Description
This is a presentation is about company analysis of tata Communication company.
COMPANY ANALYSIS
TATA COMMUNICATIONS
?
INDUSTRY ANALYSIS o TRENDS: Indian communication industry is one of the fastest growing industries in the world. It is estimated that it will achieve second position in the international telecom market. As per the statistical report published by Telecom Regulatory Authority of India (TRAI), in January 2010 the total no. of telephone users in India were 787.28 million and this figure crossed 806.13 million in January 2011. Thus Indian Communication industry has registered the growth of 2.39%. The wireless telephone subscribers figure reached to771.18 million in January 2011 from 752.19 million during the same period in 2010. An increase in the revenues generated from both landline as well as mobile facilities triggered the growth of the communication industry. As per the Business Monitor International report, India is all set to include around 8 to 10 million cellular phone subscribers on monthly basis. At this tempo, the Indian communication industry is expected to encompass more than half of the population of India i.e. 612 million cellular phone users by mid 2012. In addition, as per a research carried out by Nokia, the communications sector of India is estimated to surface as the biggest driving factor in India's GDP by contributing about 15.4% by the fiscal year 2014.
o COMPETITORS ANALYSIS: PROMINENT PLAYERS: There are mainly three types of competitors in telecom industry:· 1) State owned companies (BSNL AND MTNL).
2) Private Indian owned companies (RELIANCE INFOCOMM, TATA COMMUNICATIONS, TATA_TELESERVICES)· 3) Foreign invested companies (HUTCHISON-ESSAR,BPL, SPICE)
o SWOT ANALYSIS OF COMMUNICATIN INDUSTRY: STRENGTHS: 1. An attractive business environment with many emerging local as well as foreign players. 2. Strong mobile- communication development, with latest technologies offering attractive services at faster pace. 3. Due to faster growth of industry always attractive to foreign investors. WEAKNESSES: 1. Delayed execution of important policies due to issues among TRAI, Telecom ministry. 2. Limited spectrum availability as well as interconnection charges issue between the private and state operators. 3. Wireless Business services as well as prepaid services are growing at faster pace while wired services and post-paid services are lagging behind. 4. Lower tariff plan, high levies and duties that reflects lack of funds to reinvest in this business which demands constant funds. OPPORTUNITIES: 1. Regulator recommended foreign players participation without any local player. 2. All service providers are keen to provide more services which is great opportunity for them. 3. Telecom industry is likely to see an excellent growth of services in rural as well as semi-urban areas. THREATS: 1. High 3G service charges may reflect negative influence on demand for licenses.
2. Average Revenue Per User i.e. APRU is falling due to price war between different players. 3. Huge capacity requirements can hamper the fast growth in mobile sector.
o PEST ANALYSIS OF COMMUNICATION INDUSTRY: POLITICAL FACTORS: The political factors affecting telecom industry are the ways in which the government interferes with the industry. Government puts confinements on the tariffs and phones that the telecommunications industry can produce and all new emerging technologies must stick to stringent set of government rules. Also safety and privacy regulations are required to be followed by the telecom industries as per the government policies. ECONOMIC FACTORS: The main factors influencing telecommunication industry are inflation rates, interest rates, GDP trends, price control, devaluation and revaluation, etc. Rival communication industries need to stay competitive but most companies have had to raise prices of services during the period of global recession. Competitive companies try to overcome others by offering alluring validity period offers to customers
SOCIAL FACTORS: The important factors that affect the communication industry are career expectation, consumer activism, age distribution of population, lifestyle changes, growth rate of population, etc. The increase in on-the-go working careers has led to an increase in the requirements mobile phones having facilities to alert for messages, phone calls and internet, etc as well as additional facilities from business point of view like conference calls, instant messaging and other career focused features. Safety regulations also an important social factor for mobiles and other services.
TECHNOLOGICAL FACTORS:
Technological trend is the most important factor that affects the Telecom business. New models with latest technologies are arriving in the markets at faster rates. Service like third generation are alluring people due to their high speed services.. ? COMPANY ANALYSIS: o COMPANY OVERVIEW: Tata Communications, the leading long-distance carrier in India, is a significant player in the global wholesale market for international bandwidth and voice services. It's now moving into the retail enterprise network services market for MNCs with global requirements. It operates the world's most extensive submarine cable infrastructure, a Tier 1 Internet backbone network in the U.S., and an international IP network connecting key markets worldwide. It also has good fiber infrastructure and data center capabilities in India. It continues to invest aggressively in infrastructure in all areas. Tata has the most extensive submarine cable network in the world. Its cables include TGN-Atlantic, TGN-Western Europe, TGN-Eastern Europe, TGNPacific and TGN-India Asia. New cables under construction include TGN-Eurasia, TGN Intra-Asia, IMEWE and SEACOM. Consortium cables include SMW-3, SMW4, SAFE-SAT-3 and APCN 2. It also has a global MPLS backbone network connecting major markets worldwide, with 43 nodes in 25 countries, primarily in North America, Europe and Asia. This will be expanded by another 14 nodes in 12 countries, with coverage extending to emerging markets in Eastern Europe, Africa and Asia. Tata has an extensive network infrastructure in India, including a 40,000 km transmission network covering 400 cities and towns, a national MPLS backbone network, as well as metro and access infrastructure. It operates a fixed-line business in South Africa called Neotel, which gives it a foothold in Africa. It also has a 50% stake in CEC, a national IP VPN provider in China.
o GENERAL INFORMATION: TATA communications is one of the leading telecommunication industry in the India. It is also a global service provider in an emerging communication world. It is founded in 1986 by Mr. JRD Tata.
? Headquarters: The headquarters of TATA Communication are located at following locations: • Mumbai, Maharashtra, India • Singapore • Hong Kong • Virginia, USA • Canada • London, England • Spain • France • Abu Dhabi, UAE ? Management details: • Chairperson - Subodh Bhargava • Managing Director - Vinod Kumar • Directors - A K Mittal, A K Srivastava, Ajay Kumar Mittal, Amal Ganguli, Arun Gandhi, Ashok Jhunjhunwala, H P Mishra, Kishor A Chaukar, Md Shabhaz Ali, N Srinath, P V Kalyanasundaram, S Ramadorai, Satish Ranade, Saurabh Tiwari, Subodh Bhargava, Uday B Desai, V R S Sampath, Vinod Kuma ? Financials: Total Income Net Profit - Rs. 42708.7 Million ( year ending Mar 2012) - Rs. Million ( year ending Mar 2012)
o SWOT ANALYSIS OF TATA COMMUNICATIONS: STRENGTHS: 1. Entrepreneurial management :
Tata is led by a highly entrepreneurial management, with the willingness and ability to invest when acquisition opportunities arise. Its acquisition of Teleglobe and Tyco transformed the Indian carrier into a significant global wholesale player. It absorbed an existing virtual network operation in Europe to augment its delivery capabilities. It gained a foothold in China by taking a stake in China Enterprise Communications (CEC), a Chinese Internet Protocol (IP) virtual private network (VPN) provider. It also bought a controlling stake in Neotel, a new carrier in South Africa, giving it a presence in sub-Saharan Africa. 2. Strong product and service development: Tata invests aggressively in product and service development, recognizing that it needs to move beyond low-cost connectivity into managed and IT services to succeed in the retail enterprise market. It has developed a wide portfolio of products in the past two years, comparable with that of most established players, a big achievement considering that it started late. Notable products include Ethernet, videoconferencing, security, and managed voice solutions. 3. Wholesale strategy for enterprise market: Tata encourages other carriers, typically local incumbents that want to address their home MNC market but don't have the resources to invest in product development, to resell or "white label" its services. Tata's strategy is borne out of necessity as it lacks the sales capacity to compete direct against global or regional players in every major market. Its willingness to adapt to market realities will help accelerate its growth, although it's not clear whether this will yield substantive results in the short term. 4. Large home market: India will provide a strong platform for Tata to expand Internationally. It's the largest growth market after China. It is also the IT outsourcing and support center for western MNCs. Tata is already a large network service provider in India. It can ride on the growth of the domestic market, just like global players in the U.S. and Europe, without which it will have difficulty attaining sufficient scale to compete effectively in the global market. 5. Extensive submarine cable infrastructure: Tata's biggest asset is its extensive submarine cable infrastructure, mostly acquired at very low cost through its Tyco acquisition. It continues to invest aggressively in new cable systems, especially for connectivity within Asia and to emerging markets in Africa and the Middle East. Despite its extensive reach, Tata is not dominant in Asia, where it faces strong competition from several regional players (see Company Overview section).
6. High-speed IP, Multiprotocol Label Switching (MPLS) and Ethernet connectivity for key markets Tata has rolled out high-capacity global IP (Internet), MPLS and Ethernet backbone networks, riding on its strength in submarine cable systems. Its coverage is focused on capital cities and major cities in North America, Europe, Asia, the Middle East and parts of Africa. While Tata cannot compete with the large global providers in terms of comprehensive MPLS coverage, it can compete effectively on key routes based on price performance. WEAKNESSES: 1. Too ambitious: Tata's strategy of competing in both the wholesale and retail segments at once is a very ambitious and risky one, considering that many players in the past have failed competing in one segment alone. Each segment requires large investments over a long period of time. Wholesale requires large investments in network infrastructure. The retail market requires large investments in product development, sales and marketing, service and support, and infrastructure. Unless revenue and market share grow quickly, Tata will find it hard to sustain the investment needed to be competitive in the future. Limited presence in enterprise market: Tata is already a significant player in the global wholesale market, but it's a new and small player in the enterprise network services market for MNCs. It needs to be successful in the enterprise market to achieve economies of scale and price competitiveness that cannot be achieved with just its wholesale business. 3. Lacks brand name in enterprise market: Tata is a recognized and trusted name in the steel, power and IT services business, especially in India. But it lacks a brand name and track record in the enterprise network services market. This segment is generally conservative, wants high assurance of service quality, and prefers tried and trusted providers. It also has many established global and regional providers. Tata needs to build a brand name and trust to break into this market, a challenge that cannot be overcome within a short time. Lacks comprehensive MPLS coverage: Tata's MPLS network provides connectivity to major markets worldwide, but its coverage is not comprehensive enough to support therequirements of large MNCs with extensive global operations. It is augmenting its network reach with its network integration capabilities. However, its network integration unit is 4. 2.
relatively new and Tata needs to build up its experience to support highly distributed networks if it wants to enlarge its addressable market. 5. Limited international sales presence: Tata has sales presence in the top 20 markets worldwide to address the MNC market. But in most locations, its presence is too small to compete effectively against established global and regional providers. One reason for this is that Tata has been focusing on network expansion and product development. Now that its infrastructure and products are generally in place, it needs to step up its sales and market presence to address the opportunities.
OPPORTUNITIES: Leverage Tata Consultancy Services (TCS): Tata can leverage the skill set of its sister company TCS, a leading IT services company, to compete for large and complex deals with a high proportion of IT and professional services. This will reduce its dependence on low-cost bandwidth as a differentiator. TCS is also expanding its presence outside India, which may result in network services opportunities for Tata. Collaboration between the two companies on joint go-to-market bids is still in its infancy, but has yielded early results in terms of new contract wins.
1.
Grow market share in India to compete globally: Tata is facing increasingly strong competition from both foreign companies and local players in India. It needs to draw on its extensive presence, infrastructure and experience in its home market to grow its market share for both foreign and Indian MNC business. It needs to address this opportunity aggressively or it will weaken considerably in the future.
2.
Combined capabilities in China and India create a unique differentiator: Large MNCs have more extensive operations in either India or China than the rest of Asia combined. Tata is strong in its own market. It now has a foothold in China through CEC, a Chinese IP VPN provider with good network coverage. Tata can combine the domestic capabilities of both entities to present a unique differentiator to customers. A small but increasing number of MNCs are buying international connectivity based on a provider's capabilities in China or India, favoring Tata's local presence in these markets.
3.
THREATS: 1. Club cables: An increasing number of large incumbent carriers are getting together to build their own cable systems, partly for their own needs and partly to
reduce their dependence on large cable operators such as Tata. This will reduce the addressable wholesale opportunity for Tata considerably, which will impact its quest to get better scale and price competitiveness, and eventually its ability to invest in new cable infrastructure.
2. Strong regional players in Asia: Tata has few global competitors for wholesale bandwidth. But it faces strong competition in Asia, the most important growth region. There are several players with abundant cable capacity, including Pacnet, Cable & Wireless, Singapore Telecom, PCCW and Telstra. Pacnet, which owns 70% of the Intra-Asia cable capacity through its combined C2C and EAC cable systems, is particularly strong. 3. Continued decline in bandwidth prices: Competition in the wholesale market, of which Tata is a key participant, continues to drive down bandwidth prices. This has, in turn, riven down the bandwidth costs of large retail players, allowing them to compete more pricecompetitively in the enterprise network services market. While Tata has a cost advantage, its advantage will shrink unless it can drive more scale into its business. o FINANCIAL PERFORMANCE: The key financial parameters of Company during the year under review are given in table below:
2011-12 (Rs. In crores) 2011-12 (USD in million) 2010-11 (Rs. In crores) 2010-11 (USD in million) 2394.42 240.77 -138.87
Consolidated income Consolidated EBIDTA Consolidated profit/(-loss) after exceptional items and before tax Consolidated Profit/(-loss) after tax Standalone total income Standalone Profit before tax Standalone Profit after tax
14340.85 1791.49 -718.02
2818.01 352.03 -141.09
12185.21 1225.27 -706.7
-794.65 4270.87 265.12 171.34
-156.15 839.24 52.1 33.67
-776.9 3802.48 154.04 162.56
-152.66 747.2 30.27 31.94
* All conversion from Indian rupees to US Dollars in the above table as also elsewhere in this report are based on the noon buying rate in New York City for cable transfers in foreign
currencies as certified by the Federal Reserve Bank of New York for custom purposes which was `50.89 per USD 1.00 on 31 March 2012. SEGMENT AND PRODUCT DISTRIBUTION The Company maintains a healthy blend of revenues across its various products and segments. During 2011-12, voice services contributed 48% to revenues, data services contributed 40% and Neotel contribution grew considerably to 12% of the total revenue. Within the data services segment, the contribution to revenue by the two segments i.e. service providers and enterprises were fairly balanced with 49% and 51% of the total respectively. HIGHLIGHTS OF SEGMENT OPERATIONS Global Voice During the year, Tata Communications’ international long distance voice traffic grew 13.40% from 41.19 billion minutes in 2010-11 to 46.72 billion minutes in 2011-12. National long distance voice traffic in India decreased by 18% to 8.55 billion minutes in 2011-12. However, gross margins from voice declined 5% to US Cents 0.45 per minute, from US Cents 0.47 per minute a year earlier. ?
Global Data Tata Communications’ data portfolio continued to expand during 2011-12, and the launch of cloud computing solutions in India and Asia marked an entry into a fast-growing market segment. Revenues from this business segment were well-balanced between India 50% and the rest of the world 50%; and between service providers 51% and enterprises 49%. The Company’s strategy of expanding into managed services is beginning to show results, with managed services contributing 25% to the global data services segment. Neotel (Proprietary) Ltd. Neotel was set up as South Africa’s (SA) Second National Operator (SNO) in 2005-2006. The Company was selected by the South African Government as a strategic partner to participate with a 26% effective stake and provide best practice, cost effective telecommunication solutions to South African businesses and consumers through the use of innovative technologies. Over the last three years, the Company has increased its effective stake in Neotel to 64.10% by acquiring shares from other partners in the joint venture, thereby assuming a position of a majority shareholder in Neotel. Neotel today employs almost 1000 people and ?
?
offers communication services to the wholesale, enterprise and consumer segments in South Africa. Neotel runs South Africa’s first next generation network and the country’s first CDMA network. During the course of 2011-12, Neotel had several major achievements including a 25% year on year growth in its revenues and turning profitable at the operating (EBITDA) level. Neotel increased its business customers by 92% to 2400 and retail customers by 100% to about 100,000. o STRATEGIC OVERVIEW: The Company goes along to create and implement its strategy to be a global provider of communication solutions, predominantly targeting business customers. The Company’s strategy continues to be focused on developing a portfolio of communication and IT infrastructure services to leverage the trends shaping our chosen business segments. The key trends are: ? The growth of emerging new market economies, with an emphasis on India, Asia, the Middle East and Africa; ? The growth of IP and cloud-based communication and IT solutions; and ? The shift towards managed services, which allows client businesses to focus on their core competencies. ? Focus on catalyst services: Telepresence, CDN/Mosaic and Ethernet. ? Achieve global benchmarks in customer service and operations ? Create at least one new “home market” (in addition to India and South Africa)
doc_548924753.docx
This is a presentation is about company analysis of tata Communication company.
COMPANY ANALYSIS
TATA COMMUNICATIONS
?
INDUSTRY ANALYSIS o TRENDS: Indian communication industry is one of the fastest growing industries in the world. It is estimated that it will achieve second position in the international telecom market. As per the statistical report published by Telecom Regulatory Authority of India (TRAI), in January 2010 the total no. of telephone users in India were 787.28 million and this figure crossed 806.13 million in January 2011. Thus Indian Communication industry has registered the growth of 2.39%. The wireless telephone subscribers figure reached to771.18 million in January 2011 from 752.19 million during the same period in 2010. An increase in the revenues generated from both landline as well as mobile facilities triggered the growth of the communication industry. As per the Business Monitor International report, India is all set to include around 8 to 10 million cellular phone subscribers on monthly basis. At this tempo, the Indian communication industry is expected to encompass more than half of the population of India i.e. 612 million cellular phone users by mid 2012. In addition, as per a research carried out by Nokia, the communications sector of India is estimated to surface as the biggest driving factor in India's GDP by contributing about 15.4% by the fiscal year 2014.
o COMPETITORS ANALYSIS: PROMINENT PLAYERS: There are mainly three types of competitors in telecom industry:· 1) State owned companies (BSNL AND MTNL).
2) Private Indian owned companies (RELIANCE INFOCOMM, TATA COMMUNICATIONS, TATA_TELESERVICES)· 3) Foreign invested companies (HUTCHISON-ESSAR,BPL, SPICE)
o SWOT ANALYSIS OF COMMUNICATIN INDUSTRY: STRENGTHS: 1. An attractive business environment with many emerging local as well as foreign players. 2. Strong mobile- communication development, with latest technologies offering attractive services at faster pace. 3. Due to faster growth of industry always attractive to foreign investors. WEAKNESSES: 1. Delayed execution of important policies due to issues among TRAI, Telecom ministry. 2. Limited spectrum availability as well as interconnection charges issue between the private and state operators. 3. Wireless Business services as well as prepaid services are growing at faster pace while wired services and post-paid services are lagging behind. 4. Lower tariff plan, high levies and duties that reflects lack of funds to reinvest in this business which demands constant funds. OPPORTUNITIES: 1. Regulator recommended foreign players participation without any local player. 2. All service providers are keen to provide more services which is great opportunity for them. 3. Telecom industry is likely to see an excellent growth of services in rural as well as semi-urban areas. THREATS: 1. High 3G service charges may reflect negative influence on demand for licenses.
2. Average Revenue Per User i.e. APRU is falling due to price war between different players. 3. Huge capacity requirements can hamper the fast growth in mobile sector.
o PEST ANALYSIS OF COMMUNICATION INDUSTRY: POLITICAL FACTORS: The political factors affecting telecom industry are the ways in which the government interferes with the industry. Government puts confinements on the tariffs and phones that the telecommunications industry can produce and all new emerging technologies must stick to stringent set of government rules. Also safety and privacy regulations are required to be followed by the telecom industries as per the government policies. ECONOMIC FACTORS: The main factors influencing telecommunication industry are inflation rates, interest rates, GDP trends, price control, devaluation and revaluation, etc. Rival communication industries need to stay competitive but most companies have had to raise prices of services during the period of global recession. Competitive companies try to overcome others by offering alluring validity period offers to customers
SOCIAL FACTORS: The important factors that affect the communication industry are career expectation, consumer activism, age distribution of population, lifestyle changes, growth rate of population, etc. The increase in on-the-go working careers has led to an increase in the requirements mobile phones having facilities to alert for messages, phone calls and internet, etc as well as additional facilities from business point of view like conference calls, instant messaging and other career focused features. Safety regulations also an important social factor for mobiles and other services.
TECHNOLOGICAL FACTORS:
Technological trend is the most important factor that affects the Telecom business. New models with latest technologies are arriving in the markets at faster rates. Service like third generation are alluring people due to their high speed services.. ? COMPANY ANALYSIS: o COMPANY OVERVIEW: Tata Communications, the leading long-distance carrier in India, is a significant player in the global wholesale market for international bandwidth and voice services. It's now moving into the retail enterprise network services market for MNCs with global requirements. It operates the world's most extensive submarine cable infrastructure, a Tier 1 Internet backbone network in the U.S., and an international IP network connecting key markets worldwide. It also has good fiber infrastructure and data center capabilities in India. It continues to invest aggressively in infrastructure in all areas. Tata has the most extensive submarine cable network in the world. Its cables include TGN-Atlantic, TGN-Western Europe, TGN-Eastern Europe, TGNPacific and TGN-India Asia. New cables under construction include TGN-Eurasia, TGN Intra-Asia, IMEWE and SEACOM. Consortium cables include SMW-3, SMW4, SAFE-SAT-3 and APCN 2. It also has a global MPLS backbone network connecting major markets worldwide, with 43 nodes in 25 countries, primarily in North America, Europe and Asia. This will be expanded by another 14 nodes in 12 countries, with coverage extending to emerging markets in Eastern Europe, Africa and Asia. Tata has an extensive network infrastructure in India, including a 40,000 km transmission network covering 400 cities and towns, a national MPLS backbone network, as well as metro and access infrastructure. It operates a fixed-line business in South Africa called Neotel, which gives it a foothold in Africa. It also has a 50% stake in CEC, a national IP VPN provider in China.
o GENERAL INFORMATION: TATA communications is one of the leading telecommunication industry in the India. It is also a global service provider in an emerging communication world. It is founded in 1986 by Mr. JRD Tata.
? Headquarters: The headquarters of TATA Communication are located at following locations: • Mumbai, Maharashtra, India • Singapore • Hong Kong • Virginia, USA • Canada • London, England • Spain • France • Abu Dhabi, UAE ? Management details: • Chairperson - Subodh Bhargava • Managing Director - Vinod Kumar • Directors - A K Mittal, A K Srivastava, Ajay Kumar Mittal, Amal Ganguli, Arun Gandhi, Ashok Jhunjhunwala, H P Mishra, Kishor A Chaukar, Md Shabhaz Ali, N Srinath, P V Kalyanasundaram, S Ramadorai, Satish Ranade, Saurabh Tiwari, Subodh Bhargava, Uday B Desai, V R S Sampath, Vinod Kuma ? Financials: Total Income Net Profit - Rs. 42708.7 Million ( year ending Mar 2012) - Rs. Million ( year ending Mar 2012)
o SWOT ANALYSIS OF TATA COMMUNICATIONS: STRENGTHS: 1. Entrepreneurial management :
Tata is led by a highly entrepreneurial management, with the willingness and ability to invest when acquisition opportunities arise. Its acquisition of Teleglobe and Tyco transformed the Indian carrier into a significant global wholesale player. It absorbed an existing virtual network operation in Europe to augment its delivery capabilities. It gained a foothold in China by taking a stake in China Enterprise Communications (CEC), a Chinese Internet Protocol (IP) virtual private network (VPN) provider. It also bought a controlling stake in Neotel, a new carrier in South Africa, giving it a presence in sub-Saharan Africa. 2. Strong product and service development: Tata invests aggressively in product and service development, recognizing that it needs to move beyond low-cost connectivity into managed and IT services to succeed in the retail enterprise market. It has developed a wide portfolio of products in the past two years, comparable with that of most established players, a big achievement considering that it started late. Notable products include Ethernet, videoconferencing, security, and managed voice solutions. 3. Wholesale strategy for enterprise market: Tata encourages other carriers, typically local incumbents that want to address their home MNC market but don't have the resources to invest in product development, to resell or "white label" its services. Tata's strategy is borne out of necessity as it lacks the sales capacity to compete direct against global or regional players in every major market. Its willingness to adapt to market realities will help accelerate its growth, although it's not clear whether this will yield substantive results in the short term. 4. Large home market: India will provide a strong platform for Tata to expand Internationally. It's the largest growth market after China. It is also the IT outsourcing and support center for western MNCs. Tata is already a large network service provider in India. It can ride on the growth of the domestic market, just like global players in the U.S. and Europe, without which it will have difficulty attaining sufficient scale to compete effectively in the global market. 5. Extensive submarine cable infrastructure: Tata's biggest asset is its extensive submarine cable infrastructure, mostly acquired at very low cost through its Tyco acquisition. It continues to invest aggressively in new cable systems, especially for connectivity within Asia and to emerging markets in Africa and the Middle East. Despite its extensive reach, Tata is not dominant in Asia, where it faces strong competition from several regional players (see Company Overview section).
6. High-speed IP, Multiprotocol Label Switching (MPLS) and Ethernet connectivity for key markets Tata has rolled out high-capacity global IP (Internet), MPLS and Ethernet backbone networks, riding on its strength in submarine cable systems. Its coverage is focused on capital cities and major cities in North America, Europe, Asia, the Middle East and parts of Africa. While Tata cannot compete with the large global providers in terms of comprehensive MPLS coverage, it can compete effectively on key routes based on price performance. WEAKNESSES: 1. Too ambitious: Tata's strategy of competing in both the wholesale and retail segments at once is a very ambitious and risky one, considering that many players in the past have failed competing in one segment alone. Each segment requires large investments over a long period of time. Wholesale requires large investments in network infrastructure. The retail market requires large investments in product development, sales and marketing, service and support, and infrastructure. Unless revenue and market share grow quickly, Tata will find it hard to sustain the investment needed to be competitive in the future. Limited presence in enterprise market: Tata is already a significant player in the global wholesale market, but it's a new and small player in the enterprise network services market for MNCs. It needs to be successful in the enterprise market to achieve economies of scale and price competitiveness that cannot be achieved with just its wholesale business. 3. Lacks brand name in enterprise market: Tata is a recognized and trusted name in the steel, power and IT services business, especially in India. But it lacks a brand name and track record in the enterprise network services market. This segment is generally conservative, wants high assurance of service quality, and prefers tried and trusted providers. It also has many established global and regional providers. Tata needs to build a brand name and trust to break into this market, a challenge that cannot be overcome within a short time. Lacks comprehensive MPLS coverage: Tata's MPLS network provides connectivity to major markets worldwide, but its coverage is not comprehensive enough to support therequirements of large MNCs with extensive global operations. It is augmenting its network reach with its network integration capabilities. However, its network integration unit is 4. 2.
relatively new and Tata needs to build up its experience to support highly distributed networks if it wants to enlarge its addressable market. 5. Limited international sales presence: Tata has sales presence in the top 20 markets worldwide to address the MNC market. But in most locations, its presence is too small to compete effectively against established global and regional providers. One reason for this is that Tata has been focusing on network expansion and product development. Now that its infrastructure and products are generally in place, it needs to step up its sales and market presence to address the opportunities.
OPPORTUNITIES: Leverage Tata Consultancy Services (TCS): Tata can leverage the skill set of its sister company TCS, a leading IT services company, to compete for large and complex deals with a high proportion of IT and professional services. This will reduce its dependence on low-cost bandwidth as a differentiator. TCS is also expanding its presence outside India, which may result in network services opportunities for Tata. Collaboration between the two companies on joint go-to-market bids is still in its infancy, but has yielded early results in terms of new contract wins.
1.
Grow market share in India to compete globally: Tata is facing increasingly strong competition from both foreign companies and local players in India. It needs to draw on its extensive presence, infrastructure and experience in its home market to grow its market share for both foreign and Indian MNC business. It needs to address this opportunity aggressively or it will weaken considerably in the future.
2.
Combined capabilities in China and India create a unique differentiator: Large MNCs have more extensive operations in either India or China than the rest of Asia combined. Tata is strong in its own market. It now has a foothold in China through CEC, a Chinese IP VPN provider with good network coverage. Tata can combine the domestic capabilities of both entities to present a unique differentiator to customers. A small but increasing number of MNCs are buying international connectivity based on a provider's capabilities in China or India, favoring Tata's local presence in these markets.
3.
THREATS: 1. Club cables: An increasing number of large incumbent carriers are getting together to build their own cable systems, partly for their own needs and partly to
reduce their dependence on large cable operators such as Tata. This will reduce the addressable wholesale opportunity for Tata considerably, which will impact its quest to get better scale and price competitiveness, and eventually its ability to invest in new cable infrastructure.
2. Strong regional players in Asia: Tata has few global competitors for wholesale bandwidth. But it faces strong competition in Asia, the most important growth region. There are several players with abundant cable capacity, including Pacnet, Cable & Wireless, Singapore Telecom, PCCW and Telstra. Pacnet, which owns 70% of the Intra-Asia cable capacity through its combined C2C and EAC cable systems, is particularly strong. 3. Continued decline in bandwidth prices: Competition in the wholesale market, of which Tata is a key participant, continues to drive down bandwidth prices. This has, in turn, riven down the bandwidth costs of large retail players, allowing them to compete more pricecompetitively in the enterprise network services market. While Tata has a cost advantage, its advantage will shrink unless it can drive more scale into its business. o FINANCIAL PERFORMANCE: The key financial parameters of Company during the year under review are given in table below:
2011-12 (Rs. In crores) 2011-12 (USD in million) 2010-11 (Rs. In crores) 2010-11 (USD in million) 2394.42 240.77 -138.87
Consolidated income Consolidated EBIDTA Consolidated profit/(-loss) after exceptional items and before tax Consolidated Profit/(-loss) after tax Standalone total income Standalone Profit before tax Standalone Profit after tax
14340.85 1791.49 -718.02
2818.01 352.03 -141.09
12185.21 1225.27 -706.7
-794.65 4270.87 265.12 171.34
-156.15 839.24 52.1 33.67
-776.9 3802.48 154.04 162.56
-152.66 747.2 30.27 31.94
* All conversion from Indian rupees to US Dollars in the above table as also elsewhere in this report are based on the noon buying rate in New York City for cable transfers in foreign
currencies as certified by the Federal Reserve Bank of New York for custom purposes which was `50.89 per USD 1.00 on 31 March 2012. SEGMENT AND PRODUCT DISTRIBUTION The Company maintains a healthy blend of revenues across its various products and segments. During 2011-12, voice services contributed 48% to revenues, data services contributed 40% and Neotel contribution grew considerably to 12% of the total revenue. Within the data services segment, the contribution to revenue by the two segments i.e. service providers and enterprises were fairly balanced with 49% and 51% of the total respectively. HIGHLIGHTS OF SEGMENT OPERATIONS Global Voice During the year, Tata Communications’ international long distance voice traffic grew 13.40% from 41.19 billion minutes in 2010-11 to 46.72 billion minutes in 2011-12. National long distance voice traffic in India decreased by 18% to 8.55 billion minutes in 2011-12. However, gross margins from voice declined 5% to US Cents 0.45 per minute, from US Cents 0.47 per minute a year earlier. ?
Global Data Tata Communications’ data portfolio continued to expand during 2011-12, and the launch of cloud computing solutions in India and Asia marked an entry into a fast-growing market segment. Revenues from this business segment were well-balanced between India 50% and the rest of the world 50%; and between service providers 51% and enterprises 49%. The Company’s strategy of expanding into managed services is beginning to show results, with managed services contributing 25% to the global data services segment. Neotel (Proprietary) Ltd. Neotel was set up as South Africa’s (SA) Second National Operator (SNO) in 2005-2006. The Company was selected by the South African Government as a strategic partner to participate with a 26% effective stake and provide best practice, cost effective telecommunication solutions to South African businesses and consumers through the use of innovative technologies. Over the last three years, the Company has increased its effective stake in Neotel to 64.10% by acquiring shares from other partners in the joint venture, thereby assuming a position of a majority shareholder in Neotel. Neotel today employs almost 1000 people and ?
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offers communication services to the wholesale, enterprise and consumer segments in South Africa. Neotel runs South Africa’s first next generation network and the country’s first CDMA network. During the course of 2011-12, Neotel had several major achievements including a 25% year on year growth in its revenues and turning profitable at the operating (EBITDA) level. Neotel increased its business customers by 92% to 2400 and retail customers by 100% to about 100,000. o STRATEGIC OVERVIEW: The Company goes along to create and implement its strategy to be a global provider of communication solutions, predominantly targeting business customers. The Company’s strategy continues to be focused on developing a portfolio of communication and IT infrastructure services to leverage the trends shaping our chosen business segments. The key trends are: ? The growth of emerging new market economies, with an emphasis on India, Asia, the Middle East and Africa; ? The growth of IP and cloud-based communication and IT solutions; and ? The shift towards managed services, which allows client businesses to focus on their core competencies. ? Focus on catalyst services: Telepresence, CDN/Mosaic and Ethernet. ? Achieve global benchmarks in customer service and operations ? Create at least one new “home market” (in addition to India and South Africa)
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