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FY 2008-09 was a landmark year for the very small aperture terminal (VSAT) industry, especially the last three months. The industry crossed 1,00,000 VSATs on the shared hub in Q4 . The total number of VSATs installed by the year-end stood at 1,01,773. The industry grew almost by 24% as the installed base in FY 2007-08 was 81,395 VSATs.

This growth was primarily driven by the government and BFSI segment. They are likely to be the key growth drivers in FY 2009-10 as well. The market size of the industry grew to Rs 650 crore.

FY 2008-09 was phenomenal for the Bharti group. The company grew by more than 35% and its market share reached to 31% from 28.6% in FY 2007-08. It also grabbed the market leadership position from the pioneer Hughes, as far as number of VSATs are concerned. This was the second consecutive year when Bharti moved a step ahead in the leadership chart. During FY 2007-08, the company had outnumbered HCL.

Hughes' position dropped to #2 in FY 2008-09 as it had to shut down 2,850 VSATs during the year, otherwise it would have beaten Airtel this time as well. Among the 2,850 VSATs dropped last year, most were of lottery agents, who had either switched business or shut their shops as profitability went down in the lottery business.

The Leaders
By the end of FY 2008-09, the combined installation of Bharti Broadband and Bharti Airtel Bangalore-the two Bharti enterprise subsidiaries-stood at 31,739.

Bharti's core focus area for the year was government and BFSI segment. In a major project of the Gujarat government, the company connected as many as 13,693 villages in the state. It also received orders from common service centers (CSCs) program under e-governance, and BFSI.

Hughes' VSAT base, on the other hand, for FY 2008-09 was 30,011. The growth in the market remained flat to 31%, similar to that of FY 2007-08. The company installed as many as 7,397 VSATs in the year, but as it shut down a hub that ran 2,850 VSATs, the net number of installations on the shared hub came down to 4,547.

Hughes' satellite services revenue in FY 2008-09 was Rs 140 crore, while the hardware revenue stood to Rs 110 crore. The company's core focus for the year was BFSI and education segment. Some of the large projects to Hughes came from SREI of 7,500 VSAT's worth Rs 35 crore. Bank of India and Canara Bank also placed an order of 1,200 VSATs each, worth Rs 15 crore and Rs 9 crore, respectively. The order from ISRO Edusat was only 500 VSATs but it was worth Rs 15 crore.

The #3 slot was occupied by HCL Comnet, with 25,914 installations. Major clients of the company included United Bank of India, Indian Council of Agricultural Research, State Bank of India, Arunachal Pradesh SWAN, the Indian Army, Union Bank of India, Bank of Maharashtra, among others.

Tatanet's VSAT base grew by 3,321, clocking a growth of 63% and taking the total VSAT count to 8,389 in FY 2008-09. The company recently bagged an order from ONGC to augment its voice and data communication requirements between its offshore installations and base station office in Mumbai, and to provide back-up network for existing C band satellite network.

Tatanet is also focusing on the fast growing CSCs. The company is in the process of implementing two of the largest CSC VSAT networks across India. In the enterprise segment, new customers on board included–-Tulip, Rignet, Federal Bank, Catholic Syrian Bank, Jindal Steel, VESTAS, and Lanco.

The Trends
Overall, the industry recorded a growth of 24% in FY 2008-09 in the number of terminals. Major players, like Hughes and Airtel, adopted the latest DVB-S2 technology. This has helped the industry tide over the space segment crisis caused by the proliferation of multiple DTH operators and the lack of new satellites in FY 2008-09. The new technology has also enabled the VSAT operators to effectively compete with the terrestrial players in the access market.

In FY 2008-09, banking and rural segments have been the primary growth drivers. Satellite has and would continue to play a big role in the CSC initiative by the Government of India.

In the BFSI segment, VSATs played a key role in ATM connectivity. With the government's thrust on providing banking facilities to the most rural areas, there was an upsurge in the expansion of banking networks from most of the public sector banks. Majority of expansion came from public sector banks including the State Bank of India,Union Bank of India, United Bank of India, etc. Hughes alone got a contract of 2,800 VSATs, worth Rs 30 crore, from public sector banks.

Tele-education has also done well with state and central government and private projects that have added good number of terminals.

Further, the rising demand for higher-speed services for new value added applications like two-way videoconferencing, voice over Internet protocol (VoIP) telephone services and other real-time applications that require higher bit rates and faster links were driving factors for VSAT.

In the international arena, VSAT is widely deployed for maritime communication, which is not the case in India due to regulatory issues. Another trend that is not seen in India is that of VSAT supporting virtual network operators (VNOs). With VSAT having VNO capabilities, service providers can lease network capacity to emerging operators that wish to pursue satellite business opportunities while minimizing their initial capital costs.

In Indonesia, almost 15,000 islands of the country are connected via VSAT for basic connectivity.