KTS-EPABX: The Changing Scene

Market Size

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

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. 


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

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.

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

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, affi
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

“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

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


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.

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

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.

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.

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