The VSAT industry continued with its growth trajectory this year as well, to record a growth of around 36.2%. Its installed base on shared hub operations reached 82,063 VSATs by March 2008, up from 60,210 VSATs as on March 2007. In total, there were 21,873 VSATs installed in the last fiscal.

The overall size of the market stands at Rs 600 crore, including the equipment and services segment.

Hughes retained its leadership in the services category with its revenue from the services segment reaching Rs 135 crore in FY 08, up from Rs 120 crore in FY 07. Its biggest order worth Rs 40 crore came from State Bank of India for 1,430 VSATs. Apart from this, Hughes also bagged orders from ICICI Bank, Infotel Satcom, Reliance Retail, BPCL, Canara Bank, and UFO Moviez. The company is targeting a growth of over 25% in the current fiscal. Bagging some major orders, Bharti Airtel managed to dethrone HCL Comnet from the second position in FY 08.

It was an exceptional year for Bharti Airtel. The company increased its installed base from 13,500 VSATs in FY 07 to 23,475 VSATs in FY 08 leading to a substantial increase in its market share, from 22.6% to 28.6%. Bharti recorded a revenue of around Rs 90 crore from the services side of its VSAT business. Bharti picked up significant orders including the prestigious e-Gram connectivity project from the Government of Gujarat, an order for common service center connectivity from 3i Infotech, and another from World Health Partner.

A slightly slower growth rate could be attributed to the availability of satellite bandwidth and cost, both posing serious challenges for the industry. Bandwidth availability in Ku-band is a major constraint and the industry keenly awaits the launch of new satellites to bridge the demand-supply gap

HCL Comnet on the other hand installed just 3,055 VSATs last fiscal. The company got orders from the Indian Navy, Unicon, Punjab National Bank, Bank of Baroda, United Bank of India, and Sew Constructions.

Essel Shyam saw a major increase in its VSAT installations 4,949 VSATs by March 31, 2008, up from 2,300 VSATs by the end of March 31, 2007 recording a growth of 115%. Total revenue was Rs 97 crore.

Tata Net increased its installed base from 3,868 VSATs by the end of March 2007 to 5,060 VSATs at the end of March 2008. The company is creating a `Pan-Africa communication network for telemedicine, tele-education, Internet, videoconferencing, tele-communication, and e-governance services across 53 African countries.

Apart from this, significant new entrants in its order book for FY 2007-08 included ACC, Tata Motors, Kingfisher Airlines, Gujarat Ambuja, Defence Electronic Applications Lab, E Edge, and NTPC among others. Tata Net is also renewing its SME initiative with thrust on Internet connectivity for remote towns for small enterprises, hotels, and education institutions.

Small players like ITI and GNFC stood with an installed base of around 45 and 5 VSATs by the end of March 2008.

Market Dynamics
One of the biggest achievements of the VSAT industry last year was the emergence of big orders of more than 500 VSATs each, unlike previous years. For instance, of all the contracts that Hughes bagged, only one amounted to less than 500 VSATs.

Over the years, the role of VSAT has transformed from being the only available means for connectivity, to its present complimentary role in supporting the more prevalent terrestrial solutions. Technology has emerged as a winner in broadcast and multicast applications, which are being extensively used in banking, broking, and manufacturing segments, for their enterprise core networking requirements.

There is also an increased adoption of multicast, which is good news for the industry. Segments like digital cinema, digital signage, e-learning, business IP television (a way of streaming audio/video content within the organization) are using the multicast solution very effectively for content distribution.

Following the market one can see that there is a clear movement toward shared hub as compared to dedicated hubs. As on March 31, 2008, total VSATs on the shared hub stood at approximately 80,000, as compared to 20,000 on captive hub. The dedicated network model is also facing a slowdown and the shared network model is growing at a faster pace. Even government users have started adopting the shared network model.

In a dedicated hub, the charge for the license fee per remote VSAT per annum is Rs 15,100, whereas on the shared hub, the charges are 10% revenue share. Since the average VSAT bandwidth annual ARPU is Rs 40,000 per annum, it translates to Rs 4,000 per VSAT per annum. Hence, there is a big overhead on license fees in a dedicated hub model. This is the main reason for the movement toward outsourcing of VSAT services.

As terrestrial networks continue to penetrate, VSATs continue to play a critical role in providing access continuity services. This has led to the emergence of hybrid networks that has probably been the biggest development in favor of the industry. Telecom operators provide the bulk of the infrastructure, along with VSAT service providers equipped to provide a managed network service that comprises satellite backup for the urban sites and satellite as the primary medium for semi-urban and rural sites.

Some Worries
The VSAT industry is currently facing pressure on margins. The year gone by saw sharp decrease in the price of VSATs. Which went to Rs 45,000 from Rs 70,000 in April 2007.

The industry also faced challenges from the regulatory side. While high growth in GSM and CDMA businesses have provided a big opportunity for VSATs to link up the remote towers of operators to base stations, the highly complicated and long regulatory process has taken away considerable business potential from the industry.

Apart from these, satellite bandwidth availability and cost, pose a challenge to the industry. Bandwidth availability in Ku-band is a major constraint and the industry is keenly awaiting the launch of new satellites to bridge the demand-supply gap.

Gagandeep Kaur
maildqindia@cybermedia.co.in

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