TATA Communications (TCIL) is no longer content being a bandwidth gateway provider from India to the rest of the world. It is now challenging giants such as AT&T, British Telecom, and Orange in cloud-based applications and services, business video, and mobile broadband. Managing director Vinod Kumar, who is based in Singapore, talks about the company’s growth strategies and its failed bid for Cable&Wireless Worldwide (C&W), a global telecom company. Edited excerpts:
There has been talk of the Tatas’ move to integrate their telecom business. Has this been discussed at TCIL?
We are looking at improving synergies so that we become more efficient at deploying resources. But the talk about integration and amalgamation is speculation. We build networks jointly with Tata Teleservices (TTSL); we’ve been doing it for many years. There’s scope for optimal deployment of capex and opex in networks. We have worked with MTN and Vodacom in South Africa on fibre networks. So, TTSL is business as usual for us and a way to be more efficient and productive. We should keep in mind that TTSL and TCIL are separate companies. The Tata Group is a common shareholder but there are other shareholders too. Both companies are growing and evolving. [Similarly,] we also work with Tata Consultancy Services (TCS).
How have synergies with TCS helped TCIL?
We sell connectivity services to TCS and it does software development for us. We do joint go-to-market engagements [pitches] for some customers. But we do not work only with TCS. We work with Wipro, IBM, Infosys, and others. Similarly, TCS buys various services from others. No Tata Group company is obliged to buy from the other. Each keeps in mind the best interests of the company and its shareholders. We have relationships with each other and we add genuine value. But, at the end of the day, we do what is best for TCIL.
What percentage of revenue is being targeted from cloud, business video, and mobile broadband?
We have not issued any guidance for them. We have deliberately avoided this because our basic business of selling big fat pipes [bandwidth] is also going to grow. The internal dialogue around these three bets is that if these businesses are not valued at several hundred millions of dollars within three or four years, we have missed something along the way. This approach is a way for us to focus resources on three big technology shifts which are going to determine the communication landscape in the future. If we do not participate, influence, and learn from this approach, we will have to pay a price and that won’t be good.
Why have TCIL’s expansion plans in Africa gone slow in areas beyond South Africa?
Opportunities in Africa remain the same. It is just that Neotel [the South African telecom company in which TCIL has a controlling stake] is not our only path in Africa. Because the countries are so different—there are various regimes and the pace of growth is different—we cannot go into the other parts of the continent riding merely on our South African presence. South Africa is not the beachhead. We will use our presence in South Africa for terrestrial connectivity with carriers but we cannot replicate a South African model in Nigeria or Egypt. We are learning and moving ahead. Our interest in Africa hasn’t changed.
You recently announced a technology agreement with the Formula 1 management. Will you be developing Formula 1 applications?
We won’t do applications, but we will provide many services. We are confident the scope of services will expand. Part of our work will be related to high-speed connectivity for bringing races live on devices, transforming the way they are broadcast and experienced. The other bit is hosting services for formula1.com. We will offer security and services that affect end-user experience. Are they applications? Technically, no. But whether it is hardware or software, the important element is that we enhance the end-user experience.
How important was C&W for TCIL? Are more such deals being planned?
There was a clear reason why C&W was an attractive target at a certain price. Our business is based on scale, which we could have achieved with a company like C&W that has assets globally. In particular, C&W has an impressive list of customers in Britain. We could have created scale, both in enterprise and as a service provider. When we approach such deals, we have to understand that it takes time to integrate businesses and there are risks associated with it. Therefore, we set a clear value on what the C&W business was worth. Someone else could look at it from a different vantage point or different business considerations, and ascribe a different value to it. We stand by the logic of why we considered it for acquisition.
But at the same time there is no regret because if a deal does not make sense beyond a certain value, it is better not to put our business at risk. If we had succeeded [in the C&W deal], it would have compounded our growth.
However, even without C&W, we will keep going on the same path. We will look for other opportunities. But it’s not as if we have a list of companies and we keep ticking them off one by one. Not every company we want will be up for sale.
The message is that even before the C&W project, we had a clear idea of where we wanted to go, and that is still the same.