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With the proliferation of broadband in India, the telecom cables industry is redefining itself with an increased demand from operators and service providers for the deployment of broadband services in India.

According to VOICE&DATA estimates, the industry has grown by 50% in FY 2007-08 as compared to the previous fiscal. The demand has increased due to increase in the adoption of fiber-oriented networks by the cable TV section, service operators, and various initiatives and projects on e-governance by the government.

Sterlite retains the top spot in the telecom cables space, by recording revenues of Rs 400 crore in FY 2007-08 as compared to Rs 311 crore in the FY 2006-07.

Birla Ericsson Opticals emerged as the second major player with an overall growth of 234.4%.

The other key players included Vindhya Telelinks, Finolex Cables, Aksh Optifibre, and Paramount Cables.

Market Share
Sterlite had a market share of 27.8% and recorded growth of 28.6%.

In order to ensure technological enhancements of its existing product lines and with an objective of developing new products while taking care of the needs of the telecom industry, the company also set up a new R&D facility at Aurangabad in FY 2007-08.

Sterlite has announced its plans to expand fiber optic cables facilities to an annual manufacturing capacity of 6 mn km, from its present capacity of 2 mn km. The optical fiber expansion is on track and will be completed by June 2009 and the cables expansion would be staged by March 2009.

Furthermore, Sterlite received contracts from BSNL for manufacture and supply of high fiber count ribbon fiber optic cables. According to the estimates, the contract was valued at Rs 38 crore. The company will also manufacture and supply 20-2,000 pairs of copper telecom cables to BSNL targeted at providing basic telephony and broadband services.

The main sectors that contributed to the company's revenues are sale of OFCs and FRP. The company has also added high-count cable and micro cables in terms of the latest technological additions. Pune-based cable manufacturer, Finolex Cables also gained significantly with an estimated 11.1% market share in FY 2007-08. The company also has plans of establishing mega power plants at Ratnagiri, Maharashtra. The company emerges as #3 player in V&D rankings. On the other hand, Vindhaya Telelinks recorded an outstanding growth of 115.8%, and a market share of 8.5%.

In a move to expand the business, Paramount Cables acquired 25-acre industrial land from RIICO in Khushkhera Industrial Area, Rajasthan, for its third phase expansion project. The company already has manufacturing plants in Khushkhera, Rajasthan and Dharuhera, Haryana.

Market Curves
Globally, the industry has witnessed revitalization in demand for optical fiber and cables. While European markets are in the early stages of deployment of FTTP (fiber-to-the-home), these markets have emerged as the key contributor in the fiber optic cables market in the US.

Fibre-to-home and increased usage of broadband, both in cities and underdeveloped areas, are key growth drivers for optical fibers in India.

Interestingly, the incumbent operators such as BSNL and MTNL, which always had the lion's share as purchasers of telecom cable products, are going through a second phase of development in their operation cycles. With the market moving toward maturity, buyers are inclined toward careful analysis of product options in terms of product evaluations, compatibility with existing networks, and fulfillment of international standards.

While the government remains a significant purchaser in the fiber optic market, private telecom operators have increased their share to 36%.

Bharti Airtel announced to partner with the Gujarat government in the eGRAM Connectivity Infrastructure Project aiming to set up telecom infrastructure to connect 13,716 village panchayats and common service centres in the state. Airtel Telemedia Services had 2,178,175 customers as on December 31, 2007 of which 34.5% were subscribing to broadband/Internet services up from 1,871,387 customers as on March 31, 2007 of which 32% were subscribing to broadband services.

Sify, Tata, MTNL, and Idea Cellular have also been very keen on their expansion projects.

On a similar note, BSNL is planning to connect more than 25,000 villages with the aim to expand its rural broadband access offering using network access.

Considering the kind of expansion plans various operators have, the growth of telecom cables is bound to grow in the coming few years. The only thing that could create a slump for the shorter period is the delay in implementation of projects.

Interestingly, many industry experts also felt that with the occurrence of new capacity, there should be an avoidance of major fiber shortage; however, some temporary and localized tightness is expected to occur.

Focus 2008-09
The growth of broadband in India has failed to meet the expectations of the industry. It seems like the ambitious target of the government in terms of broadband incursion will take some more years. However, considering the potential and demand drivers in India, the growth could happen in a rapid phase, but for that to happen, consideration needs to be given to the infrastructure needs and cost effectiveness in a price-sensitive market like India.

The increased usage of broadband in urban and rural areas will act as a driving force for optical fiber cables. The market is expected to see growing competition and intense price pressure in the copper cable market, especially due to the emergence of global players to tap the Indian market.

One of the key reasons for the negative growth witnessed by the telecom cable industry in FY 2006-07 was the considerably decrease in purchases by the incumbents, BSNL and MTNL, in the copper telecom cable section. With significant tenders of more than 90 lakh km, the demand is expected to grow further by 15% in 2008-09.

The key concerns, which are posing challenges to the industry, are increase in the prices and hardening of supply of some of the key raw materials. The margins are also under stress due to competitive selling prices. The increase in raw materials could not be countered by an equal increase in selling prices as bulk of sales are done to BSNL/MTNL, under fixed price.

India has established itself as one of the largest markets after China, the US, and Japan. The country constitutes the characteristics of both highly sophisticated telecom markets as well as developing economies in rural and far-flung areas.

A considerable amount of global instability was witnessed in the metals industry for copper and aluminum in the last fiscal. This resulted in a situation where most manufacturers like Sterlite, who have substantial economies of scale, strategically hedged their copper requirements against their orders received which eventually helped these players protect themselves from the impingement of volatility in copper as a raw material for cabling.

Interestingly, many industry experts also felt that with the occurrence of new capacity, there should be an avoidance of major fiber shortage, however, some temporary and localized tightness is expected to occur.

With the focus consistently shifting toward broadband penetration in India after the mobile revolution, the country is expected to maintain the lead in the telecommunication sector. The increasing rate of broadband incursion and government investment on projects such as e-governance would certainly give a boost to the demand for the creation of high bandwidth communication infrastructure.

Jatinder Singh
jatinders@cybermedia.co.in