments, and that thing that proof of concept and all those kind of things that happen. So this will happen over time.
Over a period of time, of course, we want to see our international business to grow as large as our domestic business. But that's going to happen over a period of time. While that is happening, we do want to take our eyes off the Indian market opportunity, which is very exciting. I mean, a lot of investments are happening. A lot of growth is happening. This is our home market. We want to make sure that our full focus and we do not miss out any opportunities over here, while at the same time, we keep growing our international investments. So long story short is that India is going to remain as a focus. As we grow our international business over time, our ambition is to make it as big as the domestic market. But it's going to happen over a period of time.
Sure, sir. And also, can I know what is our company doing in order to secure the international orders when the cycle arrives? And what can we do more or what has been doing?
Yeah. Sure. Yeah. Yeah. So what we are doing is we are increasing our presence. We are increasing our sales offices, support offices, warehousing, building our teams over there, engaging with customers, setting up labs in many different geographies, engaging with customers, setting up trials, and all those kind of things. So those are the activities that are happening, actively participating in RFPs and all those kind of things. So that is what is happening. And that is an integral part of engaging with international customers and going forward. Okay?
I think it's probably time. I'm ready to make some closing comments.
Yeah. Thanks, everyone. I'll hand it over to Anand for any questions.
Thanks, Arnob. Thank you, guys, for asking a lot of good questions. I just want to close that while we're happy about this quarter, we are also heads down, focused on execution and delivering the rest of the orders and also to see how we can grow the business more. The team is very focused on making it happen. Again, I want to thank you for your time and questions.
Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.