KTS-EPABX: The Changing Scene

Market Size

While

no figures for the year 1999-2000 have been compiled yet,

industry players are hopeful of a growth higher than the

previous year. That the Indian KTS-EPABX market presents immense

opportunity is obvious not only from the past market figures but

also from the optimism of the players. In the period from 1995

to 1998, the market grew by an annual average of around 30

percent.

"The

Indian EPABX market is currently worth around Rs 300 crore. This

is expected to grow at the rate of 20-25 percent," asserts

Rajesh Tuli, director, Usha Informatics. Tuli''s observation

may not be off the mark for the market grew by 18.2 percent in

1998-99 over the previous year. He predicts the same pace of

growth for the KTS market, which had registered a 25 percent

growth during the previous year. In terms of numbers, Manish

Sablok, senior manager, Tata Telecom, estimates that the current

market size of EPABX is around seven lakh lines and of KTS

around 1.3 lakh lines. 

Players

While

Alcatel, BPL, Nortel, Siemens, Tata Telecom, and Usha

Informatics are the dominant players in the EPABX market, the

KTS segment is dominated by names like Nitshuko-Enkay and

Panasonic with players like BPL, LG, Nortel, Samsung, Siemens,

and Tata Telecom also sharing some portion of the pie.

Tata Telecom, with its

share of around 37 percent, leads the top-end segment of the

EPABX market. Other dominant players active in this segment are

Alcatel, BPL, Nortel Siemens, and Tadiran. Alcatel, Siemens,

Tadiran, and Tata Telecom again dominate the medium segment. The

low-end market is shared by several brands like Accord, Lucky

Gold Star, Matrix, and Syntel. Market

Classification

The

EPABX market in India can be classified into three broad

categories on the basis of the number of ports. The low-end

segment is made up of systems with below 50 ports, the

mid-segment consists of systems with 50 or more but less than

100 ports, and the high-end category has more than 100 ports. In

terms of value, the segment accounting for the largest share of

the EPABX market is the above 100-ports category.

There

is no doubt players like the market leader, Tata Telecom, are

concentrating more on this segment. "We have a market share

of around 36-37 percent in this segment," claims Sablok,

adding that the low-end market is low in the company''s

priority list. In terms of value, for the past two years, the

share of the high-end EPABX market has been around 45 percent.

While there is no such

classification in the KTS market, it is popular among corporate

users having a requirement of less than 100 lines. "KTS

caters to the high profile corporate customers who are looking

for facilities like caller line identification, e-mail, and ISDN

compatible features," says Tuli.

Growth Drivers

Apart

from the growth in businesses leading to a growth in voice and

data traffic, many other factors have sustained the growth in

the segment. For one, the basic telecom infrastructure has

undergone a sea change for good during the past one-year or so.

The market is directly influenced by the growth of Direct

Exchange Lines (DELs). Even though the growth in DELs has not

come up as projected, whatever growth has occurred, it has

helped the KTS-EPABX market. The DoT had planned to add 3.6

million lines in 1999-2000 to its capacity of 21.6 million in

the previous year. Besides, DoT also provided ISDN link to many

new cities and towns. The entry of private fixed service

providers like Bharti Telenet, Hughes Ispat, and Tata

Teleservices also led to an increase in the capacity. "Even

though the growth in the basic infrastructure has not been on

the projected lines, it certainly has given a boost to the

KTS-EPABX market," SB Banerjee, executive vice president,

Siemens Pvt Communication Network, points out, affirming

his optimism that the market holds immense growth potential.

Sablok agrees while emphasizing the role of basic infrastructure

development in encouraging growth in the telephone systems

market.

"The Indian industry,

especially IT and IT-enabled services, has a growth rate of more

than 30 percent. This fuels the growth of the EPABX market.

Growth in call centres, the ever expanding DoT network, new

telephone lines from the private basic service providers and

Direct Invert Dialling (DID) exchanges are likely to

sustain growth of the EPABX market," Tuli emphasizes. 

Many others are also

optimistic of a boom in sales once India emerges as a base for

global offshore call centres. Players like Tata Telecom which

now have 10-12 percent of their revenue from the call centres

are eyeing this sector as an important revenue area in the

coming years. Estimating a 40 percent rise in the number of call

centres in India, Sablok says that this year Tata Telecom is

expecting a revenue of Rs 20-24 crore from call centres.

"Basically, we will be doubling our revenues from call

centres," he adds. Emerging

Markets

Apart

from call centres, Tuli has identified a number of other growth

areas. "DID EPABX is another market that would require a

lot of attention due to the need of data switching (ADSL)

interfaces, to enable the user to connect to high-speed modems

for Internet access," he observes. ISPs will also have a

fare share for themselves in this new market. They will require

EPABX systems capable of enhanced data switching and ATM-LAN

interfaces. At the lower end, Tuli says, the EPABX segment is

expected to see greater penetration in small- and medium-sized

towns where they were earlier not known. There are customers in

these places who are looking for basic feature like

call-receive, ''0'' dialling, and call transfer. As for KTS,

Tuli asserts that people who have already used EPABX are now

gradually moving towards KTS. "Customers who are looking

for added convenience and style will opt for KTS," he

adds. 

Prices

In

the period from 1995 to 1998, the average price per port in the

EPABX and KTS markets witnessed a negative growth. The main

reason for the negative growth was the lowering of import duties

on EPABX, KTS, and wireless EPABX systems. However, as of today,

while the prices have more or less stabilized in the high-end

segment of EPABX, an incessant price war goes on in the low-end

market. "Even though the prices in the high-end segment

keeps falling, the fall is not as great as in the price

sensitive lower segment," says Sablok. He adds that price

war is an important feature of the low-end market. He says that

at the high end, the average price is around Rs 4,500 per port

while in the lower category, the average price is around Rs

2,000 per line depending on features.

Sablok

points out that till 400 ports, price is an issue in the EPABX

market. "Beyond that price sensitivity decreases as factors

like technology and requirements become more significant

influence on buyers," he points out.

Banerjee observes that

given the huge market potential price war is something, which

one cannot avoid. He however adds that players like Siemens,

which have worked hard on need-based positioning of their

products for niche segments face less problems. "Once you

place your product differently, you lower the price

competition," he adds.

According to available

figures, the prices of EPABX and KTS systems are likely to

experience negative CAGR of 3.9 percent till 2005. Prices are

bound to come down as the government is expected to further

lower import duties in the next two years in order to meet WTO

guidelines for zero import duties in 2003. However, the high-end

products in these segments are expected to experience an upward

price trend over the same period. This is because the systems

are likely to be supplied with more features and high-end

capabilities such as ISDN connectivity. Such systems are

generally integrated with other applications such as voice mail,

CTI, calls centres, Interactive Voice Response (IVR), and

network support features. These add-on features and capabilities

are expected to arrest the decline in average price per port. Emerging

Trends

With

the expansion of ISDN network in the country, digital EPABX and

KTS systems are finding more buyers as such systems allow

simultaneous transfer of not only voice traffic but also data,

text, and image on a single line.

Even though applications

such as voice mail, caller line identification, CTI, call

centres and IVR applications have become a norm in the developed

countries, they are yet to find significant acceptance among the

Indian buyers. "70-80 percent of the EPABX systems in India

are used as purely voice switches. Even though, the customer is

cognizant of futuristic themes like Voice over IP (VoIP), ATM,

etc., he does not actually invest in such advanced

technologies," says Tuli, observing that the Indian

customer is aware of the fact that technology is growing at a

fast pace. As such, planning for features that would be required

five years hence would not be a wise investment, as technology

tomorrow might offer solutions beyond the imagination today.

"This does not mean that Indian customer is not buying

high-end EPABX systems available in the country. Wherever there

is a need, he is buying it," he adds.

Banerjee and Sablok also

point out that awareness about the potential of such systems for

applications other than voice transfer is increasing. "A

need-based awareness is there and technological inputs are

driving this awareness," Banerjee says, adding that

convergence is one aspect of this. He is optimistic that in the

coming years convergence would a major growth driver. Sablok

agrees. "A lot more customers are now talking about

convergence these days," he adds. He, however, points out

that majority of the customers are still not using the full

potential of the switches. KTS and EPABX are just meant for

basic telephony purposes for them.

Among other things, the

market is also showing preference for hybrid systems–products

that blend the features of both. "A large number of

customers looking for KTS solutions often end up buying hybrid

solutions," says Tuli. He points out that there is a large

market of customers who want hybrid systems because they offer

the cost-effectiveness of EPABX and the convenience of KTS to

some senior people in the organization.

With

customers looking for need-based solutions, customization, too,

is fast becoming the norm of the day. "Today it''s

important to understand the motivations behind customers'' need

for a phone system. A product can only be successful if the

success probabilities are assessed at every step with the sole

purpose of reducing the chances of failure. Hence, customization

becomes a very vital factor influencing buyers''

decision," claims Tuli.

Yesterday, it was just the

basic telephony, which was enough to excite the user of such a

system. Now it''s time for more–data, text, image, and video.

Whatever turn the Indian telephone systems market takes in the

coming years, one thing is clear–they must keep pace with the

fast changing nature and needs of business communication.