Plenty in a name change

Six years after disinvestment, Videsh Sanchar Nigam Limited (VSNL) has been rechristened with the name of its buyer. The company will now go by the name of Tata Communications. A lot has changed apart from just the name.

The company has a more global look following the acquisitions of TGN, an undersea cable company, and Teleglobe, a provider of wholesale voice and data, in 2004 and 2005, respectively.

At a press conference last fortnight, Tata Communications announced its new brand in addition to an investment of $2 billion over the next three years. A billion out of this will be equally invested in the undersea cable business and a foray into WiMAX (a wireless digital communication solution). This expenditure will be funded through a combination of internal accruals and borrowings.

“Today, the growth opportunities are limited in India and we will have to go global,” says N. Srinath, CEO & Managing Director, Tata Communications. Along with VSNL, Teleglobe too will be integrated into the Tata Communications brand. “Our vision is to deliver a world of communications to our customers,” adds Srinath.

The investment in submarine cables is in line with the emphasis on creating high-quality infrastructure. “We have always invested in infrastructure in the past and will continue to do so in emerging markets like India, East Europe, China and Africa. Today, we have the experience of operating with customers in various markets,” says Srinath. On the plans for WiMAX, Tata Communications expects to get across to 115 towns from 30 currently.

Srinath expects Tata Communications to be an IT services company over time. At this stage, the company is also closely looking at options in the IPTV space. “Our big markets will be the US and Europe particularly the UK,” says the CEO.

Over the next four years—up to the year ending March 2012— Tata Communications is aiming for EBITDA margins of at least 20 per cent and being #1 or #2 in all its focus markets. Last year, the company’s EBITDA margin stood at 14 per cent.

A key market will be South Africa where Tata Communications holds a 26 per cent stake in Second Network Operator (SNO), a South African telecom service provider. “We should be launching our retail services by the end of this year,” says Srinath. Tata Communications is expected to make an investment of $150 million in the South Africa project in the coming financial year.

“We are expecting broadband also to be a big story in South Africa,” adds Srinath. Tata Communications gets 60 per cent of its revenues from the overseas markets while the balance comes from the domestic market. “Over the next 3-4 years, the big challenge for us will be to prove ourselves in the global markets,” sums up Srinivasa Addepalli, Senior Vice President (Corporate Strategy).

—Krishna Gopalan