With the government declaring 2007 as the “Year of Broadband” and telecom operators finalising plans to deploy broadband on a large scale, India has emerged as a key market for IP-based networking solutions provider UTStarcom.
Founded in 1991 and headquartered in Alameda, USA, UTStarcom is a global provider of a suite of telecom solutions, including wireless and wireline access networks, broadband, IP switching, transmission and 3G solutions. These enable service providers to deliver high quality, affordable voice, data and video services in both emerging and established telecom markets. The company has also been a pioneer in DSL access multiplexer (DSLAM) and IP-based personal access system (IPAS) technologies.
India operations
The company was a late entrant in the Indian market, setting up operations in 2001. While it remained a low-key player for the first three years and did hardly any business on the consumer side till as late as 2005, the company picked up steam with broadband becoming the buzzword in the industry.
Since then, it has managed to hold its own in an industry dominated by large players like Ericsson, ZTE, Huawei and Nokia Siemens.
Firmly believing that broadband will replicate the mobile success story, the company has focused strongly on this area for the past two years. “We started work on broadband in 2005 and that is why it yielded great results for us in 2006.While India may be behind schedule as far as the government’s target of 20 million broadband connections by 2010 is concerned, the point of inflection has been crossed this year and the country will witness exponential broadband growth,” says Vijay Yadav, managing director, South Asia, UTStarcom.
In less than five years since its market entry, UTStarcom’s customers in India include all the leading providers of fixed line telephone services ?? Bharti Airtel, Mahanagar Telephone Nigam Limited (MTNL), Tata Teleservices Limited (TTSL), Reliance, Bharat Sanchar Nigam Limited (BSNL) ?? as well as regional players like Himachal Futuristic Communications Limited and Shyam Telelink.
“At present, we account for about 5060 per cent of the total market. We have achieved incumbency and the majority of installed bases with all these seven wireline operators,” says Yadav.
Its revenues have also grown exponentially. In addition, it has set up four full-fledged global R&D centres that have around 275 employees focusing on cutting-edge development work for its global operations.
The company has signed a number of contracts over the last two years, the most important being a three-year project to deploy 9 million DSL lines for BSNL. The project was launched in 2006 and will be completed by 2009. “This project is one of the key reasons for the jump in broadband subscriptions from 1 million last year to about 2.5 million today,” says Yadav.
UTStarcom will provide the core equipment for the 9 million lines and access for 4.5 million lines. Collectively, the company will service about 75 per cent of the contract in value terms. Access for the remaining 4.5 million lines will be provided by its competitors ZTE (20 per cent) and Siemens (30 per cent).With this contract, the company has firmly established itself in the broadband space. “If we look at the BSNL contract, the ratios are not going to change over the next three years and once we have achieved a significant footprint it will be easier to maintain it, as market shares may at best swing by 3-4 per cent,” says Yadav.
Earlier, in December 2005, the company had signed an expansion contract with BSNL to deploy 90,000 lines of the DSLAM solution in the operator’s nationwide broadband network.
There has also been an acceleration in the broadband deployment plans of the other wireline operators, including the major players. These operators collectively account for about 1.5 million broadband lines per annum.
The company is clearly a winner as far as DSL modems are concerned and has successfully completed modem-only projects for both MTNL and BSNL when the incumbents floated tenders for 250K and 450K respectively. The company claims that while it accounts for more than 75 per cent share of Reliance and Tatas’ DSL modem business, it accounts for only 33 per cent share for Bharti Teletech.
Its other contracts include one with Reliance Communications to provide the technology for India’s first CDMA Windows Mobile 5.0 pocket PC-PPC 6700 in November 2006 and a contract to supply its NetRing 600 and 2500 optical transport solutions for the expansion of RailTel’s communication systems.
Revenues
The year 2006 was a good one. The company witnessed a jump in its India revenues, which reached approximately $150 million from $50 million in 2005, an increase of 200 per cent.
“After this quantum leap, if we grow at a rate of about 30 per cent with the industry growing at about 17-18 per cent, we will continue to do well,” says Yadav.
To achieve this growth rate, the company has increased its manpower by 60-70 per cent. There are now about 160 people looking after the India operations.
Future plans
The company has devised a two-prongedgrowth strategy and intends to focus on exploring different mediums like fibre and wireless to increase broadband penetration and promote broadband applications like IPTV.
Till very recently, most of the growth in broadband penetration was achieved by using copper. But operators such as Bharti and TTSL have made a conscious strategic push towards wire because that is where the operator really owns the customer.
For operators considering deploying more wireline networks, it is worth spending time deciding whether they should opt for copper or fibre since the cost of deploying either is now almost equal.
“Our belief is that in greenfield areas there will be a higher ratio and more fibre deployments even at the access. Fibre at the core has become acceptable and transmission is almost 100 per cent fibre, but on the access side, it is being called by different names ?? FTTC, FTTH. We are likely to witness a revolution where fibre will reach the last mile to the kerb, if not to the home. There will be many relevant technologies for deploying broadband using fibre, and we believe one of them will be Gigabit Ethernet Passive Optical Network (GEPON) or Ethernet PON,” says Yadav.
In May 2007, UTStarcom won a contract, along with United Telecom, to deploy its GEPON fibre access solution to serve as the foundation for the new statewide area network in Goa. UTStarcom’s FTTx solution will be used to provide high speed fibre connectivity across all state government offices in Goa for running e-governance applications such as education, health care, tele-medicine, and law and order.
The network will be capable of delivering up to 100 Mbps bandwidth to each office and is expected to be extended in the near future to cover sub-districts and villages to enable the Goa government to provide better services to its residents.The rollout will start in August and the project will initially cover 1,200 locations.
“The success of this project is crucial as it will substantiate the possibility of deploying a high bandwidth fibre-based network in the industry. It will also prove that state governance becomes more efficient if a robust network is available,” points out Yadav.
The company is also joining the Wi-Max bandwagon and will offer wireless broadband access by the end of this year. It is going to offer the mobile WiMax version.
The company also intends to increase its focus on IPTV and is currently at various stages of trials and testing with operators. As a step in this direction, the company has signed a three-year $100 million contract through its partnership with AKSH Optifibre to deploy its RollingStream end-to-end IPTV solution with MTNL.
The contract represents the first commercial IPTV deployment in India. The service will utilise MTNL’s existing broadband network as the content delivery backbone. Trials were conducted not only for technical feasibility but also to check for commercial viability in about 1,000 households.
UTStarcom’s RollingStream is a very widely used IPTV platform and accounts for over 2 million subscribers in China, which is the largest market for IPTV in Asia followed by Japan, which has a deployed capacity of about 1 million, and India, where the capacity currently stands at only about 500,000.
Some issues
One major concern is the lack of copper.BSNL owns about 40 million lines of which only 25-30 per cent are ready to provide broadband. This limits the potential number of lines to about 12 million whereas the contract itself is for only 9 million lines.
This means that BSNL’s broadbandcapable wire will be exhausted soon.While operators may consider deploying fibre, getting fibre accepted as a medium is likely to be a challenge.
“This challenge can easily be addressed now that we have 20 million subscribers capable of paying about $8 per month, and that too for a service that was a luxury sometime back. Moreover, now operators can provide broadband for as little as $5 per month and may offer IPTV services to customers for a little more. Therefore, IPTV will clearly be a driver for broadband in the future,” says Yadav.
Global operations
The company recently announced its preliminary financial results for the quarter ended June 2007. With market capitalisation down to $493 million, it had $528 million in cash, down from $658 million in June 2006.
Globally, the company is coping with a variety of investigations, involving stock options backdating, accounting as well as other issues.
However, despite these issues, the company has won a wide array of contracts globally. For instance, in July 2007, it signed an agreement with China Telecom to deploy its RollingStream IPTV solution.Its other global clients include telecom majors such as British Telecom, Deutsche Telekom, France Telecom and Japan-based SoftBank. It also has a strong focus on research with operations in the US, Canada, China, Korea and India.
Conclusion
India is an important market for the company. It expects the country to be its second largest market by early next year, overtaking Japan.
IPTV initiative
In February 2007, UTStarcom signed a contract with MTNL to deploy IPTV services in Delhi. IPTV uses a two-way digital broadcast signal, sent via a broadband connection to a set-top box, to access media sources.According to Vijay Yadav, MD, South Asia, UTStarcom, “IPTV will be the killer application for increasing broadband penetration in India.”
For a rental of Rs 125 to Rs 250 per month and Rs 500 basic registration charges, TV viewers can experience the superior quality and content offered by digital TV. Users can also access video calling, gaming and video-ondemand services.
With BSNL and Bharti also set to launch the service, UTStarcom is looking at significant business potential in this segment.
