Powering 5G services: Telcos may spend up to $2.5 billion on optical fibres

5G, fibre-to-home, Bharat Net will lead to demand surge in next 3-4 yrs

Optical fibre cable (OFC) manufacturers are bracing to meet a multifold increase in fiberisation, aggressively tap global markets to power 5G services, and cope with demand from fibre-to-the home (FTTH) fixed broadband. Telcos estimate that they will be spending anything between $1.5- 2.5 billion in India on OFC in the next three to four years. Global demand, with prices firming up due to 5G and FTTH roll out, will go up from $9.2 billion (502 million fibre kilometres) in 2021 to over $12 billion (610 million fibre kilometres) by 2024 - a CAGR of 10 per cent.

Optic fibre players say that demand for fibre will rise between twofold to threefold. Currently, it stands at 20 million fibre kilometres with about half, according to analysts, having come from Reliance Jio.  

“We estimate a threefold increase in demand annually in India to 60 million fibre km with half coming from 5G and fixed FTTH broadband providers and  25 million fibre kilometres coming from government contracts. As to the cumulative demand, we expect it would be about 240 million fibre kilometres in four years,” said Ankit Aggarwal, managing director of Sterlite Technologies which is among the top three players in the country.

Another big player, HFCL, is more conservative. “We expect the demand to more than double to 45 million fibre kilometres, with over two thirds coming from 5G telco operators and the rest from the government and others,” said HFCL chairman Mahendra Nahata.

While they differ on the size of the government Bharat Net contracts which entail connecting 360,000 villages to the internet in three years, both Nahata and Aggarwal agree that there is already enough capacity available to meet the multiple increase in demand as well as grab a larger share of the global market because most of the investments required for expansion have already been made.  

“We have enough capacity. All the players together have a capacity to manufacture 100 million fibre kilometres a year,” said Nahata. “In HFCL we are leveraging our capacity and domestic  demand to go global where there is a huge demand for FTTH which is taking off in a big way. ”

Analysts say that HFCL is pushing the pedal. Its target is to double its revenue from the global markets in two years. To this end, it has entered 30 countries to sell its products, built a team based in the leading global markets, and is implementing a Rs 400 crore expansion plan which includes doubling fibre capacity and increasing cable making production by 40 per cent, primarily with an eye on the export market.      

Yet India’s share of the OFC global market currently remains very small, at 10 per cent of the total non-China global market and most of it comes from Sterlite Technologies.

The firm is now setting up an optical fibre cable facility in the US which should be running by Q3 of FY23. It has been able to make a reasonable  dent in certain markets such as getting a 19 per cent share of the  OFC market in Europe and 14 per cent of the market in north America.

Sterlite has also recently won a multi-million dollar contract with a north American telco for optical fibre cable.

Despite this new push due to 5G, India accounts currently for only 4 per cent of the global demand for OFC, says Aggarwal. In contrast, China controls 50 per cent of the total demand annually.

Powering 5G services

• Demand for OFC to go up two to three times annually and could hit 60 million km fibre 

• Telcos to invest between $1.5 and $2.5 billion for OFC 

• Large part of the demand will come from 5G players as they increase fiberisation of tower backhaul, increase use of mini cells, and expand FTTH 

• Bharat Net programme to link every village with the internet and will require a lot of fibre 

• Global market expanding by 10 per cent CAGR; to hit $10 billion by 2024