T&M: Freed of US Sanctions...

For the industry, one of the most significant developments during the fiscal
2001-02 was the easing of US sanctions imposed after India conducted nuclear
tests in 1998. The sanctions that were imposed had severely affected the
fortunes of the US majors in India like Agilent and Tektronix. Take for example
Tektronix which is very strong in the oscilloscopes business. It was not able to
sell oscilloscopes for which performance exceeded 1G sample per second. Big-time
procurers included Aeronautical Development Establishment, the Electronics and
Radar Development Establishment, Bharat Electronics, among other entities. While
the US companies had limitations during the sanction period, the European and
Japanese companies, for instance, LeCroy and Iwatsu Electric had an opportunity
to cash upon. But the Indian entities were not comfortable in procuring products
from them as they had apprehensions about the support services. With the
sanctions being lifted, the US companies are happy and expect the market to boom
in 2002-03. Take for example Tektronix, which has introduced over 10 new
products post September 2001. Agilent too introduced several new products. It
launched two high-performance spectrum analyzers for cellular and
aerospace/defense industries. The Agilent E4448A analyzer enables users to
design and test integrated systems and perform depot-level testing at
frequencies up to 50 GHz while the Agilent E4446A is a 44-GHz spectrum analyzer
available with an intuitive interface and one-button measurement capability.
These are just a few examples to illustrate. Several others have also launched
newer products.

Market Mix

Service Providers  70% Defense 20% Manufacturing IT and education 10% Growth Opportunity: OFC, DWDM, and VoIP

Did it mean that the T&M industry saw an unprecedented growth? For lack
of solid data, it is difficult to speak for the entire measurement industry.
Nonetheless, it must be said that almost all companies have grown in the area of
the communications T&M and have been very aggressive. The average growth in
the business here has been close to 10-12 percent. And the orders are going up
of late. For our analysis, the communications T&M has been restrained to
spectrum analyzers, network analyzers, protocol analyzers, optical time domain
reflectometers (OTDR), optical spectrum analyzers (OSA) and plesiochronous
digital hierarchy and synchronous digital hierarchy (PDH/SDH) analyzers and
handheld testers. The biggest procurers have been BSNL and MTNL. Some of the
major tenders that got finalized during the year included the MTNL tender for
procurement of 24 OTDR Type B, 9 SDH analyzers STM 1/4, and SDH analyzers
STM1/4/16. Similarly, the BSNL tenders finalized included 175 mini OTDRs, 20 WDM
analyzers, 38 OTDRs with full features, among several things. These orders alone
are estimated to be Rs 70 crore. Considering the entire space, private sector,
BSNL, MTNL, and defense communications, the total T&M communications
industry during the year is estimated to be Rs 205 crore. The point to be
mentioned here is that most of the companies supply total solutions which
include software, oscilloscopes, and several other things. But we have taken
into account only the products we have defined as communications T&M. The
figures here do not speak of the total measurement revenue in the telecom
vertical alone, but include manufacturers, education and other sales for these
equipment. This does not include the enterprise network test equipment.

Agilent on Top

Agilent, Acterna, and Tektronix have been the leading players in the industry
and the three today account for 70 percent of the communications T&M
business in the country. Agilent is the leader in the market. Our estimate is
that Agilent has done a business close to Rs 85 crore on the communications
front only, including services and software. At a similar measure, Acterna is
estimated to have done a business of Rs 40 crore and Tektronix Rs 18 crore.
Agilent Technologies, spin off of Hewlett-Packard in November 1999, has
solutions that suit all telecom providers right from design, network
optimization, technology migration, and implementation. The company bagged one
of the largest orders for OTDR from MTNL and BSNL. It’s the clear leader in
the OTDR segment. Its revenue from this segment alone was close to Rs 10 crore.
The player close to it in OTDRs has been Acterna. Acterna too has some major
wins from BSNL/MTNL. The largest order for it has been the supply of 20 WDM
analyzers from BSNL. It also bagged orders for supply of 38 units of OTDR and
nine units of SDH analyzers. Tektronix, on the other hand, is very strong in the
private sector and the defense communications segment. It has bagged significant
orders from AirTel, Reliance, C-DOT, Trillium, and MRO-Tek, among others. Its
star product has been K1297, a protocol analyzer.

There are a couple of players targeted at the BSNL/MTNL market. These include
ICT, Fastech, Anirtsu, Seven Hills, Aishwarya Telecom, and Trinity Electronics.
ICT Electronics/Trend is another big name in the market. ICT, which has a
product range addressing PDH, SDH, and SONET technologies, has bagged
significant orders from MTNL for SDH analyzers, close to supply 20 odd units.
And Trend has been very strong on the access side with its product range that
encompasses test solutions for ATM, ISDN, and DSL. It may be recalled that Trend
Communications had acquired ICT, a Barcelona-based outfit that specializes in
development and production of portable transmission equipment, in September
2000. The combined entity’s revenue in the country is estimated to be Rs 13
crore. Another company to watch on the access side is Fastech, which distributes
Sunrise Telecom’s solutions. It is estimated to have done a business close to
Rs 8 crore in the fiscal 2001-02. On the RF side, Anirtsu is an important
company. Nonetheless, it has sound products in optical, digital, and mobile end
too. There are others like Advantest and Rohde & Schwarz who have succeeded.

Almost all the major T&M vendors are present in the country directly or
indirectly. Agilent, Acterna, National Instruments, Tektronix, Rohde &
Schwarz, Tekelec and Wandel Global Services, and some of the other majors like
Sunrise, Nettest, and Fluke, are present through distributors. Some of the big
time distributors include AIMIL, Aplab, Fastech, Forbes Gokak, Meera Agencies,
Scientific Mes-Tek, and VXL. In the BSNL tenders, ITI too has products that are
supplied on the SDH/PDH side.

While
close to 70 percent of the total test and measurement revenues has come from the
service provider segment, defense accounted for the next big contribution, with
close to 20 percent share. The rest comes from manufacturing, IT, and education.
The T&M market in India is also seeing a change on two counts. Today,
T&M companies are not looking at just tender business. With the new
operators coming in and the quality-of-service becoming an issue, even the
government operators now have begun to look at T&M as rational investment
and have rationalized their procurement options. Be it the government or the
private sector players, it will still take a couple of years before T&M will
be seen as a tool for justifying the return on investment. Plus, it is also
emerging as a test and management industry. With several technology companies in
the country doing R&D in the protocol area and product development in the
optical and wireless arena, the verification and validation process today
involves management remotely. And value-added services to telcos and telecom
companies will be the differentiator. The T&M companies have realized the
importance of the two and are actively educating the customers on the importance
of T&M from the business perspective. However, it will take some more time
before the decision trickles down the customer’s decision taking process.

Market Moves

Most of the vendors anticipate a telecom revolution to sweep the country
over the next couple of years. And they believe that the incumbent as well as
newcomers like Bharti, Tata, Reliance, Hutchison, Hughes and Escotel, and
carriers like GAIL and Power Grid are serious and long-term players in the
infrastructure leasing and bandwidth provisioning business. Today, nobody can
dream to unveil services without test and measurement instruments. Another
important thing that most of the vendors anticipate is that these service
providers will focus on their core business and leave the measurement operations
to the T&M companies. This will include not only supply of the technology
components and tools to design, build, manage and maintain next-generation
communications devices, but networks and services as well.

Another
trend in the market is the presence of niche players in the communications
sector. Today, we have Agilent, Acterna, Nettest, and Tekronix, which have
solutions suiting to the communications sector’s needs and which are focused
in this sector. Although specialized test sets for GPRS and IS-95 CDMA are still
to take off, these T&M companies are geared up to address this segment here.
Most of them have the spectrum analyzers, network analyzers, protocol analyzers,
OTDR, OSA and PDH/SDH analyzers. And the industry is hopeful because of the
growth of private service providers in cellular, basic telephony, limited
mobility, satellite communications and Internet connectivity. Further, NLD and
ILD services have also been opened. The fiber networks of Bharti, Reliance,
Gail, Power Grid, and the Indian Railways will help the growth of the OTDR and
OSA equipment market.

In India, most of the wireless technology is still in the 2G stage, but the
potentialities of 2.5G are being realized. Though till now only BPL Mobile has
launched its GPRS mobile service in Mumbai, others like Bharti Cellular and
Hutchison are not far away. Further, the wireless network on the CDMA platform
is also expected to gain momentum. While the service providers on the wireless
front will be deploying the products, companies that are working in the
communication software, especially in the protocol stack development, will also
be big-time buyers. This is mainly because India is emerging as the base for
verification and validation. A lot of work in the next-generation wireless space
has been undertaken by companies like Sasken, Wipro, Axes, Ubnetics, and Future
Software.

The growth of the communications sector has made players concentrate on
segments based on market opportunities and their own inherent strengths. The
industry today has players looking at the optic fiber T&M equipment
suppliers and those operating in the wireless domain. Those like Acterna and
Anritsu have traditionally been associated with the optic fiber T&M and are
focusing on their inherent strengths to leverage upon. The growth opportunities
in the optic fiber network market have seen Agilent and Tektronix chart new
courses to consolidate their existing markets. Similarly, Rohde & Schwarz,
strong in the wireless T&M market is consolidating its base too.

DWDM is another hot area, especially with the Internet and Internet-related
services growing at a rapid pace. And VoIP is also on the anvil. So there is
likely to be a significant bandwidth requirement and DWDM will be the technology
that will be seen as an answer to this problem. And there will be an increased
demand for the OSAs.

Another trend that has come to the forefront is that in some product segments
like spectrum analyzers and OTDRs, the orders are getting settled on price. The
post-sales service becomes a very important requirement. Today, the pressure on
the T&M suppliers is on not just providing tools for diagnosing the
problems, but on preemptive network support. Earlier, the users used to be
concerned with the performance and features like user interface, but today the
demand is not only for performance but also for accuracy, reliability, and most
importantly user-friendliness.

QoS is emerging as an important issue. Earlier, the name of the game for
service providers was subscriber acquisition. So the earlier definition of the
T&M equipment, of being just maintenance tools, is being changed. T&M
today is being seen as one of the key benchmarks for identifying leadership in
service quality. At the moment, the state-owned BSNL, owing to its massive
communications network, continues to be the biggest customer for T&M
equipment. But other operators too will be going for them. For example, with NLD
and ILD opening up, the role of carriers will become important. And the
operators, who plan to carry the traffic on any of these carriers, will go for
the best one in the game. And this is where the T&M equipment will be the
differentiator. The recent move of BSNL to decentralize its equipment
procurement to individual telecom circles is also expected to favor the T&M
equipment suppliers’ with wider infrastructure. And this step is seen as a
fact that BSNL is also bracing up on not only on quality but the instrument that
protects its investment.

Ch. Srinivas Rao