VSAT: Policy Glitches



The VSAT industry in India was unable to repeat last year’s performance of
26 percent and had to be satisfied with a modest growth of around 18 percent.
The total market size inclusive of VSAT equipment and services, was estimated at
Rs 372.64 crore up from Rs 316.8 crore in 1999-2000. The terminal and equipment
market was estimated at Rs 214.74 crore, in comparison to Rs 213.33 crore in
1999-2000. The terminal and equipment market had a negligible growth as the
growth in revenue terms was not even 1 percent.

About 4,928 VSATs were installed in 2000-01. This increased the overall tally
of VSATs installed in the country till 31st March 2001, to 17,545. As on 31st
March 2001, the country had a total installed base of 6,423 VSATs on the shared
hub front.

In terms of the number of VSATs installed, the industry registered a growth
of around 39 percent. The country added 4,238 TDMA terminals and 686 DAMA
terminals during the same period. TDMA dominated the scene with a market share
of 86 percent whereas DAMA accounted for only 14 percent of the total VSAT sales
in the country. The stagnant growth in the VSAT equipment market can be
attributed to a negative growth of around 17 percent on the DAMA front, in terms
of the number of VSATs, whereas the TDMA market grew by 30 percent.

VSAT Equipment Market

In terms of VSAT equipment provider, Hughes Network System was the No. 1
player leading the race with
Rs 82.54 crore. Viasat, which also had Scientific Atlanta under its fold, was
unable to make a breakthrough. It paved the way for Gilat which stood at No. 2
with a revenue of Rs 65 crore. Viasat’s performance was not up to the mark and
the company made a revenue of Rs 40.07 crore. Even Viasat service providers in
India–Bharti BT, Telstra V-Comm and HFCL Satcom were unable to make a mark and
performed badly. Nortel DASA and India Satcom too had a bad year. Radyne was a
new entrant in the Indian market through Comsat Max. The company made around Rs
2 crore in the last fiscal.

This slow growth can be attributed to a lack of transponder capacity in the
first half, which was partly compensated by the availability of transponder
space in the second half. The announcement of revenue sharing policy for the
VSAT service providers in the country was further compounded by the slow growth
of VSATs as the corporates were eagerly waiting for the new policy which would
have helped in bringing down the cost of VSAT by around 20-25 percent. Many
government orders were put on hold. Retail and e-commerce business could not
take off. Other reasons were VSAT for village telephony was not allowed due to
policy, corporates adopted a wait-and-watch policy and Internet via VSAT was
very slow because of unclear regulatory policies.

VSAT Services Market

On the shared hub front, HECL was leading the race with 2,378 VSATs (as on
31st March 2001) contributing around 37 percent of the total market. Next in the
race was Comsat Max with a cumulative installed base of 1,537 and having a
market share of around 24 percent. HCL Comnet was the third player with a market
share of 19 percent and a cumulative installed base of around 19 percent. It was
a bad year for companies like HFCL Satcom, Essel, Shyam, Bharti BT and Telstra
V-Comm.

Banking and finance still dominated the scene followed by manufacturing,
stocks and security and distance education. Major banks like ICICI, SBI, UTI and
RBI deployed VSAT in large numbers. Media was also a bulk buyer, as it helped
them in providing faster information to their viewers. The Aditya Birla Group of
companies went for massive connectivity by connecting all its companies together
under one fold.

New Policy

The much-awaited VSAT policy based on revenue sharing is out, but the
operators have not made their transition to the new policy as there are some
glitches in the policy which the service providers are objecting to. The policy
will help in reducing the Total Cost of Ownership (TCO) of VSAT and make it more
affordable. Along with the lifting-up of the 64 Kbps ban for 512 Kbps, it will
help the industry to grow at a faster rate in this fiscal. And it is expected
that the industry will grow at around 50 percent if the policy gets a go-ahead
by the first quarter of 2001. Allowing Ku-band along with extended C-band will
provide more opportunities for the industry. HECL has already set Ku-band hub
and is testing it. HCL Comnet has also gone for a Ku-band hub to be operational
in June. The company has already begun a price war in the country by offering
VSAT at Rs 99,000 and offering bandwidth at Rs 99 per day.

TOP
VSAT Equipment Providers
CompanyNo. of VSATsRevenue 
Rs Crore
TDMADAMAMCPC
1Hughes1,76082.541,609151 NA
2Gilat2,700652,498202NA
3Viasat281 20.07+
(20.0)
121160NA
4STM Wireless15315.53NA153NA
5India Satcom47.2NANA4
6Nortel Dasa102.510NANA
7Radyne201.9NA20NA
NA stands for Not Applicable(20.7) stands for sales from VSAT
hub

Source: V&D Estimate

With the cost of VSATs coming down further due to Ku-band, VSAT services will
be more affordable to small corporates and they can think of buying a couple of
VSATs to enhance their connectivity. This year, one can see a growth of around
30-35 percent in the VSAT market.

Top
VSAT Service Providers
Service ProvidersNo.
of VSATs installed*
Market Share (in percent)
HECL2,37837.02
Comsat Max1,53723.93
HCL Comnet1,21818.97
Bharti BT4406.86
Telstra V-Comm3214.99
RPG Satcom1402.18
Essel Shyam1402.18
ITI1281.99
HFCL Satcom1211.88
*Stands for VSATs installed (as on 3
March 2001) on the shared hub front

Source: V&D Estimate

This year, the retail segment will dominate the scene. The foundation of
distance education will be strengthened in this fiscal, as one will see many
institutes opting for it. Even hospitals and medical institutes will go for tele-medicine
applications, once the new policy is operational. VSAT service providers like
HECL, HCL Comnet and Comsat Max have started providing value-added services, and
would be more aggressive this year with their VPN and IDC products. They will
also provide Internet access via VSATs. Moreover, e-governance will also drive
VSAT demand in the country. It appears one will see a good growth, this year, if
the policy gets a go-ahead.

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