Apart from the projects in the pipeline, trends over the last 10 years suggest a 36 percent CAGR growth in IP traffic, resulting in a 17 percent CAGR growth in fiber deployment. 5G will further provide a major impetus.
The optic fiber cables industry is seeing a lot of traction. Several network projects are being developed in India. A secure network for the Armed Forces under Network for Spectrum, enabling rural broadband through BharatNet, the 100 Smart Cities initiative, and establishing high speed fiber-to-home are all in process. Applications, such as Aadhar-based e-payments, e-authentication, and e-commerce are growing manifold. Optical fiber remains the fastest medium to deal with the exponential growth in data.
Globally too, data consumption is continuing to grow exponentially with emerging technologies, such as cloud computing, Internet of Things (IoT), machine-to-machine, virtual reality, and artificial intelligence.
The latest annual report of Sterlite Technologies says it all. To quote: “Government of India is working to ensure India embraces 5G telecom networks in tandem with the rest of the world. It plans to auction the 5G spectrum in bands like 3300 MHz and 3400 MHz to promote initiatives, such as IoT, machine-to-machine communications, and instant high-definition video transfer.”
Globally too, governments are committed to national and rural broadband plans – today, over 150 countries have national broadband plans. In Europe, the European Commission has set aggressive targets to create a Gigabit society through ultrafast Internet access by 2025 – 1 Gbps connectivity for providers of public services and digitally intensive enterprises, 100 Mbps speed for all urban and rural homes, and uninterrupted 5G broadband coverage for all urban areas. Fiber connectivity is imperative to realize this vision.
Under its Mobile Black Spot program, Australia has committed to investing in telecommunications infrastructure to improve mobile coverage along major regional transport routes, in small communities, and in locations prone to natural disasters. Together, the first and second rounds of this program are set to an investment of USD 600 million.
Similarly, most countries have plans to significantly improve connectivity in the next few years.
Network innovation. In this increasingly hyper-connected world, technology evolution will continue to influence the shape of future data networks, which need to be smarter – resilient, denser, faster, and securer. 5G, distributed data centers, small cells, open source, and software innovation will enable these broadband networks in attaining the required features. Innovations in design will lead to the next-generation of networks.
Transition from 3G to 4G and 5G. While currently a 4G network generates about four times more data than a 3G network, by 2021 5G is expected to generate 7.7 times more traffic than an average 4G connection, according to Cisco VNI, 2016.
In 2016, 4G networks carried 69 percent of the total mobile traffic, representing the largest share of mobile data traffic by network type. By 2021, 4G speeds will be nearly double than that of an average mobile connection, and 5G will have 0.2 percent of connections (25 million), estimates Cisco VNI. In an era of evolution of mobile networks, 4G or LTE is forecasted to have the primary market share.
At the same time, 5G is expected to provide download speeds of up to 10 Gbps with latency of less than a millisecond, and support for a million connected devices per square kilometer.
4G/5G rollouts will require a significant rise in the fiber deployment. Each change in generation (G to G) has seen an increase in fiber use – the roll out of 4G networks and fiber to the x (FTTx) in the last six years resulted in almost a tripling of fiber deployment, compared to a fiber volume deployed in the six years preceding 3G rollout. Next-generation networks will see a huge proliferation of dense micro sites and small cells, all connected through fiber backhaul, and offering high-speed data connectivity.
Moreover, transition period, from generation to generation, is significantly reducing with every technology – for example, a shift from 4G to 5G is expected in three years, while the transition from 3G to 4G took around five years.
FTTx. FTTx will enable high-speed connectivity demand from small businesses and homes. This will require mobile backhaul as wireless mobile technologies shift from 4G-LTE to 4G. This will also see usage of Gigabit passive optical networks (G-PON) technology to enable a single fiber feed from the provider to multiple homes and small businesses.
Software defined networking (SDN) and network function virtualization (NFV). The transformation on legacy networks is being driven by innovations, such as SDN and NFV. SDN is the programmatic decomposition of the network, separating the control and management from the data plane. Enterprises are moving from MPLS-based VPN connectivity to a less expensive and operationally efficient software-defined WAN (SD-WAN). But as security threats originate from within the enterprise, WAN segmentation is increasingly becoming a must-have for many organizations.
Hyper-converged data-center infrastructure. Several hyperconverged infrastructure offerings are being deployed that combine hardware, including open compute compliant (OCP) servers, storage, networking switches, and racks, with virtualization and cloud software options. The new converged infrastructure solutions provide native hybrid cloud capabilities so businesses can leverage on-premises infrastructure for predictable, mission-critical applications, and use public clouds for more elastic and unpredictable workloads.
Sensory fiber networks. Systems and applications in optical fiber sensor technology continue to expand and be driven to a very large extent by advances in optical fiber and photonic measuring systems. They play a key role in the optimization of energy efficiency, health monitoring of structures, and serve as a key innovation factor for new and future-oriented markets, including smart infrastructure and real-time network health-monitoring systems.
Network infrastructure innovation and MVNO. Getting more from existing networks and reducing operational cost is top priority for CSPs. Commercial considerations, rather than regulatory mandates, have become a key drive pressing CSPs to share their network infrastructure with either competition or launch multiple sub-brands (MVNOs) to optimize the investments made in network infrastructure, resulting in reduced CapEx.
Fiber demand. Given the trends in data consumption and technology innovations for networks, optical fiber continues to remain the fastest medium to carry this increased data. The densification of 4G network and the advent of 5G networks is further bolstering the demand for fiber. At the same time, fiber will enable wirelesstechnology as it is critical for high-capacity backhaul and future proofing the network.
Fiber is ranked as the most important backhaul and transport technology for 5G due to its capability of delivering for high-capacity backhaul for intended data rates, according to a TIA and Interdigital joint study, 2017. Globally, it has been seen that the CapEx intensity increases significantly when the share of data increases in the total revenue pie.
Supporting these trends, global fiber consumption in 2016 was 425 million fkm, which represents an 11 percent increase from 415 million fkm in 2015, as per a CRU report. China’s 4G network coverage is on its way to reaching a high level.
Also, certain companies have stated that full-year fiber consumption could have been higher, if they had not been constrained by fiber-shortage scenario, as per a CRU report.
Sterlite Technologies recorded revenues of ₹2594 crore in FY17, higher than 82275 crore in FY16, showing a 14 percent year-on-year (y-o-y) improvement.
Exports for the year increased to ₹957 crore against ₹547 crore in FY16, registering a growth of 75 percent. Exports as a percentage of the overall revenue were 37 percent in FY17, compared to 24 percent in FY16.
The breakup of its sales, domestic and exports, is 75 percent from OFC manufactured at Silvassa and optic fiber manufactured at Aurangabad and 13 percent from copper cables and structured cabling at Dadra and Nagra Havelli.
The sales of finished goods amounts to ₹1788.97 crore in 2016–2017.
Profitability. The company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) showed a consistent growth of 14 percent, from ₹475 crore in FY16 to ₹542 crore in FY17. In terms of percentage, this translated into an EBITDA margin of 21 percent in FY17 at the same level as in FY16.The net profit after tax after minority interest for the year thus is ₹201 crore, compared to ₹154 crore for last year.
The company reinforced its position as the leading player in Smart Cities, with development in several Indian cities. Gandhinagar Smart City services were rolled out in December 2016; the Jaipur Smart City project is complete and currently in the operations and maintenance phase; and the Ahmedabad project that focuses on enabling an optical-fiber backhaul infrastructure to interconnect Ahmedabad’s BRTS corridor to the main data centre through passive network integration, is on the verge of completion.
The company is fully committed to rural broadband through BharatNet, which aims to provide broadband access to 250,000 gram panchayats in India.
At the same time, it is continuing to build highly secure and intrusion-proof smarter networks to keep the borders secure. Its teams on the network for spectrum project in Jammu and Kashmir are making progress as they roll out several thousand kilometres of fiber in a very tough terrain.
The company is on track to achieving 30-million fkm fiber capacity this year, and also announced the optical fiber capacity expansion to 50 million fkm, which shall be executed in phases. This capacity will come in a Greenfield set-up at an estimated CapEx of ₹1000–1200 crore.
For the full year, the total segment revenue of Finolex Cables was ₹3148.07 crore as against ₹3062.26 crore. The muted value growth over the year was largely in view of the lower commodity prices for much of the year, except during the last quarter when commodity prices reached parity with the previous year. In volume terms communication cables grew by 22 percent.
Newer product lines (fans, switchgears, and water heaters) were introduced by the company during the year and performance of these product lines has been satisfactory.
KEC International Limited
The company’s core business verticals are power transmission and distribution. Its balance sheet clubs revenue from power, telecom cables, and turnkey cable solutions.
With regard to Telecom Cables, revenues declined owing to cancellation of some large orders by customers due to reduction in market prices. During the year, the company partnered with a leading Global Consultant to transform its cables business into a profitable venture and augment its cable-manufacturing capabilities.
HFCL is an end-to-end telecom infrastructure provider. Its fully automated plant at Goa produces 1F-576F optical fiber cables. The company also has two more OFC manufacturing plants in Chennai and Hosur (through its subsidiary HTL).
Its balance sheet lists revenue from telecom products which apart from OFC includes microwave radios, and GPON equipment.
Vindhya Telelinks Limited
VTL, an MP Birla Group company is primarily engaged in the business of manufacturing and sale of telecommunications cables, other types of wires and cables, FRP rods/glass rovings, connectorized cable products, and engineering, procurement, and construction (EPC) business.
The company’s gross revenue from operations on account of sale of products comprising of telecommunication cables, other wires
and cables, FRP rod/glass rovings and traded goods witnessed a decrease from ₹459.82 crore in the previous year to ₹283.30 crore during the year under review, due to less than expected orders inflow, competitive pricing and change in product mix based on demand pattern of the customers.
The management maintains that while the gross revenue increased by 3.32 percent, revenue from exports, including project exports declines mainly due to unremunerative price levels, without factoring the steep rise in the prices of key raw materials including optical fiber globally.
Its EPC segment clocked a noticeable increase in gross revenue, whereas the cables business segment registered a decrease by 40.12 percent in gross revenue in comparison with the previous financial year due to change of product mix based on demand pattern of customers, lower volumes, and competitive price levels.
Birla Cable Limited
An MP Birla Group company, it is primarily engaged in the business of manufacturing and sales of optical fiber cables and copper telecommunication cables and other types of specialty wires and structured cables.
The company’s revenue from operations decreased to ₹229.52 crore from ₹273.14 crore in the previous year (a decrease of about 15.97 percent). The decrease in revenue was mainly due to less than expected orders received from various customers. Optical fiber cable contributes 81 percent and copper cables 17 percent to the total turnover of the company. The profit (before depreciation and tax) for the year decreased to ₹12.99 crore as against ₹22.53 crore in the previous year. The decrease in profit was mainly because of fall in turnover during the year under review.
The name of the company has been changed from Birla Ericsson Optical Limited to Birla Cable Limited on August 19, 2016. The change in name was necessitated due to termination of Joint Venture Agreement entered into between Ericsson Cables AB, Sweden on one part and Universal Cables Ltd. and Vindhya Telelinks Limited on the other part, followed by divestment of the entire shareholding by Ericsson Cables AB, by way of inter-se transfer amongst the promoters.
Despite the growth in the Indian telecom sector in terms of consumption of optical fiber cables, the price pressure is definitely a factor which is hindering the healthy growth. This is mainly due to increase in the price of optical fibere coupled with nonavailability of optical fiber with longer delivery periods used in the manufacture of optical fiber cables. Further, the enthusiasm in the cable industry is dampened by not so encouraging price increase of cables in proportion to optical fiber price increase. By keeping the cable price at past levels, the industry is not getting required support to sustain on a long-term basis.
Optical fiber cables (OFC). There is a fall in revenue from OFC business, which stood at ₹186.36 crore as compared to ₹226.34 crore in the previous year due to nonrealization of expected orders from the customers. However, exports continued to show constant momentum and the company was able to clock healthy sales of ₹60.06 crore in the financial year 2016–2017.
Although, the domestic market for optical fiber cables during the year was reasonable in terms of volume off-take, the cable price levels were always under pressure and it was not proportionately enhanced in line with the optical fiber price level increase which is the basic raw material in the manufacture of cables. This price pressure on cables is expected to continue in the domestic market segment, despite non-availability of optical fiber combined with its high price levels.
Copper telecommunication cables. The company’s domestic sales turnover on account of traditional jelly filled Telephone Cables (JFTC) saw a marginal decrease from ₹3.99 crore in the previous year to ₹3.18 crore during 2016–2017. This is mainly due to the focus on replacing copper-based networks with optical fiber-based ones to reap the benefit of unlimited bandwidth capacity by the telecom operators. Further, the combined sales of other copper-based cable products, viz. structured cable, co-axial cable, quad cable, etc. stood at ₹35.54 crore from both domestic and export market segments.
Structured cable business is seeing a good traction for the company and the ongoing expansion project will further augment the capacity thereby enabling the company to achieve higher sales, as lot of Internet Service Providers (ISP) are enhancing their customer base for broadband connectivity solutions.
Aksh Optifibre Limited
Aksh Optifibre Limited manufactures optical fiber, optical fiber cables, FRP rods and is one of the largest e-governance (E-mitra) service provider in the state of Rajasthan.
The company has acquired FRP rods manufacturer, Unitape Mandovi Composites Pvt. Ltd, Silvassa, and renamed it as Aksh Composites Pvt. Ltd. Diversification is planned by the company for the ambitious ophthalmic lens project.
In 2015–2016, to cater upcoming robust demand in optical fibre industry and also to maintain its leadership position, the Board of Directors had approved capital expenditure of ₹95 crore for expansion and modernization of existing manufacturing facilities and to enhance the capacity in optical fiber by 100 percent, optical fiber cable by 50 percent, and fiber reinforced plastic by 200 percent.
To be in line with the vision of the company to have a global footprint, the company has joined the elite league of fistful companies across the globe who export OFC to China and see tremendous potential in the overall Chinese market.
Paramount Communications Limited
The company’s focus shall be to sustain and increase the momentum in its business segments namely, optical fiber and copper telecom cables, power cables, and railway signaling cables etc. by leveraging its inherent strength of product development as per evolving industrial standards and superior project execution capabilities to drive both the short-term and long-term growth. The company’s vision for the coming year is to be a key participant in every relevant initiative of the government so as to improve growth and development prospects of the company.
It has been registered with the Board for Industrial and Financial Reconstruction (BIFR) in October, 2013. However, Ministry of Finance chose December 1, 2016 as the date on which the provisions of Sick Industrial Companies (Special Provisions) Repeal Act, 2003 would come into effect and Section 4(b) of the SICA Repeal Act would be enforced. With the effectiveness of the SICA Repeal Act, the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) stands repealed and the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) also stand dissolved.
In 2016–2017, some of the banks have assigned their loan, together with all underlying securities thereto, to an Asset Reconstruction Company (ARC), for settlement of their entire dues. The company is hopeful that the remaining banks also assign/settle their dues during the current year. Apart from this, the company is exploring possibilities of new investors. The company has also taken several measures to reduce its cost.
In conclusion, apart from the obvious, with the convergence of Network and IP, entry of MVNOs in the Indian telecom space, MSOs offering quad play services, and telcos offering solutions across ICT, IoT, cloud, and mobile applications, the changing digital landscape offers tremendous opportunity.