27-04-2011 Telecom Cables: 2010-11-A Watershed …

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Telecom Cables: 2010-11-A Watershed Year
News - Archive Th u r sday , 15 Ju l y 2010

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Subscribe Marked by two major contracts from BSNL for defense and navy, the industry is riding high.
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The year 2010-11 may go down as the watershed year for the Indian cable industry. Marked by
Business Directory two major contracts from BSNL for defense and navy, the industry is riding high.
Browse By Category
BSNL is building an exclusive Optical Fibre Cable (OFC)
List By Name
network for the armed forces in lieu of their vacating the
Search Using Keywords spectrum. The value of this is estimated at Rs 600 crore.
Bids have already been invited for the OFC based nationwide
search... optical backbone for 414 defense sites and optical gigabit
Buyers Guide access networks at 219 army sites. Aster-Vindhya Telelinks,
Communications L&T-Sterlite, Teracom-Punj Lloyd, KEC-Finolex, Telecom
Today website Construction India Limited- Birla Ericsson, ITI-Aster, Punj
Lloyd-Teracom, and TCIL-VTL have partnered for this
◘ Advanced Search ► mammoth project and participated in the bid.

Login Form BSNL is supplying 96F OFC and its accessories on a turnkey
Username basis for the Indian Navy. The value of the entire project is
estimated at Rs. 180 crore. Teracom- Neo Duct, Sterlite-
TCIL, and VTL-Engineering P & Construction have
Password participated in the bid.

Current Scenario
Remember me
Lo gin Transmission in the networks is becoming more and more
digital and the need for broadband access has resulted in
Lost Pa sswo rd?
OFC increasingly becoming the transmission medium of choice with inherent capacity to transmit
No account yet? R egiste r
all forms of communication. This is bolstered by the fact that there has been a constant rise in
copper prices in the last few years driven primarily due to the shortage of the supply, thereby
shifting the focus of wireline market to OFC. India became the world's third largest domestic OFC
market in the year 2009-10.

OFC is a noticeable preference

of the service providers for the
new network rollouts and
upgrades of existing ones to
meet the growing traffic
demands, with its virtual
limitless capacity to transfer
bandwidth. The overall trend of
the technologies is focused on
data and converged services,
and making the solutions more
robust.

On the backdrop of the

government's initiates of bringing broadband to every Indian household and an initial target of 20
million broadband subscribers by 2010, the telecom cable segment is at the point of inflexion.
The increasing usage of smartphones in the country and introduction of new applications will
provide requisite impetus to the industry. All of this is translating into an exponential growth
which would give rise to the need of a robust and expandable network capability.

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27-04-2011 Telecom Cables: 2010-11-A Watershed …

Market Dynamics

The market for telecom cables showcased negative growth in 2009-10 and stood at an estimated
Rs. 1060 crore, recording a dip of approximately 18.4 percent from Rs. 1300 crore in 2008-09.
The decline in sales may partly be attributed to the non-procurement of ribbon cables. In 2008-
09, BSNL had procured Rs. 150 crore of ribbon cables (48F, 96F and 288F). There are indications
that there shall be no procurement of this product in 2010-11 too.

The optical fiber segment contributed to 82.5 percent (Rs. 875 crore) of the market share, PIJF
accounted for 9.4 percent (Rs.100 crore), while the balance 8.1 percent (Rs. 85 crore) was
accounted for by CATV/MSO segment. The buyers for the PIJF segment were BSNL (Rs.15 crore)
for circles, MTNL (Rs.25 crore) procured 2.8 lckm for the network being laid for Commonwealth
Games, Reliance (Rs. 5 crore), and Bharti (Rs.55 crore). The vendors for PIJF are Finolex,
Sudarshan, Delton Cables, UM Cables, Golconda, LK, SPMT, KEC, Paramount Wire, Paramount
Communications, Surana, VTL, Birla Ericsson, Sriram, CKM, Polycab, Singla , Sterlite, Himalaya
Cables and Uniflex.

Sterlite Technologies led the pack with a turnover of Rs. 272 crore, out of which OFC business
was Rs. 175 crore and PIJF was Rs. 97 crore. M.P. Birla Group, comprising of Birla Ericsson and
Vindhya Telelinks, was in the second slot with a domestic turnover of Rs. 197 crore, the OFC
business accounted for Rs. 100 crore and PIJF accounted for Rs. 97 crore.

Bharti Airtel imports cables from Prysmian Cables while Vodafone imports from Prysmian Cables
& Corning. The new operators including Uninor, MTS & STel largely lease the cable from large
service providers depending on the geographical location.

Growth Drivers

The concerted initiatives by both BSNL and MTNL to begin roll out of FTTH across the country to
provide high speed broadband and triple play services will potentially help boost the demand for
OFC in future with current demand mainly being driven by the long distance and metro networks.
Several other prominent pan-India telecom service providers, rail operator, gas and power
utilities, cable TV companies and realty developers too are evaluating the techno-commercial
benefits of this technology which on implementation will augment the demand for OFC.

In a move that could add to the broadband uptake in the country, Indian Railways is planning to
roll out 15000 route km of OFC through the Public Private Partnership route. This cable
infrastructure will be utilized to offer broadband services across the country and will allow OFC
vendors to partner railways in the venture. In addition to this, the tenders floated by BSNL on
behalf of Defense & Navy, for laying nation wide OFC backbone networks will accelerate its
demand in a sizeable way.

The Government's ambitious plan to lay a nationwide OFC network to bring the country's 12 lakh
villages into the high speed internet fold will result in an explosive growth of OFC business.
Optical backhaul networks can support robust access connectivity and track rising bandwidth
demands. This proves to be true for a country like India, where there are clusters of DSL
deployments which need to be connected by fibre backhaul. Hence the next level demand for
bandwidth for data and video can be met by fibre only.

3G and BWA services will be able to provide the benefit of voice, broadband connectivity, and
high speed data downloading & computing to the common man on their mobile devices. This will
also pave the way for deployment of optical transmission platforms and infrastructure to support
the roll out of 3G networks which provide greater bandwidth efficiency and decrease in operating
costs as data traffic grows exponentially and revenues per bit decline. The demand for high
speed and bandwidth hungry applications in 3G networks will make optical fibre based
transmission a necessity promising huge opportunity for vendors.

Challenges

Telecom sector is impacted substantially by government policies and investment. While no

reversal in the planned investment is envisaged, prices and demand are definitely subject to
changes in policies on tendering and indenting. This sector has a long term evolution strategy
and the government needs to locate the necessary environment for growth with the Indian OFC
market now forecast to be set for a period of strong growth. The recent proposal mooted in
certain quarters of the government for unbundling of all fibre/copper long distance
infrastructures may have an adverse impact on the growth of OFC business. India faces
technological and commercial challenges in broadband penetration, the most important of which
are low PC penetration and affordability issues due to high cost.

On the technology front, the consumption of JFTC per DEL is expected to remain low due to
increasing telephone density and large scale deployment of wireless technology as compared to
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increasing telephone density and large scale deployment of wireless technology as compared to
JFTC in access networks in India. As against opting for Optical Fibre for broadband rollout plans,
BSNL's strategy of endorsing ADSL modems as a means to its broadband connectivity may impact
demand of OFC in access network and FTTH applications.

Vendor Update

Sterlite Technologies won a contract from BSNL valued at Rs. 372 crore in 2009-10 for enabling a
FTTH network using the GPON technology. It received a major share of the total outlay of the
project. MTNL in association with Sterlite launched its prepaid broadband services for households
and enterprises in Mumbai. The vendor also received a contract of the country's first ultra mega
power transmission project. According to the contract, it would build, own and operate a
transmission network of two 400kV double circuit lines of approximately 430 kms across the
states of Bihar, Assam and West Bengal. The vendor has further enhanced its product portfolio
with the introduction of application-focused products like Optical Ground Wire Cables,
specialized data cables and optical fiber products that can be optimized for FTTx applications.
Sterlite is in the process of enhancing its optical fiber annual manufacturing capacity to 20
million-km, which would position the vendor amongst the top three manufacturers globally.

Vindhya Telelinks concentrated on its new EPC division for moving quickly toward being a service
provider on turn key projects. This division focuses on 3 business segments viz. telecom, power
and gas distribution pipeline and provides solutions in trenching and laying of optical fibre
cables, installation and commissioning of telecom equipments, FTTH installation, civil work and
foundation of towers and maintenance of network.

Sudarshan Telecom expanded its product portfolio which now includes railway signaling cables
and quad cables in view of increasing demand in these cables in Indian Railways. The vendor is
also manufacturing LT power cables, cntrol, instrumentation cables in the same manufacturing
unit under the brand name of Sudarshan Power.

Teracom, primarily an OFC vendor, received contracts from BSNL, Aircel, Railways & Railtel and
Idea for Rs.28.89, Rs.7.84, Rs.6.8 and Rs.1.89 crore respectively.

Tamilnadu Telecom is planning an expansion in the power sector as the requirement is growing
in that vertical.

Paramount Cables launched India's first lead free wires. These have been manufactured in
collaboration with AEI Cables, England, and are 100 percent non-toxic.

Outlook

The Indian buyers may be prudent to procure a higher count optical fiber cable, in line with their
international counterparts. Currently 288F cable is installed in the metros and 96F-144F in the
backbone. Considering the intricate formalities to be followed for Right of Way, huge digging
and installation costs, BSNL too must procure 48F, instead of the current 28F for its current
mobility network.

The government is targeting a transmission line length of over 4.7 lckm and AC substation
capacity of over 7 lac MVA by the end of March 2017, as per the XIIth five year plan. The
government is keen to encourage investment in the country's telecom networks and is providing
incentives in support of telecom networks in rural areas from USO Fund which will lead to
exponential growth in demand for OFC in foreseeable future.

Despite the increase in demand of OFC, there may not be any significant improvement in the
domestic OFC prices and the bargaining power of buyers. The existence of overcapacity will
constrain the ability of players to resort to any considerable price hikes in the near future.

With network traffic certain to grow in the future, significant investment is likely to flow
towards laying of optic fibre network which offers faster connection with ultra high speed by
many orders of magnitude over wireless. The advent of 3G and LTE will make it more important

for service providers to roll out optic fibre based transmission networks, which have the high
bandwidth capabilities necessary to support 3G applications.

Experts Speak
Challenging Time Ahead for Telecom Cable Industry
R. Sridharan
Sr. Vice PresidentBirla Ericsson Optical Ltd. / Vindhya Telelinks Ltd. / Birla Furukawa Fibre
Optics Ltd. / M.P. Birla Group

On telecom cable market

Indian Market continuously behaves in an unique way in terms of price levels. Take the case of
copper telecom cables or optical fibre cables, the price levels are lowest in the world, thereby
rendering the operations of Indian cable manufacturing companies un-remunerative way
However, the volumes are picking up which is expected to off-set the price pressure. The major
off-take will be from defence / BSNL's big tender for country-wide exclusive optical fibre cable
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27-04-2011 Telecom Cables: 2010-11-A Watershed …
off-take will be from defence / BSNL's big tender for country-wide exclusive optical fibre cable
network (for vacating the spectrum) and a recent big tender for Copper Telecom Cables from
BSNL. More OF Cable requirement is also in the pipe-line from BSNL on Turn-key business model.
On the contrary, in the global market, the price levels are reasonable and one can expect a
better realization.

On market and technology trends

Market size in India is poised to pick-up owing to recent announcement of 3G license auction.
New entrants in the 2G sector will also drive the demand for more cables. Fibre-to-the-home will
be the key technology (GPON and EPON) for high speed triple-play networks

On growth drivers

A drive on more broadband penetration in India is going to increase the demand for telecom
cables in general. New 3G license holders will drive the demand and also the new 2G players.

On export prospects

New broadband services initiatives by various global telecom operators will require more cables
in access networks. M.P. Birla Group is poised to penetrate into these markets in a big way due
to the strong product development base especially for specialty optical fibre cables.

On challenges faced by players

Low technology players spoiling the market with their sub-standard quality cables. Pressure on
price margins will continue to remain and volume-based strategy will have to be adopted

On future outlook

Bound to grow in a healthy way at the rate of around 10-12 percent CAGR

On green initiatives

Various energy management initiatives, thereby, saving energy costs and protecting the
environment, strictly adhering to the environmental management systems.

Anything else to add

We expect Market consolidation to take place so as to weed-out non-serious players from the
field.

Experts Speak
Exports to Drive Growth

On Indian cable market

Indian telecom industry is scaling greater and greater heights and

hence the cable market is also growing rapidly; however, when we
compare with China we are still way behind,especially in the area of
broadband network Fortunately, FTTH/FTTX is rolled out and we can
expect a substantial demand for cables in this year itself.

On technology trends

Even though there are more than a dozen major cable manufactures in
India, who can manufacture and supply quality cables, some basic
telecom operators are buying cables from the Chinese market
irrespective of the fact that the Chinese product is no better than the
indigenous product.

On growth drivers

After 3G rollout there will be a huge demand for fiber networks we expect the demand to grow by
12 percent in the coming year.

On future plans

Our business target for the FY 2010-11 is Rs. 65 crore

On export prospects

With the extensive demand for FTTH in the Middle Eastern countries, the export front is quite
encouraging.

On challenges

Main challenges on the export front are posed by China and Korea. In India cost of our input
material viz., HDPE/NYLON/PBT/GEL is increasing day by day, but the cable selling price is very
competitive.
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Telecom Cables: 2010-11-A Watershed …

On green initiatives

We are putting in our best efforts to match with the future demand and our plans are underway
for expansion.

Anything else to add

In the power sector requirement of optical fiber cable is growing and we are planning to expand
on that front also.

Experts Speak
OF Cables Rule

Puneet Jain
Sr. V.P–Corporate Business
Teracom Limited

On growth drivers

The fibre optic cable market in India has grown rapidly since 2003. The rise in demand for fibre
optic cables is being driven by the strong growth in the mobile phone sector, and increased
demand for broadband services. The fibre optic cable market in India has various current and
potential customers like the mobile operators, the Indian rail operator , and the gas and power
utilities.

On your plans for FY 2010-11

We have a plan in place to double our existing capacity in OFC from 1 million FKM to 2 million
FKM. We are at the advanced stage of putting up additional infrastructure and machines and
adding specialty cables in our product line. Major attention is on increasing its share in
international market and increasing brand visibility in the world telecom market. We have also
submitted our bids for the NFS (Network for Spectrum) project floated by BSNL on behalf of
Defence. and are envisaging to supply the required optical fibre cable

On export prospects

Teracom is aggressively targeting export prospects by adding new products in its product line
and reaching customers worldwide. It has already achieved major breakthrough in some large
telecom companies and service providers outside India and expect to get at least 30 percent of
its revenues from exports in the coming years.

On challenges faced

There is a tremendous price pressure faced by OFC manufacturers in India. Indian manufacturers
have to withstand large changes in raw material prices due to volatile metal and polyethylene
price which is never compensated by the customers.

On the future

Although the optical fibre network in India is the fourth largest in the world, the optical fibre
length per capita is only 39 meters in this country while it is 197 meters in China and 907 meters
in the United States. India must install another 180 million km of optical fibres in order to catch
up with China and 1,020 million km to catch up with the United States' volume per capita. The
Indian telecom cable demand is expected to increase faster than CRU's conservative estimate,
reaching 15-20 million FKM in 2015 due to its potentially tremendous telecom market.

On your green initiatives

Teracom is an ISO 14000 company which gives utmost importance to environment concerns. In
all the company premises major area is demarcated for garden and plantation to compensate for
the industrialization. We are exploring the possibility of our contribution towards Corporate
Social Responsibility (CSR).

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