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Hughes Communications - Maintaining its lead in the VSAT market

June 15, 2010
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Hughes Communications India Limited (HCIL), which started its operations in the country in 1995, was among the first companies to invest in the Indian software and communications sector after the economy was opened up in the early 1990s. The company currently accounts for the largest shared hub service in the AsiaPacific region, serving about 3,000 very small aperture terminal (VSAT) sites across 2,000 locations in India.

With the increased government focus on the VSAT sector for promoting rural connectivity, these services are receiving a major impetus. HCIL is actively involved in the government's e-governance initiatives besides offering value-added services like interactive vocational education, telemedicine and e-commerce. Presently, it is offering its services to more than 6,000 remote kiosks across the country.
Going forward, the company's focus in this area is likely to increase.

The company, which is primarily a VSAT service provider, has also been diversifying its portfolio of services. It is currently classified into four basic business units -­ enterprise networks, education, retail and broadband services. HCIL offers managed network services like broadband internet access, high speed data, video conferencing, voice over internet protocol, multicast data delivery and multimedia services including MPEG video and digital video recording.

Market position
The first company to introduce Ku-band services in India through the NSS 11 satellite, which is four times more powerful than the INSAT series, HCIL is one of the leading VSAT providers in the country today with a 29 per cent share of the market and about 33,833 subscribers on its network as of December 2009. In fact, in this segment, it is not far behind the market leader Bharti Airtel, which has a 29.64 per cent share. Bharti overtook Hughes in 2008. HCIL's other competitors include HCL Comnet and Tatanet.

Financial position
Financially, the company has been on a strong footing. HCIL recorded a 15 per cent increase in its total revenues and a 22 per cent rise in its service revenues in the quarter ended March 2010 over the corresponding quarter in 2009. There was a 30 per cent increase in its adjusted earnings before interest, taxes, depreciation and amortisation during the same period.

However, the recent price pressure and erosion of margin in the enterprise business, a major market for the company, is likely to have a negative impact on its balance sheets. "Our efforts to mitigate the risk is through higher levels of customer education, building unique customised solutions with higher value realisation and higher levels of economic efficiency through automation and process control", says Partho Banerjee, chief executive officer, HCIL.

Key contracts
HCIL is most active in the banking and finance vertical. Its key clients include the State Bank of India (SBI), ICICI Bank and UTI Bank besides the SREI Group and the Antrix Corporation. As of December 2009, Hughes had connected over 6,500 core banking solution (CBS) branches and about 4,500 ATMs or kiosks for various banks in the country using VSAT technology.

One of its biggest contracts has been the Rs 225 million, five-year contract from SBI for deploying 2,880 satellite broadband networks to connect the bank's off-site ATMs across the country. This contract, signed in September 2009, involved the deployment of a turnkey network, including the provision of system integration, satellite bandwidth and network management services. Hughes also had to provide secured VSAT-based connectivity along with backhaul to the bank's data centre and disaster recovery locations. In addition, about 2,000 ATMs were to be set up by its associate banks. A part of SBI's ambitious "25,000 ATM" project, which aims to double the bank's ATM base from 12,250 to 25,000, this contract has enabled SBI's associated banks to directly place orders with HCIL for connecting their ATMs.

Other contracts in the banking, financial services and insurance segment include deals signed by the company in October 2008. These included contracts for linking 1,200 off-site ATMs and branches for Canara Bank, around 500 branches and ATMs for the Bank of India, and 100 branches for Yes Bank. In June 2008, the company had deployed a satellite broadband network for the Union Bank of India to improve its core banking services.

Some of the other key projects implemented by HCIL include the deployment of a satellite-based VSAT hub system in early 2008 to provide voice and data connectivity to remote railway stations.

Though the competition in the VSAT industry has been gradually increasing with several new players gaining a foothold, HCIL has been able to maintain its dominance in the market.
Richa Kansal

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