Modest Growth

The modem market has grown to Rs 390 crore in FY 2007-08 as compared to Rs
335 crore in the previous fiscal, recording a growth of over 16.4%.

Analyzing the market, the growth of dial-up modems is not very impressive;
however, the market is expected to grow on account of healthy growth rate on the
DSL & ADSL modem front.

The xDSL modem market stood at Rs 180 crore in FY 2007-08 while the dial-up
market was at a mediocre Rs 25 crore. The SOHO and SME segments are going to be
the key sectors for the market as they contribute a major chunck of business.

The number of broadband subscribers (with a download rate of 256 Kbps or
more) has reached 3.9 mn by the end of March 2008 as compared to 2.34 mn last
year, thereby showing a promising but not very impressive growth of over 65%.

Market Players

According to VOICE&DATA estimates, Atrie Technology has retained its
leadership position in the modem market. The company recorded a 5.7% growth in
FY 2007-08 and increased its market share to Rs 166 crore. The main orders came
from Syndicate Bank, Oriental Bank of Commerce, Bank of India, Bank of
Maharashtra, Dena Bank, and Vijaya Bank.

MRO-TEK and D-Link, on the other hand, showed negative growth rates.
MRO-TEK's growth rate was 25% lower and its revenues stood at just Rs 41.2 crore
in FY 2007-08 as compared to the Rs 55 crore recorded in the previous fiscal.

The company's continuous decline in terms of revenue in the modem segment is
attributed to its focus on the niche leased line modem segment, in which the
company is one of the key players.

The main revenue drivers of the company are compression equipment and media
converters. MRO-TEK is also in the process of developing more products in-house
to cater to the emerging needs of broadband.

D-Link is playing the cards according to the latest trends. The company has
introduced newer versions of modems in the market with the capability to support
IPTV deployments and Windows Vista. The company fetched major orders from Tata
Communications, Railways, and BSNL in 2007-08.

Unlike MRO-TEK and D-Link, Bharti Teletech increased its revenue by 15% to
reach Rs 56.3 crore during FY 2007-08 as compared to Rs 49 crore in the previous
fiscal. The company also stands at #2 in the annual survey of VOICE&DATA.

Bharti Teletech's major orders came for combo modems and Wi-Fi modems from
private service providers.

Gemini Communications also increased its market share significantly in the
last financial year. The company is presently not in the dial-up modem section
and has projects with Tamil Nadu Electricity Board, BSNL, and Indian Railways.
The company is a prominent player in the wireless segment, but is completely
absent in the dial-up modem segment.

Globally, ADSL is nearly 90% of the Internet access media. In FY 2008-09, it
is expected to see the growth of leased line in the banking, finance, railways,
airline ticketing, and freight management segments. The modem market is
extremely price sensitive and profitability often has to be compromised to
maintain volumes.

Trends

In the current scenario, the industry is seeing a colossal demand for DSL
modems from service providers who buy through tenders.

With the popularity of the new Internet and broadband applications, and the
emergence of technologies such as WiMax, broadband access has increased and has
created a new set of customers who insist on immediate response time.

The ISDN modem market will also continue to gain traction between Small and
medium enterprises as well as SOHOs.

Globally, the industry is witnessing amplification in the adoption of
Ethernet and Wi-Fi modems with VoIP connectivity, as consumers are increasingly
availing themselves of VoIP services.

Similar trends can be witnessed in India as the adoption of Ethernet and
Wi-Fi technologies is poised to increase.

The modem industry saw the launch of IADs (integrated access device) and
remote management facility as key technology additions during the last financial
year.

In terms of new technology addition, VDSL technology was introduced in FY
2007-08 and saw niche deployments. The ADSL2+ technology is expected to prevail
for more time.

Prospects Aplenty

Interestingly, the market shows the tendency of shift toward the
incorporation of technologies like wireless/firewall-VPN into ADSL.

As the user segment is getting more entertainment-hungry and service
providers increasingly offer value-added services rather than simple broadband
browsing, the modem market is expected to see a noteworthy growth in FY 2008-09.

The growing demand of broadband and its innovative applications will be
accommodating the demand of DSL technology modems. While VDSL technology will be
of huge interest to the industry, ADSL2 and ADSL2+ will also continue to show
their strength in the market.

The popularity of ADSL2+ technology modem is increasing because of its
effectiveness to offer a high-speed broadband connectivity without bothering
about the phone line as compared to dial up.

The increase in the number of PC users is also set to increase the demand for
modems in the country.

In FY 2008-09, BSNL/MTNL plan a total of 7.5 mn modem tenders whereas Bharti
plans to add substantially to its existing modem subscriber base.

Considering the potential of the Indian broadband market, and the kind of
initiatives and projects undertaken by the government and services providers to
proliferate the broadband incursion in the country, the modem market is expected
to grow significantly in FY 2008-09.

Jatinder Singh

jatinders@cybermedia.co.in