The Indian telecom cable market was valued at Rs 15 billion in 2012-13. Of this, the domestic market accounted for nearly 76 per cent and the remaining was contributed by exports. Sterlite Technologies was the market leader, with its telecom division recording a turnover of Rs 9.28 billion during the year.

While the value of the polyethylene insulated jelly filled cable segment continued to decline in 2012-13 and stood at Rs 750 million, the optic fibre cable (OFC) segment accounted for about 39 per cent of the domestic market. Growth in the OFC segment can be attributed to the replacement demand for jelly filled telephone cables (JFTCs). Some JFTC manufacturing units in the country have shut shop owing to low demand. On the other hand,  several global players are planning to set up plants or form tie-ups in the Indian OFC segment.

Growth drivers for the telecom cable market

The telecom cable segment has witnessed limited growth over the past five years, with the market value being pegged between Rs 12 billion and Rs 15 billion. However, in 2013, this is expected to grow to almost Rs 39.5 billion. The primary driver for this growth will be the significant increase in OFC demand. Given its benefits and advantages like high bandwidth, light weight and better quality of voice and data transfer, fibre is emerging as the preferred connectivity medium.

Some of the key growth drivers for the telecom cable market are:

•   Increasing data usage on the 3G platform and 4G long term evolution (LTE) roll-outs (by players like Reliance Jio Infocomm and Bharti Airtel) require high speed and high bandwidth backhaul systems. The demand for cables will increase as service providers upgrade their backhaul systems. OFC, which offers virtually unlimited bandwidth, will be the future of bandwidth-intensive applications like VoIP, IPTV, multimedia video streaming and online gaming.

•   Under the National Telecom Policy, 2012, the central government aims to connect all village panchayats through OFC by 2014. The ambitious NOFN project aims to connect 250,000 gram panchayats across the country by laying over 500,000 km of OFC. With the initial tendering process under way, the domestic OFC industry is gearing up for the project. This requirement would be met by December 2013. Further, repeat orders for 200,000 km of OFC are expected in 2014 and 2015.

•   With the growing demand for bandwidth in the enterprise sector, FTTH is definitely the “end game” in access networks. Other technologies like broadband services, IP-VPN, wireless communication and those related to security are generating demand for telecom cables.

OFC requirements and key challenges

The demand for OFC is increasing as the medium offers virtually unlimited capacity, a high degree of security and long-term economic gains. Also, with the increase in rural telecom penetration, scarcity of spectrum will emerge as a key challenge, and, therefore, the demand for OFC in base transceiver stations access and backhaul networks would increase. The OFC market is expected to witness a compound annual growth rate of 12.5 per cent between 2011 and 2018, and is estimated to reach $290.8 million by 2018.

With the finalisation of orders for the NOFN project, the increasing demand from the defence sector, and upcoming 4G LTE roll-outs, the country’s OFC demand is expected to increase from 6 million km in 2012 to 17 million km in 2013. Meanwhile, the fibre manufacturing capacity has been growing and the industry hopes to achieve a capacity of 28 million fibre km in 2013. Therefore, India will be able meet its future fibre demand domestically.

However, OFC and its associated optics are expensive as compared to their copper counterparts. Generally, each OFC core needs to be spliced in order to be properly connected with network/optical switches. Fibre splicing is a complicated procedure and needs skilled manpower to achieve the required level of precision. Moreover, it is an expensive process as the cost of the splicing equipment and its installation per core is very high. Therefore, the high cost of OFC and total ownership, right of way (RoW), reduced life due to mishandling, fibre cuts and high installation time are the key challenges faced by operators while deploying OFC networks.

Impact of copper/fibre price movements

The telecom sector accounts for nearly 30 per cent of the country’s demand for copper, which accounts for about 80 per cent of the raw material cost of cable manufacturers. Fluctuations in its global pricing, coupled with the sharp depreciation of the Indian rupee against the US dollar, have impacted the operations of cable manufacturers. Further, high market competition has resulted in downward pressures on pricing. Besides, recent events like the closure of Sterlite’s copper smelting unit have led to doubling of copper imports. All these factors have impacted the profit margins of cable manufacturers.

Currently, copper cables have an edge over OFC due to their relatively low costs. However, it would not be surprising if OFC and copper cables reach price parity in the future. OFC’s various technological advantages and operational benefits including lower incidence of cable thefts vis-à-vis copper cables (important in the Indian context) have strengthened the case for its deployment.