Telecom Cables: Back In Gear

Dealing with a huge crisis for the past few years the telecom cable industry has shown some signs of revival.

The market was going from bad to worse with an intensive price war among the cable manufacturers and losses y-o-y.

However FY12 has brought a huge smile to the manufacturers as industry shows positive growth with overall market clocking revenue of `1,422 crore in FY12 from `1,299 crore in FY11 showing a promising growth of 9%.

Sterlite, Birla Ericsson, Finolex Cables, Vindhya Telelinks and Aksh Optifibre contributed a major chunk of the market share.

Sterlite remained a leader with total revenue for telecom cables at `804 crore in FY12 followed by Aksh Optifibre with `171 crore.

Market Watch

Telecom cables demand especially in copper cables is slipping drastically in India. The reason for the slowdown is the slow offtake, especially from the private players.

Due to the overall adverse conditions prevailing in the cable industry, many players are quitting the game having borne huge losses. Already 2 major players-Surana Telecom and Bhagyanagar Telecom-have exited.

The demand for Jelly Filled Telephone Cables (JFTC) has declined sharply. Also, the demand for JFTC has decreased due to the wireless technology revolution and is further anticipated to go down with the launch of 3G and BWA services. The impact is so bad on JFTC manufacturers that some of the manufacturing units have also closed down. However having said that, the players are letting no stone unturned for gaining positive growth.

According to Sterlite, the company continues to be a preferred supplier to all buyers of fiber optic cables such as BSNL, Reliance, Tata, Bharti, MTNL, Indian Railways as well as utilities in the power, oil & gas, roadways, defense, and other sectors.

Even though the company's performance is still low in the sector, it has shown better performance than its counterparts.

RPG cables showed a good performance in the last fiscal. According to the financial results, the company bagged another contract in the cable business worth `145 crore for supply of power and telecom cables.

Paramount Cables performed exceptionally well with revenues shooting upto `25 crore in FY12 from mere `3 crore in FY11 showing a huge growth potential. The company completed two major projects in JFTC segment for MTNL and BSNL of `8 crore and 17 crore, respectively.

Currently, the company is working on a `18 crore project of BSNL for TIJF and a `15 crore order of BSNL in optical fiber.

Ray of Good Hope

Cables, being used for transmission and distribution, are the veins of any infrastructure. The government's initiatives for infrastructure development to reduce the infrastructure deficit would bear a direct impact on the wire & cable industry and would also provide for higher demand of these products by the base industries such as power generation and distribution sectors, telecom, railways, industrial and construction sectors (civil and commercial), etc.

Numerous applications like broadband services, internet protocol virtual private network (IPVPN), wireless communications, and security technologies are in turn generating demand for the telecommunication cables.

With the recent launch of 3G and broadband wireless access (BWA) services, high speed and high bandwidth backhaul is needed, which would be met through optical fiber cables (OFC) networks that provide stable and upgradable backhaul system.

The growth of OFCs has been long foreseen. The government has proposed National Optic Fiber Network (NOFN), a 250,000 km long system, to be implemented over the next 5 years. The Central Department of Telecommunications (DoT) on July 22, 2011, approved `30,000 crore NOFN for broadband connectivity to 2,500 panchayats in India.

Thus, telecom cable manufacturers need to focus in this segment as the demand of OFC is likely to rise at a rapid pace in the future. Testament to this are the projects initiated by defense and navy departments.

The Indian navy also has a requirement for 96F OFC for 3 zones. This brings in another area for fiber optic cable providers to lay out cables. Another order for the defense network; also needs to be set up by BSNL. This tender was invited for the procurement, supply, trenching, laying, installation, testing, and maintenance of optical fiber cable and accessories for the construction of exclusive optical NLD backbone.

Fiber-to-the-home (FTTH) is finally emerging into the mainstream and is set to transform the telecom environment worldwide over the next decade. These projects like NOFN, defense projects, and projects on fiber-to-the-home networks would be major drivers of growth.

The telecom industry is facing challenges in delayed implementation of projects due to various environmental factors. Also the fluctuating dollar adds to the industry woes. Other challenges include ROW, reduced lifetime of cables due to mishandling, deployment times, complex tendering modalities, etc.

The industry should recover on its own because of the strong growth in the data requirement as well. The overall trend for the technologies is focused on data and converged services, and making the solutions more robust. This will lead to more demand in the coming years.