Telecom cable companies’ operating profit will fall: Study

Krishna Gopalan in Mumbai

A Cris Infac (a wholly-owned subsidiary of Crisil) study has predicted that operating profit of telecom cable companies would decline during the financial year 2001-02. This has been attributed to a significant decline in the operating profits of optical fibre cable (OFC) and jelly-filled telecom cable (JFTC) manufacturing companies.

JFTC accounts for 80 per cent of the aggregate turnover of telecom cable manufacturers, while OFC accounts for the balance 20 per cent. Interestingly, the overall offtake of OFC from the companies is expected to increase by over 70 per cent in 2001-02. The study points out that the fall in prices of OFC is what will contribute to lower profits.

For instance, OFC prices have declined by 45 per cent in the bidding for BSNL’s tender for 2001-02, compared to that of 2000-01. This decline has been attributed to a decline in the price of the main raw material optical fibre (OF).

The price of optical fibre, says the study, has been steadily falling since April this year. This is on account of a slowdown in the network roll-out of major international service providers. The current cost is in the range of $30 per km against a high of $80 per km towards the end of last year.

Cris Infac’s study predicts that the net sales of the JFTC division of the cable companies will increase by around 3.5 per cent. The growth rate in offtake is expected to offset the decline in average JFTC price realisation. The study quotes the case of BSNL, where the value of its JFTC tender fell significantly by 16 per cent, to around Rs 616 per core kilometre (ckm) over those in 2000-01.

During April-June 2001, net sales of cable producers increased by over 40 per cent because of a significant increase in the offtake of JFTC. Overall demand increased by around 70 lakh ckm for the cable producers. The study adds that this increase will not be indicative of the trend for the July-March 2001-02 period.