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HCIL - Diversifying beyond VSAT to take on competition

June 15, 2009
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Pesent in the Indian market for about wo decades now, Hughes Commuications India Limited (HCIL) has not only established itself firmly in the VSAT space but has also worked steadily to diversify and widen its range of services.

The company has introduced managed network services and provides enterprisewide networking solutions like messaging, ATM, multicasting, enterprise resource planning, video conferencing and interactive onsite learning.

HCIL's key clients include the State Bank of India, ICICI Bank, Hindustan Lever, Galileo, ITC, Sony, UTI Bank and the Indian Railways. The company is also actively involved in the government's National eGovernance Plan (NeGP) and is playing a key role in providing connectivity to the rural regions.

Having worked with over 50 top banks in the country, HCIL has developed a strong understanding of the demands of the banking sector. In October 2008, it secured multiple deals from Canara Bank, Bank of India and Yes Bank for providing 1,800 satellite broadband terminals to help improve their core banking services. HCIL will link 1,200 offsite ATMs and branches for Canara Bank, around 500 branches and ATMs for Bank of India, and 100 branches for Yes Bank. It will also deploy turnkey networks providing satellite bandwidth, system integration and network management.

In June 2008, the company deployed a satellite broadband network for Union Bank of India for running its core banking solution across 400 branches and ATMs in the country. The project, valued at Rs 22 million, included the deployment of a turnkey network encompassing system integration, satellite bandwidth and network management. The network is built on a satellite-based virtual private network technology and consists of a central network operations centre that is connected to the various branches/ATMs of the bank via satellite.

Globally, Hughes' clients in the banking, financial services and insurance (BFSI) sector include banks like Banco do Brasil, People's Bank of China, HSBC and ANZ. On an average, over 7.5 million financial transactions are processed on Hughes' network every day by retailers and financial customers across the world.

In India, with an eye on the growth witnessed by small and medium enterprises (SMEs) and the increased focus of these companies on strengthening their IT infrastructure, HCIL set up its SME division in 2007. In October 2007, the company introduced its satellite broadband services in terrestrially underserved locations and rolled out an all-India channel network targeted at organisations with single and multiple locations. The company also set up a robust channel network to provide services.

On the rural front, the company provides VSAT services for the rural regions as the potential for deploying satellite technology to deliver communication services is huge. The lack of adequate communication infrastructure in these areas and the high cost and technological problems associated with building terrestrial infrastructure in rural areas offers big opportunities for VSAT services. Besides providing basic connectivity in the rural areas, HCIL delivers value-added services like interactive vocational education, telemedicine and ecommerce. The company has tied up with Comat and the Haryana government to set up special centres called e-Disha Ekal Seva Kendras which will enable access to various e-governance applications.

Under the NeGP, HCIL is in the process of enabling e-governance services over its telecom network, as it is also engaged in connecting over 10,000 common service centres across the country.

In February 2008, the government gave its approval for a national long distance (NLD) licence for the company, which was crucial for its VSAT business. However, the issue of the licence took some time after that as the company was involved in a legal wrangle with the Department of Telecommunications (DoT) over the licence fee for its VSAT services.

HCIL is one of the largest VSAT operators in the country accounting for nearly 30 per cent of the market as of December 2008. However, the company lost its leadership position in the segment to Bharti Airtel during the OctoberDecember 2008 quarter. In fact, its market share has been on a decline since December 2007 with Bharti Airtel rapidly gaining ground. HCL Comnet is another major player in the VSAT space with about 27 per cent market share. Interestingly, the period during which HCIL's NLD licence was pending with DoT was the time in which Bharti Airtel's VSAT business witnessed the highest growth rate of over 81 per cent.

Clearly, HCIL is under significant pressure as competitors expand their services. The company will have to take measures on an urgent basis to retain its market position even as it expands into other areas.

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