Network integration biz passe, Tulip focuses on corporate data services

Tulip Telecom, the country's largest MPLS (multi-protocol lable switching) data connectivity provider, is planning to reduce its dependence on its network integration business and focus on corporate data services that include managed services and data centres business.

Tulip Telecom CMD HS Bedi said, "Currently, our network integration business accounts for 43% of the Rs 1,219-crore revenue and we want to reduce it to 15 to 20% and increase the data business to about 80% of the total revenue." This is because the network integrations business is a low profitable business with margins almost 30-40% lesser than that in the data business, he adds.

"Focusing on the data business will give us high profitability going ahead and we have already started working on those lines," he said. The international long-distance (ILD) licence will also help the company to cater to a larger market, he adds.

Talking on contracts at hand, Bedi said, "There has been some constraints with certain clients. We are witnessing reduction in the capex plans but there are no major changes when it comes to the operational expenditure."

Last year, the company accessed the foreign currency convertible bond market to raise $150 million, of which it has spent just $40 million to extend its network. According to Bedi, this has been sufficient to create infrastructure to support its clients. Some of its corporate clients include Bloomberg, Vodafone, ATandT and Accenture.

Tulip provides IP/VPN-based wireless connectivity services especially to corporate clients through its brand 'Tulip Connect'. The inter- and intra-city connectivity is provided through leased lines and fibre optic cables from multiple service providers while the critical last-mile connectivity is through its own fibre/wireless broadband network.

Integrated telecom service providers such as Reliance Communications (RCOM.NS : 166.6 -1.5), Bharti Airtel (BHARTIARTL.BO : 283.65 +2.65) and BSNL, who are already in the data connectivity business, may offer last-mile connectivity, impacting Tulip's profitability and market share.

Tulip's edge over its competitors is that they depend on last-mile connectivity through copper and leased lines, thereby helping the company rapidly roll out its network over difficult terrains and in places where there are no copper lines, and with high uptime and low latency.