midas communication technologies private ltd Management discussions

MIDAS COMMUNICATION TECHNOLOGIES PRIVATE LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS Your Directors are pleased to inform you that Income from Operations for the period under review has been considerably lower, though the company has done well on other fronts. Revenues for the year under review is Rs.7266.52 Lakhs as compared to Rs. 22,269.77 Lakhs in the previous year. The operating profit for the period is Rs 86.09 lakhs as compared to Rs.1104.11 Lakhs in the previous year. The Profit after Tax registered for the period is Rs. 31.77 lakhs. Your company had a healthy grown in the previous 3 years, in terms of revenues. The period under review had a focus on creating new technologies to address the data connectivity opportunity that is unfolding in the domestic as well as international markets. The company has created three distinct technology platforms, wireless, wireline and a hybrid platform that uses existing co-axial cable. The company has had a considerable reduction in the revenues, as the focus was on creating new technologies and consolidating on the technology platforms, with path- breaking technology offerings. The financial results from these efforts will be visible in the next two to Three years. The Singapore branch continues to play a crucial role in ensuring timely and quality deliveries as well as increased profitability due to the high volume purchase of consolidated requirements. Your Singapore Branch Office and their operations have generated revenues amounting to Rs.2079.15 Lakhs during the year under review. Review of the year During the year under review, our largest customer M/S BSNL who had implemented the corDECT system in over 577 exchanges, has seen a healthy growth of subscriber usage of the technology platform, and with the introduction and validation of the upgraded platform called Broadband corDECT, BSNL is planning to deploy the new platform for Broadband delivery in small towns and rural areas, on a national scale. The business potential for this platform in domestic market alone is estimated to be over 2,500 Cr. BSNL has already initiated procurement of the systems for three of their best performing states, and the revenues from this major break through will be visible over the next 2-3 years. Other service providers in India as well internationally have shown keen interest in this new offering and a very healthy revenue flow is expected from this product platform in the ensuing years. International business has also seen good progress. During the year under review, the Company has exported corDECT systems to Bhutan, Singapore, Russia, Ukraine, Bangladesh, Tunisia, Thailand, and Honduras amongst other countries. Our international licensees have installed systems in Iran, Tunisia, Oman, Iraq and many African countries. This year the new markets where the corDECT solution has got established were Ukraine, Sudan and Honduras. These are markets with good growth potential and the company should be able to build a strong revenue stream from these geographies, over the next two to three years. optiMA, the Fiber in Local Loop product, has been exported and installed in Tunisia, Bangladesh, Ukraine and Togo and it is functioning smoothly. The operator has evinced interest in expanding his network using more optiMA systems. Banyan Networks, the wireline Broadband Division of the company has created the next generation DLC and DSL product lines and they were tested and deployed in domestic markets, as well as in Ukraine, Bangladesh, Tunisia and Sudan. The IP-DSLAM market is expanding all over the world and the company is making all efforts to get the products approved by different carriers. BSNL had floated a big requirement for the IP-DSLAM systems and your company is well placed to win major orders from this tender as all its three bids have won in the open tender, which had participation from most of the suppliers in the world. CITIUS / CATIUS - Last year the company had started this new business group, with a unique offering that would make use of existing Cable TV networks to provide Internet Triple Play Unified System, this was installed at a few ISPs and Cable TV operators places, and the product platform got fine tuned in terms of the actual field situation and the market requirements. Currently, there are three different variants of this product line that are now in the market place and the response has been very good. The products are being installed by ISPs like Sify as well as local cable TV operators, offering variety of services based on broadband data connectivity. There are more than 60,000 cable TV operators in India and the company expects this product to scale up over the next year. Global Outlook WIRELESS The demand for data connectivity and voice telephony is increasing globally and in particular in developing countries. Wireless remains the most preferred way of providing the last mile for data connectivity. Broadband corDECT has enormous potential to address this ever increasing demand. It provides simultaneous Voice and Internet and is unique in this aspect in the world. The Broadband corDECT platform offers enhanced switching capacities per node with a three, fold increase in the data speeds. Your company is also actively working on next generation wireless standards like WiMax to introduce new generation wireless services in near future. WIRELINE BROADBAND The wireline Broadband connectivity requirement is also increasing in the developed countries and with the product offerings we have, we are in a position to address most of the market demands. For addressing the global markets, your company is looking at forging some OEM relationships with companies that have strong market presence. The Indian Scenario The telecom industry has evolved into a vibrant competitive one and is adding more than 5 million subscribers on a monthly basis. Govt. of India has a special thrust on Broadband connectivity for rural as well as urban areas, and your company is much better equipped today to address all segments of the broadband connectivity demand. WIRELESS The global wireless revolution has been the principal growth engine in India too, as in other parts of the world. The wireless subscriber base has galloped from 1.6 million in 1999 to nearly 100 million in 2005-06. Wireless services (mobile & fixed wireless) will account for almost all of the growth in telephone lines over the next five years. It is expected a total of 200 million subscribers to be added over the next 5 years, of which 175 million will be in mobile services, 25 million in fixed wireless and a mere 2 million in wireline services. The fixed wireless services, which accounted for almost the entire net additions of fixed services over the last couple of years, will continue to drive growth in the fixed services-segment. corDECT is being used in India by most of the private as well as government service providers. Your company is actively working with all the service providers in the country to introduce the new Broadband corDECT platform, and has already had some break through with the govt. operator. The growth expectation of fixed wireless for Broadband connectivity in the next 5 years will give a tremendous opportunity for your company to increase the market share of corDECT product line. Your company is also spending substantial resources on the next generation of wireless access technologies, like WiMax and microGSM BTS. BROADBAND Broadband is set to revolutionize all sectors of the economy-agriculture, industry and services-and lead to huge economic gains for India. The Government has a special focus on increasing the no of broad band users in India, by way of reducing tariffs, reducing the bottleneck in licensing and supporting multiple technologies. Your company has developed multiple technology platforms to suit different geographic terrains and different socio-economic situation for the Broadband access. The corDECT platform is substantially enhanced to support data speeds of 256/512 kbps, (as against the previous offering of 35/70kbps), it is ideally suited for semi-urban, small towns arid rural areas. The new platform is named BroadbandcorDECT. This has been tested and validated by the Telecom Engineering Centre (TEC) and a General Requirements Specifications are released by TEC, for its use in Indian Telecom networks. This is a major break through, as a standard has got created for this product platform. The IP-DSLAMs and Broad Band DLCs are well proven platforms and would serve the needs of urban deployments. BSNL had floated a large tender for procurement of IP-DSLAMs and your companys bids have won all the three bids totalling a supply of nearly 600,000 ports, in three phases. The newly introduced platform Citius / Catius has received good response and will serve the needs of small neighbourhood operators very well. Citus / Catius This new product line adds the ability to provide a number of services base on data connectivity on the existing co-axial cable networks used by local cable TV operators in the country. Currently more than 10 such operators are using the product and your company is getting repeat orders for the same. The cable TV operators are giving a range of services on the platform like triple play bundle of voice, voice and data services, video on demand services, video security surveillance etc. The new platform is in commercial. operation at in a few cities and the Company expects good revenue in the next years. Awards Your company bagged the coveted NASSCOM Innovation award from the President of India for the year 2005. This is one of the most prestigious awards at national level given by the premier software and IT industry association. Your company got wide publicity in the print and electronic media. Your company also received the Technology Development Board award for DSL products. The Company was listed in the top 50 in India and in the top 150 in Asia Pacific in the Fastest growing Technology companies by Delloit. Your company also was adjusted the top exporter of telecom equipment by the Electronic and Software Exports council of Govt, of India. Human Resources A Company is only as good as its people. This adage is particularly true for a knowledge based company like Midas. Your Company has created a favourable work environment that encourages innovation and meritocracy. As we transition towards our goal of becoming a global company, the organizational and business challenges that we face become very significant. These challenges can be met only if we have great leaders at all levels. We need leaders who can imagine the future, who can think without limits and above all who are passionate about their work. Leaders and leadership development is therefore a key area of focus.