After the acquisition of VSNL, Tata Communications has transformed itself from a small Indian company to the world’s largest player in voice communication. It has grown inorganically in recent years and now has a presence in all communication markets across the globe. ET caught up with N Srinath, CEO, and Srinivasa Addepalli, senior VP, Tata Communications, to find out more about the future strategy and challenges faced by the company.
You operate through 48 subsidiaries spread across two dozen countries. Does this make your operations unwieldy and complex?
NS: This is due to the inherent nature of our business model. We own and operate in several countries around the globe. To own infrastructure assets in a country, one requires an operating entity in that region. Similarly, to get a license in a country, one should have a company incorporated there. Due to these reasons, we have floated so many subsidiaries in several countries.
Our service offerings are such that our business serves customers in all time zones. Those functions which require a customer interface — sales and customer service, network operations and security product offering — are geographically diversified.
But others like finance, HR and back-end operations, are carried out from India, where we have cost advantages. Though it’s a challenge to manage so many layers seamlessly, advances in communication technology like video conferencing and tele-presence have made the task easier.
How has Tata Comm transformed itself in the past few years after the VSNL acquisition?
SA: After VSNL’s monopoly ended in ’03, we started looking for new sources of growth. We thought of different business ideas and some of them were dropped as other Tata Group companies were already into it. For instance, in ’02, one idea could have been to enter mobile telephony. Since some other Tata company was involved, we didn’t enter that segment.
We were relatively strong in the voice business, which was very competitive. So, we thought of venturing into new areas like enterprise and data service, which can utilise our existing infrastructure. Since many of our customers wanted services across the globe, we decided to globalise aggressively.
Where do you see growth coming from in the future?
SA: Currently, Tata Comm is the No 1 global player in the voice business and the only non-American and non-European player among the top 10 companies in the Internet Protocol business. Going forward, the relative importance of voice business in our total revenues will continue to fall.
Currently, we get 55% of our revenues from voice and the rest from data business. This mix will go in favour of data and enterprise businesses. Even within the data business , we will not be a pure commodity player, providing only bandwidth.
We will provide value-added services like broadband internet, virtual private network and other managed services to large users.
How difficult is it to get new business in developed markets?
SA: Obviously, getting new business in developed markets is tougher, since many of the clients in these geographies are mature and have basic communication infrastructure in place. But we are trying to attract customers by investing in new technology , ahead of peers in developed markets.
For instance, our service in global ethernet is ahead of others. We are also providing end-to-end solutions to customers. Further , the Tata brand is well known in many parts of the US and UK. Clients recognise we are part of the $60-billion Tata Group and that gives confidence to clients about our financial strength and stability.
Data centre is a rapidly growing business in India? What is your business strategy regarding that?
SA: We are a major player in data centre in India and are planning to grow in that space. Data centre requires huge investments in terms of real estate and power. We are adding 500,000 sq ft in this space in cities like Delhi, Mumbai and Hyderabad. We are moving up the value chain, from renting data storage space to managing the server and its contents for clients.
Over the past few years, other Tata companies have grown rapidly. How has this benefited your business?
NS: It has definitely benefited us. Now, we have got better visibility and brand name around the world. Secondly, as the group companies expand into other geographies, we look forward to more business, since these acquisitions are big ones. Thirdly, we have received support from the group about integration-related issues like common culture and value systems with such diversified operations. Overall, it has been a positive experience.
SA: Whenever there is a contract to be awarded by a Tata Group company in the communication space, we compete along with other outside players. But everything (quality of service, price) else remaining the same, the chances of getting the contract is high for us. Also, TCS has a big presence among many Fortune 500 companies and this help us to get business. For instance, many clients want a software company like TCS to take onus of a contract and TCS, in turn, outsources some of the communication-related business to us.
You are a global player. What are the challenges you face in India, given that telecom service providers like Reliance Comm and Bharti Airtel are now growing backwards, besides entering the enterprise space?
NS: It is not only domestic players, but also international players like AT&T and British Telecom who are our competitors in the Indian market. The challenge is about what services you can provide to domestic customers. Since we have scale and reputation of providing good services in the global market, it will be easier for us to sell our products and services in the Indian market.
We can also provide better services to our customers since our network is wide. For example, many MNCs are opening their offices in India and want to connect back to their home territory. Since we have a global presence, we are better placed to offer such services.
SA: Such telecom players have two options: build their own infrastructure, or come to communication companies like us to avail of the service. Though some companies are building their own infrastructure , it will not be economical for them to build a worldwide network.
Customers are increasingly making calls to different geographies, which will require a global infrastructure. So, we don’t think there’s much threat from such players.