Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis - II - Question Paper

2005-06 should see further consolidation of the industry and normalization of capacity utilization.

Indian Scenario

Initial estimates for the fiber-optic industry in India in FY 2004-05, based on market info and published sources; indicate that 2004-05 was the year of turnaround and growth in the Indian Fiber Optic Industry. After an abnormally depressed demand in 2003-04, there has been a recovery and increase in demand in 2004-05 to about two million-km of cabled fiber. This represents a CAGR of about 7% from 2003 through 2005. The Government incumbents like BSNL, MTNL and RailTel continued to be the largest buyers of fiber optic cables, closely followed by the Indian Private Telecom Incumbents. The Indian Government as a buyer of Fiber Optic Cables through the Telecom Incumbents & Public Sector Undertakings such as the Oil and Gas Sector, Power Sector, etc. cumulatively constituted about 60% of the total purchases of Fiber Optic Cables in India in FY 2004-05. During 2004-05, India purchased about 150-lakh km (lakh-conductor-km) of Copper Telecom cables. BSNL and MTNL were the predominant buyers for these cables. The value of the Indian Fiber Optic Cables market was Rs.3 bn and that for Copper Telecom Cables was Rs.9.50 bn. Major player in the industry are Aksh Optifibre, Paramount Communications, Birla Ericsson Optical, Sterlite Optical Technology, Tamil Nadu Telecom, Himachal Futuristic Communications etc.

Telecom and Broadband

It is believed that Broadband and wireless networks, as well as the likely convergence of different technologies and standards will drive the telecom market growth in India over the next few years. Today, India offers exciting opportunities in telecom and has great appetite for broadband. Triple Play will give the impetus for broadband growth in the country. The total wireline and wireless subscriber base in India has zoomed from 4.8 Million subscribers in 1992 to almost 100 Million subscribers in 2005, with an expected further doubling of this figure in next 3 years. Broadband subscriber growth is likely to be at even faster rates as the market matures.

Convergence of different services on the identical mode is the future. MTNL, primarily a wireline player in India is now aggressively pushing forward its broadband services that feature applications such as entertainment and data. The entry of BSNL and MTNL into the broadband arena will influence the entire industry and allow for a much larger playing field. Indian Government’s policy of deregulation will support to build and optimally manage fast and efficient networks, which in turn help in expanding Telecom Cables production. The telecom-manufacturing sector in India is likely to ride this boom. Further deregulation of the market, which is already 1 of the most competitive markets in the world, will allow for aggressive expansion of telecom service providers. Along with that, the adoption of Next Generation Network (NGN) will mean more opportunity as well as the capability for more applications. India is expected to have its 1st operational 3G network this year itself. With the emergence of India as a crucial emerging market, global telecom vendors are looking at India to launch their recent technologies and applications. It is predicted that India can become a global delivery center for telecom applications worldwide, and can leverage its strategic strength in technology to reach out a wider global audience in the telecom space. With a vibrant wireless industry, the wireline sector will see rapid development as applications grow and the rates for applications like leased lines reduce. Lower costs will be directly proportional to higher broadband penetration in the country.

Earning:   Approval pending.