The central government and industry regulator Telecom Regulatory Authority of India (TRAI) may have given the go-ahead for in-flight connectivity services over Indian airspace late last year, but no firm has begun offering them yet. This may change soon, however, with several developments over the last few weeks indicating that service providers are getting close to a roll out.
While the first in-flight connectivity licence was issued to satellite communication market leader Hughes Communication India only in February this year, nearly three months after the government gave the green light, the subsequent months have seen a flurry of licence issues. After Hughes, satellite service providers like Tatanet Services, a wholly-owned subsidiary of Nelco; Bharti Airtel subsidiary Indo Teleports Limited (ITL) and state-run Bharat Sanchar Nigam Ltd (BSNL) have all been granted 10-year licences by the Department of Telecom. Sources also say that several other telecom and satellite communication majors like Reliance Jio, Ortus Communications and Cloud Cast Digital have made applications.
More recently, the top two market leaders in the Indian Very Small Aperture Terminal (VSAT) industry — Hughes Communication India and Bharti Airtel — have announced plans to merge their two businesses together. VSAT services are used to provide satellite-based telecom and internet access to individuals and enterprise users, especially banks and their ATM touchpoints.
However, VSAT is also the backbone of in-flight services across the world and experts say that the impending merger of Hughes and Airtel’s VSAT businesses will create a giant entity capable of taking on rivals in the sector, both existing and new like Reliance Jio.
According to TRAI’s market report for the quarter ended December 2018, the number of VSAT subscribers in India stood at 2.87 lakh, growing by 1.96 per cent. Hughes Communications controlled the lion’s share of the pie (35.89 per cent market share), followed by Bharti Airtel (27.7 per cent) and Tatanet Services (23.51 per cent). Post merger, the new company is set to hold nearly 64 per cent of the market.
Industry observers say that the VSAT market is currently rather minuscule compared to the larger telecom industry, at around Rs 900-1,000 crore a year. However, the rollout of in-flight services has the potential to open up the segment, and ongoing consolidation is a sign that companies are gearing up to take on the new market, say insiders. “The Hughes-Airtel combine can be formidable because they can leverage what economies of scale are there. Secondly, with Jio also an aspirant, incumbent market leaders will need to find ways to counter Jio’s financial muscle. Consolidation is one way to do that,” said a senior industry executive.
For their part, Hughes and Airtel say “the combined entity will benefit from enhanced scale, improved operational efficiencies and wider market reach”. “(We) will be well positioned to leverage the demand for secure connectivity in a rapidly growing digital economy,” an Airtel statement said.
“Combining the proven capabilities of both companies,” added Ajay Chitkara, director and chief executive officer, Airtel Business, “the partnership will bring synergies to the forefront for the benefit of customers.” Post the merger, Hughes will hold 67 per cent stake in HCIL, while Airtel will have a 33 per cent stake.
The in-flight services market is expected to rise sharply. Euroconsult, for instance, says that over 23,000 commercial aircraft will offer such services to fliers by 2027 globally, from just around 7,400 in 2017.
