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Volatile rupee, upcoming polls may slow down Cisco's expansion plan this year
NEW DELHI: Cisco is betting on India's telecommunications, media, banking and financial services segments to continue driving its revenue growth, but repeating the 37% expansion reported in the last fiscal year will be difficult for the US-based network equipment maker, with a volatile currency and upcoming polls posing key risks.
The company sees a key growth area emerging from India's thrust on financial inclusion by expanding banking services to rural and remote places, as this will likely boost demand for equipment to network bank branches in those areas.
Dinesh Malkani, Cisco's vice-president for sales, India and Saarc, has his main focus set on the opportunities offered by data traffic. Over the next two to three years, companies such as telecom and cable TV operators are expected to see "phenomenal growth because of mobile data, digitisation and broadband, etc.," he said.
As much as 60% of the infrastructure deployed in telecom networks in the country is based on Cisco's technology. The company is also the market leader in eight of the 10 segments that it is present in India, indicating the US major's dominating presence in the South Asian nation. For equipment like ENT router, the company commands as much as 75% of the market.
Cisco's Bangalore development centre is its largest outside the US. It has more than 11,800 employees in India with offices spread across cities such as New Delhi, Mumbai, Chennai, Pune, Kolkata and Hyderabad, apart from the country's IT capital.
Cisco saw strong revenue growth in the last financial year ended in July 2013, with telecom service providers being the biggest contributors. This despite stiff competition from Chinese gear makers such as ZTE which typically offer much cheaper products.
Though Cisco posted strong overall revenue growth in the last fiscal year, the pace had slowed as the year progressed - from as much as 50% in the first two quarters to 29% in the third and 19% in the final three months. While a government-propelled drive to digitise TV cable networks had boosted the first-half revenue, a fall in the rupee's value, which pushed up effective product prices and led to some buying decisions being put off, has hurt its performance in the second half.
This year, too, rupee remains a key risk, apart from the upcoming elections which could lead to deferral of some buying decisions and delays in central and state-level spending.
Malkani also cited the base effect. "When you come off a year of 37% growth, repeating that is always a challenge, but certainly it (this fiscal year) will be a growth year for us."
Telecom companies, which are Cisco's main customers, are currently seeing "pretty flat growth" in the voice segment, he said. But data is exploding, which is expected to drive revenue, he added. As per Cisco's Visual Networking Index, mobile data traffic in India is expected to grow 60 fold between 2012 and 2017.