Anand Agarwal, the group CEO of Sterlite Technologies Ltd—India’s largest optical fibre provider—has big plans for the company. Curiously, they have little to do with fibre. On 23 August, Agarwal told the press that Sterlite would hire 300-400 professionals to work on new focus areas. Specifically, developing wireless and 5G technology.
The announcement to ramp up its 3,100-strong workforce follows on from a string of peculiar investments over the past year. In September 2019, Sterlite acquired United Kingdom-based IDS Group, which designs data centres. Three months later, it picked up a ~13% stake in Israeli software firm ASOCS, which specialises in virtual radio access networks (RAN)—software for the radios that transmit mobile network signals.
Sterlite also announced partnerships with American enterprise software major VMware and Gurugram-based VVDN Technologies. Both tie-ups are geared towards developing 5G solutions.
The Pune-headquartered company has clearly seen the writing on the wall—it can no longer rest on its optical fibre laurels. Part of multi-billion-dollar mining conglomerate Vedanta Group, Sterlite is one of the top 10 fibre suppliers worldwide, catering to around 12% of global demand.
Fibre, though, isn’t the opportunity it once was. The nervous system of a telecom network, fibre has become increasingly commoditised as cheap, Chinese-made fibre flooded the market. “The prices came down from $8/fibre kilometre to ~$6 between 2018 and 2020,” said a Mumbai-based analyst who covers Sterlite. While Sterlite saw revenues of Rs 5,154 crore (~$701 million) in the year ended March 2020, its profitability declined by 16%. From Rs 563 crore (~$76 million) in the previous fiscal, its profit after tax dropped to Rs 472 crore (~$64 million).
“The market will take at least one year before the demand for fibre rollout again picks up, when operators globally will start the 5G rollout,” said another Mumbai-based analyst.
Sterlite isn’t one for waiting. Instead, it’s looking further up the telecoms value stream for growth. Indeed, according to global consulting firm Analysys Mason, the new areas Sterlite is focusing on—like wireless, cloud and edge computing, as well as 5G technology—are must-haves. By 2026, these will account for the largest chunk of capital expenditure by telecom operators globally.
In an investor presentation in August, Agarwal declared that Sterlite is no longer a fibre cable company. He unveiled his roadmap for what he dubbed Sterlite 3.0—the integration of all its competencies, new and old. The scope is breathtaking. Sterlite 3.0 would encompass specialisation in network-building, a la Tata Communications; telecom software and system integration, like a Tech Mahindra or a Tata Consultancy Services; and telecom equipment manufacturing, like a Nokia or a Cisco.
According to Aggarwal, Sterlite’s addressable market would more than double—from $30 billion to $75 billion—by 2023. “As a company [we are] becoming an end-to-end digital network integrator for our customers,” he told investors.
Already, the stock markets have rewarded the publicly-listed Sterlite for its ambition.
