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Sector Focus : Telecom Cables

Telecom cables industry: Post-budget

State of the industry (2000-01)

Tariffs, prices and landed costs

 

Tariffs (per cent)

Prices (Jan 2001)

Landed costs (Rs/tonne)

 

Customs

Excise

Dom-
estic

 

Intnl

 

Pre-
budget

Post
budget

 

2000-01

01-02

2000-01

01-02

(Rs/ton)

 

($/ton)

 

 

 

Jelly-filled telecom cables

26.9

24.8

16.0

16.0

733

1

-

 

-

-

Optical fibre cables

21.2

19.6

16.0

16.0

8,422

2

-

 

-

-

Copper

44.0

40.4

16.0

16.0

146,700

3

1,788

 

146,822

143,112

Preform

9.7

9.2

16.0

16.0

-

 

-

 

-

-

Optical fibre

21.2

19.6

16.0

16.0

4,000

4

60

5

3,932

3,932

Polyethylene

44.0

40.4

16.0

16.0

49,300

3

633

 

50,265

48,995

Polypropylene

44.0

40.4

16.0

16.0

43,268

3

575

 

45,696

44,541


ckm: core kilometers; fkm: fibre kilometers; JFTC: Jelly-filled telecom cables; OFC: Optical fibre cables.
1 Weighted average prices (in terms of Rs/ckm) of BSNL's JFTC tender for 2000-01.
2 Weighted average prices (in terms of Rs/fkm) of BSNL's OFC tender for 2000-01.
3 Market prices.
4 Market prices, in terms of Rs/km.
5 Market price, in terms of $/km

Source: CRIS INFAC

  • During the 2000-01 to 2002-03 period, demand for optical fibre cables (OFC) is expected to increase at a CAGR of around 40 per cent. Growth in the demand for OFC is expected to be high due to a significant increase in the consumption of OFC in long distance telecommunication networks by BSNL and other private operators.
  • In 2000-01, there was a severe shortage of optical fibre (main raw material for OFC), largely due to higher demand for telecommunication network. Shortage of optical fibre is expected to continue till April 2002. (OFC producers have entered into long-term contracts of 2 years with optical fibre suppliers.) Given the higher expected demand for OFC and shortage of optical fibre, some cable producers have proposed to integrate into the manufacture of optical fibre, in order to ensure continuous supply and increase margins.
  • In 2000-01, BSNL placed orders of around 499 lckm of JFTC, accounting for 95 per cent of the total orders placed.
  • In 2000-01, operating margins of JFTC and OFC producers are expected to decline, due to an increase in the prices of raw materials, copper, optical fibre, polyethylene and polypropylene.

Budget impact

Impact factors

Company name

Impact

Impact factors

Birla Ericsson Optical

Pos

A, B

(37.70, 40.15)

 

 

Finolex Cables

Pos

A, B

(188.40, 194.05)

 

A, B

RPG Cables

Pos

A, B

(22.20, 23.95)

 

 

Sterlite Optical Telecommunications

Pos

A, B

(562.55, 571.20)

 

 


Note:
Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
pos= positive neg= negative neut= neutral.

Source: CRIS INFAC

A: The reduction in effective customs duty on copper, polyethylene and polypropylene is expected to have a positive impact on producers of JFTC and electrical cables. Companies with a larger proportion of JFTC and electrical cables (over 90 per cent) in their product mix, such as Finolex Cables, RPG Cables are expected to benefit more as compared with companies such as Birla Ericsson which have a relatively lower proportion of JFTC (about 75 percent) in their product mix.

B: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on producers.

Rediff-CRISIL Budget Impact Analysis
Budget 2001


Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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