Some customers still look at components level interaction for selling fibre or cable products but more and more customers are moving to end-to-end solutions.
“Covid-19 is an inflection point for the data networks industry. Globally we are seeing people accelerating investments and whatever they intended to do in five to six years, they want to do in two to three years,” says Anand Agarwal, Group CEO, Sterlite Technologies. “Covid-19 has caused some short-term disruption, but in the medium to long term the outlook is bullish with demand for high quality broadband and creation of large scale networks by cloud companies, enterprises and government,” he tells Geeta Nair in an interview. Excerpts:
What has been the impact of the Covid-19 disruption on your company?
Sterlite has plants in India, China, Italy and Brazil. For a brief period all the plants were fully shut but now all are operational. The Covid impact, particularly in the second half of March 2020, coupled with the industry challenges pertaining to China-related impact on optical fibre business, had a bearing on the overall numbers of the company. Short-term is going to be painful for everybody, but hopefully the second half of the year will be coming back to normal and see much larger activity.
Demand for fibre is expected to grow again from 2021 and at rates much faster than currently anticipated. The start of 5G network deployment will see an increase in demand for optic fibre. STL has shifted to integrated solution offering and we started to have a better mix of customers requiring integrated services.The mid- to long-term outlook is pretty strong.
Is this shift to digital a big opportunity for STL?
This shift post Covid-19 towards digital is clearly permanent. While we are seeing a 30-40% increase in traffic, the increase can be much more but is constrained by the capacity of the network. The overall demand is much more than what can be seen currently and most of the networks are running at capacity. The shift to digital infrastructure is going to be permanent. TCS is saying 75% of its employees will operate from home; that means instead of road and transport infrastructure that load is moving to the digital infrastructure. It is going away from from buildings, offices and roads as people will now work from home.
There was a decline in investments by the telecom sector. Will this change now?
In various parts of the world we are seeing that governments are getting extremely aspirant on investing in digital infrastructure. So the basic infrastructure is built by the government, then the service providers come in and use that platform to put on their applications for education, for something like what Jio is doing with Facebook, for strengthening the enterprise ecosystem or application for entertainment. Bharatnet in India is starting to do that but that is only the tip of the iceberg. There has to be multiple such investments in a combination of a public private partnership very similar to what we see on the highway side. It used to be public private, then the government took over and once the traffic comes the government puts it in invites and attracts global investments. Something very similar could happen in the digital infrastructure space also. The government will invest in the core infrastructure and the private sector will put on the applications and do the service provisioning but the pull will come from the demand on the entire infrastructure.
What will be the impact on Sterlite’s business as the shift to digital happens?
We are fully into designing, building, deploying and managing the data networks and we are doing it with our integrated solutions combining optical, hardware and software capability whether it is network augmentation, fibre to home or defence. The level of engagement and activities have gone up. We have very focused customers and geographies and increasingly they are engaging with us when they are thinking of doing their network design and augmentation. Some customers still look at components level interaction for selling fibre or cable products but more and more customers are moving to end-to-end solutions.
You have worked with Reliance Jio, which has attracted a lot of investments. Will there be any spin-offs for you?
This is an investment where Jio is clearly now looking at enterprises becoming its customers. As enterprises become customers, they will require networks – taking fibre to the enterprises, creating the full platform, taking wireless to those enterprises. We are engaged with most of the Indian telcos.