In the enterprise voice and data markets, Tata Communications looks to leverage its own network and global reach to take on intense competition and still maintain its leadership.
Mr Srinivasa Addepalli, Senior Vice-President, Corporate Strategy and Communications, told Business Line how he thinks this would be possible, when he spoke on the sidelines of the Global Media and Analyst meet held in Dubai. Excerpts:
Competition is heavy in India in the enterprise services space, with Bharti Airtel, Reliance Communications and even players such as Tulip Telecom gaining market share. How is Tata Communications positioned domestically?
I think particularly in the enterprise data services market where we compete in, as per some research reports, we are the number one player.
There are some key differentiators vis-à-vis competition. First, we have a very long-standing relationship with large enterprise customers. Our experience and credibility in terms of delivering to customer requirements is very high. This is our only business. It is not a division contributing some 10 per cent of revenues like it does to competition. So we are fully focussed.
The second aspect is the portfolio of services that we possess. Various other players have some offerings that they have pulled together. We are an end-to-end player. Be it network services, managed services, data centre hosting, security, tele-presence, enterprise voice and data, we are fully entrenched. These have been developed with global benchmarks.
Third, we have a global capability. None of our competitors can offer the kind of reach that we can on our own.
Does the lack of captive voice traffic which some of your peers have affect volumes and assured revenues?
That can impact only on the international voice side. We do carry Tata Teleservices' traffic. We also have many other Indian mobile operators that provide us their traffic.
This was an issue five years ago, where India was our only market. Now, after expanding globally along with overseas acquisitions such as Teleglobe, it is no longer an issue. International voice into and out of India is now less than a third of our total. The volume on our network is quite good.
Lack of captive traffic does not make a huge difference to the economics of the business.
Do you see a very significant shift in business-mix from voice to data?
Revenues from voice at the net level, that is after paying all interconnect and other charges, is just a quarter of our revenues. Data revenues are much higher at the net level.
But voice revenues continue to grow at high single or double digits, in a slowing market, and we have several national and international customers who have given us three- or five-year contracts. That improves revenue visibility.
Yes, there is a shift in favour of data, but it is not too dramatic.
Was not bidding aggressively for broadband wireless access spectrum a conscious decision? Were you cautious?
It was a conscious decision to walk away at a point. We were interested and put in a lot of efforts. But it did not make sense to bid beyond a price.
It has been nearly two years since the auction was completed and to date nobody has launched services.
If we had bid and won and paid say Rs 12,000 crore, the amortisation and interest costs alone would have been huge. For the last two years, interest cost would have been Rs 2,800 crore and add another Rs 1,200 for amortisation. The question is whether the market opportunity is that high. Yes, it may become big enough in another 3-5 years.
Two years ago, we neither had the cash nor the appetite to take such an exposure.
But, you could have bid selectively, rather than on a pan-India basis.
The way the auction was structured, in general, costs in all circles were pushed up. Metros became so expensive in relation to their opportunities.
When is VSNL land sale likely to happen?
It is a decision that will be taken by the government. It is not in our hands now.
Raising equity has become difficult due to government's 26 per cent stake. Your debt-equity is high and interest coverage has reduced. How do you intend to manage future expansion?
I think the resolution of the surplus land issue will be the key milestone in solving these issues.
It appears, from what we have been hearing and reading, that the government is serious in finalising the sale of land as early as possible.
At this time, there is leverage. But our operating profits and cash generation capabilities are increasing. We have also indicated that our capital expenditure on a per annum basis will continue to come down.
Thus the need for us to borrow more to fund our capital expenditure is reducing.
Our incremental capex will be only to support specific growth.
Are you looking at selling the stake in Tata Teleservices?
A part of the stake was sold when the DoCoMo investment happened. There is no strategic roadmap as of now to divest the stake.