Print

Comment

Email

Digg

Del.icio.us

Reddit

Despite the increased broadband focus and surfacing of plenteous multimedia applications, the Indian modem industry has failed to produce any significant result during the last financial year. According to VOICE&DATA 100 estimates, the size of modem industry was pegged at Rs 356 crore at the end of FY 2008-09, as compared to Rs 390 crore in FY 2007-08, a significant decline of 8.7%. The industry is plagued by issues such as poor margins and lethargic R&D approach. Though there is a definite increase in demand, in terms of revenues, market does not seem to be very rosy.

Major players who are combating for the pie are Atrie Technology, Bharti Teletec, and D-Link. According to VOICE&DATA 100 estimates, Atrie Technology maintained its leadership position and recorded a 4.2% growth during FY 2008-09. The company sold around 2,92,500 units of modems during this period. The company has a large portfolio of clients which includes Canara Bank, MTNL, Syndicate Bank, Oriental Bank of Commerce, HFCL, Union Bank, Sify, etc.

Bharti Teletec held the second position with revenues of Rs 58 crore in FY 2008-09, a marginal 3.6% rise from FY 2007-08.

Most of the companies are now adopting the strategy of diversification and reducing their dependence on modem business. MRO-TEK, for instance is no longer into modems business any. Notably, the company was ranked third in the modems rankings for FY 2007-08.

D-Link India is focusing on Draft N technology and unified wireless solutions for mid to large deployments. D-Link India has its own R&D in India and this gives it the flexibility to offer customized solutions for service providers. It also claims to be the first company to introduce green networking and offers a complete line of green technology solutions.

With MRO-TEK out of business, D-Link automatically emerged as a third major player in the segment. The company recorded an estimated revenue of Rs 25 crore, showing a negative growth of 30% compared to FY 2007-08.

The other players in the fray include Dax Networks, Linkquest Telecom, Gemini Communication, Huawei, Sterlite Technologies, UTStarcom, etc.

At present, the industry is witnessing amplification of technologies such as leased line, dial-up, ADSL, ISDN, etc. Among the trends, the dial-up modem market continues to lose its long prevalent edge in the market. There has been a growing traction of the adoption of Ethernet and Wi-Fi modems in global market. In the current scenario, there is a huge demand for DSL modems from service providers who buy through tenders. This, however, results in vendors vying with each other to win the tender, leading to reduction of margins to such levels that it becomes extremely difficult to support the products.

The year gone by has seen a lot of discourse on the adoption of different wireless technologies in India. As the demand of mobility is reaching new heights, implementation of technologies such as WiMax and 3G are expected to become a new lifeline for the overall modem market. With WiMax, operators/carriers can save significant sum of cost with fewer base stations.

Support of industry players and frequent decisions over technology implementation would act as key growth drivers in FY 2009-10. Despite issues like price margins and increased competition, industry is betting big on government driven projects to fuel the overall broadband growth. This optimism is also driven by increase in demand for superior throughput and spectral efficiency, wider coverage, multi-application technology, faster Internet access, interoperability, focus on standardization and cost-effectiveness.

In FY 2008-09, the popularity of ADSL2+ technology modem continued to gain traction in the market. Its popularity has been increasing due to its effectiveness to offer a high-speed broadband connectivity without bothering about phone line unlike in dial-up. Also, ISDN modem market is seeing a colossal demand from SMEs and SOHOs.

Developments
VOICE&DATA 100 analysis reflects that the economic slowdown will further hamper the sales of leased line modems in FY 2009-10. In order to reduce the recurring cost, customers may look for alternate WAN technology. Furthermore, adoption of WiMax technology may affect the sales of ADSL modems. Overall, the industry is heavily depending on the rollout of broadband initiatives in the country.

Bharti Teletech, one of the major players in the segment, announced the appointment of Sunil K Goyal as its chief executive officer. Thus far, the company has manufactured over 40 mn fixed lines phones in India. Beetel also offered a range of modems for broadband, and claimed to be the largest player in 'free to air set-top box' for 'direct-to-home' market.

In another noteworthy development, Gemini Communication (GCL), acquired a majority stake in Chennai based Veeras Infotek. The deal was valued at around Rs 7 crore and was funded through internal accruals of GCL. With this, GCL is eying a major share in the network security space.

For Dax Networks, the major verticals that contributed to its revenue include telecom, SMB and ISPs. The company supplied modems in bulk to PC vendors for various school projects. Its revenue from modems was Rs 50 lakh during last fiscal.

Furthermore, BSNL, the state- run incumbent, is reportedly looking to establish a joint venture for manufacturing modems and other related equipments. During last fiscal, BSNL invited tenders from equipment majors for the said purpose. The company has a large focus on rural broadband and is working aggressively to take broadband to the masses.

Outlook
With less than 7 mn broadband connections, the country offers huge potential in this space. Interestingly, the market for modems has been shrinking since the past few years. The main reason behind this is higher emphasis on the latest MPLS technology, which does not require modems.

Also, the industry is witnessing a sharp trend of bundling of services, which is also causing a setback to the industry. Issues such as after sales support, lack of marketing, increasing presence of local players among others are making things more complicated for the industry.

As the demand for alternate technologies and services like 3G, Wi-Fi and WiMax is gathering an impetus among the consumers, market can mature significantly in the years to come. According to VOICE&DATA estimates, if things are set in place, the industry can achieve a 25% growth in FY 2009-10.

However, to take the growth to the next level, substantial measures would be required from service providers and government.

Jatinder Singh
jatinders@cybermedia.co.in