Hale and Happy

The happy days of the Indian telecommunication industry are not ending any
time soon; it is expected that by 2010-end over $50 bn would be spent in this
sector. It's not just telecom but closely related optical fiber market too is
going strong in India, increasing from 3.1 mn km in 2006-07 to over 5.5 mn km
this year, against the industry expectation of just 15% growth.

Major telcos from gas, power and railways have contributed to growth in
volumes of bare optical fiber, as they are largely using optical fiber-based
signaling infrastructure to earn more revenues by leasing their bandwidth to
other operators.

Similarly, growth beyond expectation also marks the voice telephony market.
According to industry experts, demand for telecom equipment, including telecom
cables, will be higher in India than anywhere else across the globe, as India is
gearing up for newer technologies and 3G rollouts. National Internet backbone,
e-governance, IPTV, FTTx, and continuous upgrades and replacements of current
infrastructure set-ups are likely to fuel this demand.

According to V&D 100 estimates, the telecom cable industry has grown by 50%
in FY 2007-08 as compared to the previous fiscal and stands at Rs 1,440 crore.
The demand has increased due to increase in adoption of fiber-oriented networks
by the cable TV section, service operators, and various initiatives and projects
on e-governance by the government. The increased usage of broadband in urban and
rural areas will give an impetus to the growth of optical fiber cables.

Source: cabletech-electronics.tradenote.net

On the other hand, experts believe that the market is anticipated to see
growing competition and intense price pressure in the copper cable segment, due
to the emergence of global players to tap the Indian market. Industry estimates
forecast that the copper cable market would remain more or less same with yearly
requirement of 440 mn conductor kilometers.

New Opportunities

Industry experts believe that the Indian market has characteristics of one
of the most advanced telecom markets, which represents two different flavors in
one basket. On one side, there are abundant opportunities in the already
developed industrial sector; and the other side constitutes of an unexplored
rural and semi-urban market, which is in a developing stage. These two flavors
provide exciting opportunities for industries to grow and diversify as per the
demand of the region. "With the tremendous impetus that the telecom industry is
providing to India's economy, and the resultant positive initiatives taken by
the government, both regulators and the industry, in the coming few years,
should see the digital divide with optical fiber becoming ubiquitous and
broadband becoming a utility. The coming years promise to be the beginning of an
always connected future," says Manish Agarwal, head of marketing, Sterlite.

"We have continued to focus on projects related to de-bottlenecking of
currently installed capacities, improvements in operational efficiencies and
productivity" added Agarwal. Sterlite has also decided to double their optical
fiber capacity to 12 mn fkm and triple the fiber optic capacity to 6 mn fkm

Aware of the several opportunities that broadband offers, the central
government has hiked the budget allocation for e-governance. Even the state
administrations are now focusing their resources and efforts toward extensive
implementation of services like online education, telemedicine networks, and
enhanced connectivity for knowledge centers in rural areas. Considering the
thunder that broadband is likely to witness due to its increased application in
transportation, industry, and online commerce, the regulators have recommended
steps for an open-sky policy for DTH, VSAT and up-linking using satellites.

According to industry estimates, the country, with varied clusters of market
segments such as railway, power, etc, could become one of the top five largest
optical cable markets.

The industry curve is expected to take shape in a positive manner with the
recent announcement of 3G policy. Experts believe that this would bring new
entrants to the markets, which will make the competition more intense and
competitive.

RS Tanwar, chief manager, marketing, telecom, Paramount Cables, says, "The
broadband growth would be the next big push for the telecom cable market in
India, and since wireline offers the best quality, the copper cable market can
improve significantly in the next three to four years."

Where Now?

Although the market has shown considerable development over the years, there
are various challenges and hurdles that need to be overcome to achieve the next
level of expansion. While market opportunities for the fiber optic industry are
going to be humongous in the coming years, the copper cable market is forecast
to remain sluggish.

According to SK Chopra, advisor, projects, Paramount Cables, "No doubt the
optic fiber cable scenario is making an upward move in the country, as everybody
is expending the capacity, the copper telecom cable market is not happening at
the same pace."

"There has been considerable fall in the demand from the conventional buyers
of cables like BSNL and other government sectors, which is making a huge impact
on the overall growth,' he adds.

Similar to that, Agarwal of Sterlite says, "The main challenge that the
Indian industry has been faced with over the past few years is the decrease in
demand from the traditional buyers of cables, mainly from the government
sectors, as they chose to either optimize the bandwidth capacity utilization of
their existing network or to experiment with wireless technologies to achieve
their subscriber targets in the shortest time."

Experts believe that the government needs to play an active role to take the
growth to the next level. It could formulate a target for making 'fiber-ready'
homes, similar to what NTT in Japan did or the US government initiatives (no
unbundling on fiber), which have helped carriers such as Verizon and SBC in
taking fiber to subscribers.

Betting Big

The country has over seven network operators that have installed more than a
quarter million of fiber kilometer in 2007-08. And taking into account the
current expansion plans of operators the demand of telecom cables is bound to
grow. The rural connectivity programs and 3G expansion plans of operators could
mark a further growth of over 25% in this domain.

However, issues such as poor price margin, lack of support in exporting
cables, delay in implementation of projects, and growing competition could
create a tough job for small and new players to grow. Many industry experts also
feel that with new capacities, some temporary and localized tightness is
expected to occur.

The industry is betting big on the broadband front. As more bandwidth hungry
applications and services will gain consumer interest, the industry would
require the platforms and data transmission capability. This would increase
dependency on fiber and would grant much more opportunity to everyone. However
there is also a need to reduce the manpower department, a proper control on
infrastructure, and brawny initiatives from the government to improve the price
margins to assure that the escalation should not be stopped.

Jatinder Singh

jatinders@cybermedia.co.in