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If we look at the number of orders booked by leading VSAT vendors, the year 2002–03 would appear to be a good one for the industry. After all, there was around 17 percent growth in terms of hardware volumes. However, if we look at the total value of orders during the year, there was a decline of around 7 percent as against a 17 percent growth in 2001–02. Voice&Data estimates that the VSAT equipment market shrunk to Rs 234 crore in 2002–03 from Rs 252.4 crore in 2001–02. This mismatch between growth in volumes and decline in revenues was largely due to a decline in the cost of hardware as well as a major drop in the order for DAMA VSATs.

Vendor Performance
So was it a good year or a bad year for the VSAT industry? From the perspective of vendors like Gilat and Viasat, it was indeed a bad year. While there was a decline of 16 percent Gilat’s revenues, Viasat had to bear with a decline of 40 percent. Only one vendor, Hughes Network System (HNS), registered any significant growth. HNS, at Rs 106 crore, cornered 45 percent of all equipment sales in terms of value and more than 50 percent in terms of volume. While Nortel Dasa Satcom also did well, its presence remained insignificant.

The Market
The growing ubiquity of terrestrial connectivity options like leased line and VPNs influenced the growth of VSATs in areas like manufacturing, where VSATs, in many cases, was relegated to the role of a backup medium. Applications like ERP, which even VSAT vendors accept are not the kind of applications suited for VSATs, began shifting to terrestrial lines. On the other hand, the market also suffered because of the non-realization of orders expected from the Airport Authority of India and the defense sector.

However, VSATs found a growing market in the banking and lottery, and distance education segments. The biggest order of the year 2002–03 was from the lottery operator Playwin, which placed an order for 5,000 VSATs with HNS. Even though distance education did not bring in volumes, it surely emerged as a promising sector for the use of VSAT technology. And VSATs remained the preferred mode of connecting bank ATMs.

Outlook
The lottery business is likely to be the biggest driver of the VSAT market in India. Apart from Playwin, which is likely to deploy around 10,000 VSATs in the year 2003–04 for expanding its network, a dozen other companies are likely to get into the lottery business or expand their currently small operations. These include companies like Apollo Tyres, Videocon, Modi Entertainment, Essar, Ispat Group, Sahara, SPIC, and Martin Lottery.

However, not all lottery business connectivity needs are likely to be fulfilled by VSATs. VSATs are likely to face a good deal of competition from GPRS equipment in the lottery space. Already, Playwin is running 750 of its total 4,452 terminals on GPRS. In case all these or even a few of these lottery projects go live, VSAT vendors can expect a windfall.

The government is likely to continue as an important segment for VSAT vendors in 2003–04. Vendors can expect business worth around Rs 200 crore from different government organizations and PSUs. These include the department of education (for ERNET project), army, Airport Authority of India, BPCL and Damodar Valley Corporation. Distance education will also grow, though on a relatively small scale.

Ravi Shekhar Pandey