Vinod Kumar, CEO & managing director, Tata Communications,

‘Using the PPP model, we've transformed an India-centric business into a global leader’

Tata Communications has come a long distance since the Tata Group took over the company under the government’s disinvestment programme ten years back. The company has been described as a visionary in IT research firm Gartner’s Magic Quadrant and is looking to build the best network in South Africa. Vinod Kumar, CEO & managing director, Tata Communications, tells Beryl Menezes how the company has grown from being an India-centric one to having a presence in 50 countries today. Excerpts from the interview : Tell us your journey towards disinvestment and your partnership with the government? A public-private partnership (PPP) is like any other partnership — there are shared objectives and there are longer-term objectives. In any kind of transformation journey, there will be ups and downs, but if you are willing to resolve issues at the Board level through dialogue and discussion, it will succeed. I think both the Tatas and the government have approached the relationship with an openness. I think this has been proven from the fact that we are still working together. As for the operating aspects of the business, we have been shielded from all controversies, thanks to a strong Board of directors. As a manager of the business, I, too, have never felt any impediment on account of any turbulence. What has made your PPP work, when so many others have fallen through in India? Every organisation has a process of decision-making and the same applies to private companies and the government. We have had to understand the process of decision-making within the government and provide the information required to enable that decision-making and allow some time for it to take place. The government has been a big supporter of decision-making and strategy and we have faced no impediment to our relationship so far. How has your image changed from a leader in Indian enterprise data services to a global communications leader? We have made a very India-centric business into a global business, and we are now recognised as a global challenger and leader in many areas. We have grown the company from one country to presence in 50 countries, serving customers in 115 markets. We have grown from 3,000 employees to 7,800, from one nationality to 40 nationalities — and we have done all this with good corporate governance along the way. By any yardstick, it is clear that the transformation that took place was done using the PPP model and I don’t see why others can’t emulate us. Subodh Bhargava recently cited differences with the Board for stepping down as the chairman of Viom Networks. Will this have any impact on his place on the Board of Tata Communications? While we cannot comment on Viom, Subodh has been doing a great job on the Board of Tata Communications and will continue to be the chairman. Your South African unit Neotel has not been able to show profits despite it being operative for 4-5 years… Any telecom venture in a new market where infrastructure has to be built from scratch takes time to take off, because in the beginning, you are investing heavily to build a state-of-the-art network, which is the best network in South Africa. You cannot fill that network with customers from day one — it takes time to get customers and the operations going. Neotel is an opportunity, a positive story and it will play a bigger role in our financials. What chance does Neotel have against competition? We are the only viable option to Telecom South Africa and have a fibre-based and owned infrastructure; which is why we are gaining with enterprise customers there. Neotel is well-positioned to grow, so we welcome the regulatory changes that are allowing more competition in South Africa because we have been ahead of the curve to invest and capitalise on that opportunity. Neotel is still establishing adequate coverage to serve enterprise or business customers in South Africa. We will continue doing that till we have adequate coverage to offer South African customers the full range of Tata services. Neotel has now started offering VPN and ethernet services, and will launch cloud services and more industry-specific applications going forward. Tata Communications is seeing steady quarter-on-quarter losses. What strategies have you put together to turn the business around? There was a marginal decline in Q2-Q3, but that was because we had actually seen a big jump from Q1 in Q2 - usually these kinds of variations are there because there are big projects, big expenses and also you tend to build for next year. Overall, our data margins have been good and have improved significantly quarter -on-quarter from a year ago. Tell us about the opportunities you see with respect to voice versus data, especially with the growth of mobile broadband? Our voice and data revenues are almost equal, in a ratio of 55:45. Obviously, data is growing faster, and a lot of voice is becoming data. This is a reversal of an earlier trend, where voice made up 95% of the revenues. However, voice is not going to become insignificant, and it is how one still makes money from voice that is critical. As the number of broadband players and mobile broadband users increases, we see huge opportunities for our business. What services will you offer for mobile broadband? We will offer multiple services on one IP network to be exchanged between mobile operators — this is still at a conceptual stage, but it will help in enabling minimum quality requirements and services and still make the services interact with each other. What is your strategy to reduce capital expenditure that has been hurting your bottomline for a while now? We have been spending about $400-500 million per annum towards capex in the last few years, but a large part of that went towards some very specific strategic projects, in which submarine cables and data centres took 30-40% of the investments. However, this was a one-time spend and we don’t anticipate spending on them again. So from $400-500 million, we are now talking of $200-250 million capex in the next few years. Whatever cash or profits we now generate, should be sufficient to meet our capex requirements. How are you going to beat the gloomy telecom forecast predicted for the next quarter? While there may be some degree of uncertainty of the mobile wireless business, we see adoption of network services by enterprises rising rapidly because businesses are using networks now to transform themselves. Things may not grow at the same pace every year, but they are definitely on a growth trajectory. Besides, people are turning to new technology and they are also looking at new markets where growth rates may be higher. In India, we will continue to expand our network as more and more enterprises grow in semi-urban and rural areas. We see an increasing willingness of Indian enterprises and CIOs to outsource many activities and focus on their core businesses. This presents a great opportunity and we are positioning ourselves to provide end-to-end services and managed outsourcing services for them - rather than just providing bandwidth. Lastly, there are certain verticals like banking and financial services that are doing well and have a higher propensity to use our services