VSAT: Small Aperture for Growth

The industry added 11,719 VSATs on the shared hub in FY 07,

with a 22% growth over installed base at the end of FY 06. The total number

of VSATs on the shared hub crossed 60,000 units. VSATs continued their expansion

and growth in existing market segments of broking, banking, and manufacturing,

and adoption in new market segments: distance education, tele-health,

e-governance, retail, and SME.

Though VSATs were being used as a backup to MPLS, ISDN, or any

wireless technology, volumes show that satellites are still there on the minds

of CIOs. The unit price has crashed to an all time low, much beyond

expectations, down to Rs 60,000-80,000 from around Rs 1 lakh the previous year.

If industry sources are anything to go by, one vendor has sold units for as low

as Rs 35,000.

Big Successes



One of the key achievements was the breakthrough in some sunrise segments
that have been high on importance worldwide and are seeing big growth in India.

The digital cinema initiative was one such in the entertainment industry. The

next breakthrough is in the cellular backhaul segment, where satellite provides

a backhaul to locations that are not reachable by microwave or fiber. The third

one is in the retail sector, where VSAT provides connectivity for credit and

debit card authorization servicemore cost-effective than the traditional

dial-up connection, and quicker. The traditional segments that include

government and defense, BFSI, oil and gas continued to be the growth drivers.

Robust buying by the financial segment was another growth driver. High

availability offering for business continuity witnessed good growth this year.

The Race



Voice&Data, Indias leading telecom magazine from CyberMedia

(publishers of Dataquest), estimates that Hughes tops the VSAT list. Its

revenue for FY 07 was Rs 120 crore, a 25% growth. Adding 5,428 units, it

increased its count to 20,240 units. The growth drivers for Hughes

Communications were e-learning, oil and gas, banking, digital cinema, retail,

and telecom. The company now intends to be a complete managed network service

provider. It has also supplied VSAT for backhaul to mobile service providers

like Hutch, Idea, Reliance, and Aircel.

HCL Comnet garnered Rs 102 crore, a decline of 25%. But, it

managed to get some good orders: from Orissa Treasury, Berger Paints, Mahindra

& Mahindra, Lotte India, Air Deccan, and Simplex. This year too HCL Comnet

managed to be in the good books of SBI, and got some deployment orders.

Bharti Airtel bagged orders for about 5,000 VSATs, and installed

1,500 on its shared hub services till March 31, 2007, totaling 13,500

installations across the country. It bagged a large order from ICICI Bank for

1,000 VSATs, 250 for Union Bank of India, and 250 terminals for the Sahara

Group. Airtel has also managed to get large orders from the Indian Army for

systems integration projects using VSAT technology.

Tata Indicom VSAT services registered a growth of 25% to the

tune of Rs 75 crore. The growth area was mainly the enterprise sector. The

company is now seeing backhaul connectivity as another area of growth.

Last fiscal, Essel Shyam generated revenues of Rs 73 crore up

35% over the previous fiscal. The company did projects for ONGC, broadcast

service industry and stockbrokers networks. Its growth came mainly from

increased usage. Essel Shyam has a market share of 60% in broadcast services.

New Growth Markets



VSAT services in urban India are on the point of saturation. The industry
envisages only about 10-15% growth in these areas. However, new markets in

semi-urban, rural and remote areas can propel and sustain healthy growth in the

coming years.

Distance Education: This sector has been growing steadily

over the last two years, and has great potential to grow further. More so

because of the EduSat program of the Department of Space for distance education

to schools and colleges with a projected VSAT base of 35,000 in the next three

years.

Inventory Control of Consumables: Oil companies like BPCL

and IOC are using VSATs to update their inventory for bulk storage and highway

outlets. HLL is using VSATs in a big way to update inventories in the remote

consumer markets.

e-Commerce: A successful example is the use of around 6,000

VSATs by ITC Chaupal.

e-Governance: The Central Government, and many state

governments have embarked upon the use of VSATs for e-Governance.

e-Finance: Use of more VSATs for ATMs and other banking

activities.

Tele-medicine: High potential market, but the high cost of

service is a barrier at present.

Internet Broadband Penetration: A recent policy change has

cleared the way for commercial service providers to deploy VSATs for

proliferation of Internet, and broadband services in rural and remote areas.

Speed Breakers



VSAT services are tied to INSAT satellites. If operators can use any satellite,
services will become affordable in a competitive environment. The TRAI has

repeatedly said that VSAT is a viable solution not only for rural connectivity,

but also for penetration of Internet and broadband in these areas. The

government will not be able to meet its broadband targets for 2010 unless it

takes bold and radical steps such as the use of satellite technology, which is

most suitable for short-term results.

The biggest constraint to growth in rural areas is high

artificial cost incurred due to government policies. The obstacles like large

distances and inadequate infrastructure can be overcome by access to virtual

institutions that provide banking, education, health care, neonatal information,

agriculture advice, and so forth. VSATs can play a major role here.

VSAT services in urban areas are taking a beating from alternate

technologies. Its future market lies in the rural areas where VSATs can be

deployed effectively for Internet and broadband services such as e-education,

e-Governance, e-commerce, e-finance, telecom, tele-medicine, and entertainment.

VSAT services have to become more affordable in rural areas. It can be used to

meet the national objectives for rural upliftment. Any half-hearted approach

will stagnate the industry.

Whats in Store



There is a robust demand for both Ku as well as Ext-C band services from
various industry verticals, and it provides diversified growth. The key industry

segments that are expected to contribute strongly in FY 08 are banking,

e-Governance, stock/commodity trading, defense, distance education, and retail.

There is a high acceptance of VSATs as a broadband access medium by a much

larger addressable market of SMEswhich will provide additional growth

compared to the traditional enterprise and government segments. The industry

aims at touching 75,000 units on the shared hub in FY 08, and 1,000,000 in

three years time.

Like last year, the industry this year is quite enthusiastic

about digital cinema value proposition. The value of the Indian cinema market is

around $1.5 bn, but 80% of films being made in India do not give the expected

returns due to various factors. One of the major factors is the high price on

distribution. The industry feels that if cinema could be distributed digitally,

it would be a win-win situation for both the industriesno doubt the viewers

would be king again.

In fact, everything except the open sky policy seems to be

working in favor of the industry. The broadband policy supported usage of VSATs

in high-speed Internet connectivity. The SOHO and SME segments have huge

potential, but the general perception toward VSATs and a cultural mind block

prevents mass usage in these segments. Unless volumes pick up, this segment will

not be a viable business proposition for service providers.

Gyana Ranjan Swain





maildqindia@cybermedia.co.in