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HCIL: Leading the VSAT market through strategic alliances

April 09, 2013
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Owing to its countrywide reach, satellite-based communication is playing a major role in facilitating the expansion of banking and e-governance services in India. Over the past few years, the number of off-site ATMs, which are typically served by VSAT, has increased substantially. This offers significant business opportunities to players operating in the VSAT market. Hughes Communications India Limited (HCIL), a subsidiary of Hughes Network Systems, LLC, is one such player which has leveraged its strategic business alliances in the banking and e-governance sectors.

In December 2012, HCIL won an eight-year contract, worth Rs 2 billion, to connect 27,000 ATMs of state-run banks with a broadband satellite network. The project is being commissioned by the Ministry of Finance and is aimed at increasing the country’s ATM density. It will help HCIL in strengthening its position in the banking segment, which has become a key area of expertise for the company in the past few years. Currently, HCIL is estimated to have a 35 per cent share in the Indian banking market at the service level. The ATM industry is on a high-growth path with the off-site ATM base growing to around 100,000 over the past three years. It is likely to reach around 200,000 by 2016, presenting major opportunities for HCIL. With a strong portfolio of banking projects, the company is poised to consolidate its position in this market.

In 2011, HCIL received orders to install 5,000 VSATs for providing network connectivity to brown-label ATMs in India. At such an ATM, the hardware and the lease are owned by the service provider, while operations related to cash handling and connectivity are managed by the sponsor bank. This allows banks to establish several ATMs within a short time frame as the installation is outsourced to the service provider. At present, the company’s VSATs are being used by several brown-label service providers including FIS, TSI, TCBIL, Diebold, AGS, Prizm, FSS and Euronet, which provide services to leading banks such as Axis Bank, Canara Bank, the Bank of India and Allahabad Bank. HCIL’s portfolio also includes a Rs 400 million contract from Allahabad Bank, a Rs 125 million project for the Central Bank of India and a Rs 225 million contract from the State Bank of India to deploy a VSAT network.

Leading the VSAT market

HCIL has come a long way since its entry into the Indian VSAT communication segment in 1995. In June 2011, the company overtook Bharti Airtel as the largest VSAT operator in the country. It has been leading the segment since then and currently serves a subscriber base of 59,767 (as of September 2012), accounting for over one-third of the market. So far, HCIL has delivered over 110,000 VSATs to around 250 customers across various business verticals including banking and financial services, telecom, education, digital cinema, digital delivery and e-governance.

Other key alliances

Over the years, education has emerged as an important vertical for HCIL. It launched the HughesNet Global Education service in 2002 and has established significant coverage. Besides, the company has implemented strategic e-education projects for several state governments. Recently, the Punjab government awarded HCIL a contract for supplying and operating a comprehensive, satellite-based network for educational institutions through the INSAT-4CR satellite. Under the contract, HCIL will deploy the satellite-based network to provide educational content and lectures to 2,960 schools in Punjab. These will either be pre-recorded or delivered as live telecasts from studios based in Mohali. HCIL has also partnered with CSC e-Governance Services India Limited, a special purpose vehicle of the Department of Information and Technology, to provide broadband connectivity across 2,500 locations in Uttarakhand, Himachal Pradesh, Jammu & Kashmir, Assam and the Northeast, under the government’s National e-Governance Plan.

The company also offers broadband satellite connectivity to several public utilities. In 2011, it signed a three-year contract with Jaipur Vidyut Vitran Nigam to provide broadband satellite services connecting 825 locations in Rajasthan and a five-year contract with five power distribution companies in Karnataka to deploy a network connecting 713 sites. In December 2012, HCIL signed a five-year contract worth $6 million with the National Bank for Agriculture and Rural Development to offer a broadband satellite network and managed services to over 3,000 branches of the bank.

Challenges and the way forward

One of the key challenges facing the company is limited bandwidth availability. The VSAT segment has not witnessed fresh bandwidth allocation in the past few years. Going forward, HCIL’s wish list on the regulatory front includes the allocation of additional bandwidth and a revision of the existing fee structure. This, the company believes, will drive its growth as well as that of the VSAT industry.

Meanwhile, HCIL will continue to strengthen its position in the banking sector and aim for large-scale e-governance programmes. Besides, it is likely to explore new verticals such as digital content delivery and satellite backhaul, and broadband service provision in the rural areas, to drive growth.

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