Tulip Telecom Ltd

COMPANY PROFILE

Tulip Telecom is India’s leading enterprise communications service provider.

The company offers IP-based infrastructural solutions to its customers and isIndia’s largest MPLS/IP VPN player, which has been at the forefront of offeringmulti-location wide area network across various industries. The company, since 2009, hasstarted laying its own optic fiber which has enabled it to now provide additional serviceslike IPLC, DLC, and VPN on fibre and Internet.

Tulip Telecom’s deep entrenchment in the data telecom service space is endorsed byits prestigious list of over 1,600 clients, spanning across diverse segments includingBanking, Telcos, Retail, Manufacturing, Services, Education, Healthcare, Utilities andGovernment.

From a simple business nearly two decades ago as a software reseller, Tulip Telecomcontinuously moulded its operational focus as per the transition and technologydevelopments in the fast evolving IT & Telecom space, always protecting itself fromthe technology commodity curve and the resultant de-growth of its margin. As it evolvedover the years, Tulip Telecom ensured that it captured a significant market share in eachbusiness of presence.

From emerging as the largest network reseller for Cisco in 1999 to setting up theworld’s largest rural wireless network in Kerala (District Mallapuram) in 2002, TulipTelecom has always made significant strides as it evolved its businesses. From 2004, TulipTelecom began exploring VPN networking across India, adopting a clear business focus oftapping regions away from the radar of large competitors and seized opportunities cateringto emerging and mid-sized businesses.

Its strategy of innovation has paid off as Tulip Telecom has not only carved a nichefor itself but has been recognised as a leading player in the MPLS VPN segment. Thecompany has won the Frost and Sullivan award as India’s largest MPLS/IP VPN providerfor three consecutive years since 2007.

Tulip Telecom has now expanded its service portfolio from largely wireless basedconnectivity (MPLS/VPN) to the entire suite of enterprise connectivity solutions. WhileTulip’s primary offering, based on wireless last mile, was an effective solution forlow bandwidth requirements, it limited the provisioning of higher bandwidth services. Tocapture this market space, Tulip Telecom has rolled out fibre in central businessdistricts across nearly 100 cities.

In a short span of one year, the company’s roll-out of last mile fibre networkacross cities has resulted in Tulip Telecom owning the largest fibre last mile network inthe country which now covers over 4,000 kms.

The fibre roll-out will drive increased bandwidth sales related to VPN services, whichis currently a mix of fibre and wireless and enable Tulip Telecom to offer other serviceslike IPLC/DLC/ Internet, which require a dedicated fibre last mile.

Thus, through the recent fibre rollout for last mile, the company is now in a positionto tap high-bandwidth connectivity market, complementing its strong foothold in wirelesssegment and increase the potential addressable data enterprise market.

Tulip Telecom offers international connectivity services through Global MPLS, IPLC andEthernet Leased Lines. The company has extended connectivity solutions to mostinternational locations including U.S., Middle East and the Asia Pacific.

The company offers connectivity to customers’ global offices, along with theadvantage of complete back-up in the domestic markets, better governance with regard toredundancy, global reach and market ready rollouts. Tulip Telecom, through strongerpartnerships for holistic connectivity, is equipped to offer carrier agnostic solutionsfor better business agility.

"In a short span of one year, the company’s roll-out of last mile fibrenetwork across cities has resulted in Tulip Telecom owning the largest fibre last milenetwork in the country which now covers over 4,000 kms"

The company also focuses on the large e-Governance infrastructure space and hassuccessfully worked on numerous projects for the Government of India’s Nationale-Governance Plan.

Capabilities like managed services have helped Tulip Telecom fortify the dataconnectivity business, and downsizing the legacy low-margin network integration business.

Headquartered in New Delhi, the company has regional offices at Kolkatta, Mumbai,Chennai, with ISO 27001 and ISO 20000:1 certified Data Centers at Mumbai, Navi Mumbai, NewDelhi and Bengaluru and Network Operations Centers at Delhi and Mumbai. The company hasestablished a strong national presence with 26 branch offices spread across the countrysupported by a strong employee-base of 2,600 of which over 70% are technical staff.

The company enjoys a position of eminence in the enterprise communication space with acountrywide network reach extending to over 1700 cities spanning across almost everydistrict in India.

INDUSTRY STRUCTURE & DEVELOPMENTS (TELECOM SECTOR – ENTERPRISE DATA SERVICES)

Fiscal year 2009-10 commenced on a difficult note. The global financial crisis, thatbegan in 2007, led to a significant slowdown in the growth rate of the Indian economy inthe second half of 2008-09. However, the wide range of timely policy measures abated thenegative fallout of the global economic slowdown in India. Over the span of the lastfiscal year, the Indian economy has posted an enviable recovery, not only in terms ofoverall growth figures but also displayed fundamental strength with the expansion ofgrowth across manufacturing and industrial sectors. The economy has expanded to grow at7.4 per cent in 2009-10. The country’s key policymakers see this as a signal of theeconomy returning to high growth rates that prevailed before the global economic crisis,and the economic growth is expected to touch 8.5% in the current fiscal year.

The telecom sector is one of the prime support services sector vital to the rapidgrowth and modernization of various sectors of the economy. India offers an unprecedentedopportunity for telecom service operators, telecom infrastructure developers,manufacturers and associated services companies.

Tulip Telecom is a data telecom service provider and IT solutions provider thatinnovatively provides customers IP-based infrastructural solutions. Through the roll-outof the fibre optic Tulip Telecom has expanded its offerings to services including IPLC,DLC, and VPN on fibre and Internet.

The Indian enterprise data market, which is a part of the fast growing telecom sector,has been on a strong growth trajectory. This is driven by the need for flawless enterpriseconnectivity grows as organisations grow geographically and aggressively employ moreIT-based solutions for enhancing their efficiencies. Organisations increasingly adoptenterprise solutions where connectivity is the key to fully monetize investments insolutions like Enterprise Resource Planning (ERP), Supply Chain Management (SCM), CustomerRelationship Management (CRM) and other applications. Connections providing 24*7communications, efficient and intelligent networking infrastructure are now an absolutenecessity for seamless integration of business operations across geographies, thusproviding scalability at a lower cost.

Success and growth of organisations cutting across industries is increasing wovenaround the successful evolution of the telecom sector and IT. By enabling organisations toharness the true potential and strengths of these two sectors, Enterprise DataConnectivity successfully delivers speed, agility and competitive edge to customers andplays an invaluable role in improving organisational productivity, improving customersupport and servicing ability. Enterprise Data Connecting is viewed as not only a tool torun organisations efficiently but is also viewed as an important part of the solution thatcan transform organisations as they grow.

According to Frost and Sullivan, India’s Enterprise Data Service market isestimated to be Rs 7,535 crore and the contribution is expected to rise to 36% at Rs16,779 crore by 2014.

The Enterprise Data Services market includes:

1. International Private Leased Circuits (IPLC)

2. Domestic Leased Circuits (DLC)

3. Multi Protocol Label Switching (MPLS)/ Internet Protocol Virtual Private Network (IPVPN)

4. ATM/Frame Relay

5. VSAT

6. Internet services

1. MPLS/IP VPN currently dominates the growth in the Enterprise Data Servicemarket due to its ability of establishing redundancy in the network, providingend-to-end security, higher uptimes and offering highly flexible & scalable networksolutions, thereby allowing it to deliver more bandwidth at the same price as otherconnectivity solutions. With most companies expanding operations across geographies, it isimperative that they have seamless integrated operations to maintain competitive edge.

MPLS is a highly scalable, protocol agnostic, data-carrying mechanism inhigh-performance telecommunications networks, which directs and carries data from onenetwork node to the next. For transmission of data a wide variety of physical hardware canbe used including fibre, copper circuits, wireless connectivity.

A Virtual Private Network (VPN) links two or more computers through anunderlying local or wide-area network, while encapsulating the data and keeping itprivate.

IP VPN is a network that uses public telecommunications infrastructure, such asthe Internet, to provide remote offices or individual users with secure access to theirorganisation’s network. A virtual private network can be contrasted with an expensivesystem of owned or leased lines that can only be used by one organisation. The goal of aVPN is to provide the organisation with the same capabilities at a much lower cost.

MPLS VPN is a family of methods for harnessing the power of MPLS to create VPNs.MPLS VPN acts as a common platform from which a wide range of services such as multimedia,Voice Over IP (VoIP), videoconferencing, multicast, ERP, SCM, CRM, access VPN, etc. can bedelivered.

According to Frost and Sullivan estimates, MPLS IP VPN accounts for nearly 42%(approximately Rs 3,227 crore) of the total Enterprise Data Market in India.

It is anticipated that the growth in Enterprise Data market will be mainly led from theEthernet & MPLS segments - which are estimated to be the fastest growing markets withCAGR of 64.5% & 34.2% respectively.. Moving forward, MPLS/VPN market is expected to bea dominant growth driver and is expected to constitute about 58% of the overall EnterpriseData Services market (pegged at approximately Rs 16,799 crore) by 2014.

2. International Private Leased Circuits (IPLC) is a point-to-point privateline used by an organisation to communicate between offices that are geographicallydispersed throughout the world. IPLC facilitates Internet access, business data exchange,video conferencing, and any other form of telecommunication. IPLC provides internationalconnectivity to enterprises which is vital to the IT, ITeS, and BFSI sectors. The fastgrowth and expansion of the ITeS sector in India has generated a healthy demand from theIT hubs.

According to Frost and Sullivan estimates, IPLC accounts for nearly 10% (approximatelyRs 748 crore) of the total Enterprise Data Market in India

3. DLC (Domestic Leased Circuit) offers a point-to-point private line whichcan be used by enterprises to communicate between offices that are geographicallydispersed throughout the country. A DLC can be used for Internet access, business dataexchange, video conferencing, and any other form of telecommunication.

According to Frost and Sullivan estimates, DLC accounts for nearly 16% (approximatelyRs 1216 crore) of the total Enterprise Data Market in India.

4. Over the years, legacy technologies such as Asynchronous Transfer Mode (ATM)& Frame Relay (FR) are becoming obsolete due to their complexity and costsinvolved in

"The company enjoys a position of eminence in the enterprise communication spacewith a countrywide network reach extending to over 1700 cities spanning across almostevery district in India"

supporting a large network of branch offices, as virtual circuits need to be configuredmanually between each site. The market share of these technologies is increasingly takenover by newer technologies such as MPLS/IP VPN and other connectivity solutions.

5. VSAT (Very Small Aperture Terminal) is a two-way satellite ground stationor a stabilized maritime VSAT antenna with a dish antenna that is smaller than 3 meters.VSATs access satellites in geosynchronous orbit to relay data from small remote earthstations (terminals) to other terminals (in mesh configurations) or master earth station"hubs" (in star configurations). VSATs are most commonly used to transmitnarrowband data (point of sale transactions such as credit card, polling or RFID data,etc), or broadband data (for the provision of Satellite Internet access to remotelocations, VoIP or video).

According to Frost and Sullivan estimates, VSAT forms approximately 6% of the totalEnterprise Data Market in India.

6. Internet

The rapid growth in technology ushered in the information age has become the basis fordefining speed, decision, servicing capabilities and power in the modern corporate world.It is a widely accepted fact that no modern business and economy can thrive without anintegral information technology and telecommunications infrastructure on board, of whichInternet plays a critical role.

According to Frost and Sullivan estimates, Internet forms approximately 26%(approximately Rs 1,751 crore) of the total Enterprise Data Market in India.

OPPORTUNITIES

The exponential growth of the Indian economy is expected to augment the demand for dataconnectivity as more organisations scale up their businesses across geographies. Even inthe downturn, the telecom sector witnessed growth as organisations cut down their travelcosts and invested more in connectivity options across the world which, in the long run,would effectively reduce costs.

1. Economic growth

Though inflationary pressure may challenge policy makers, the government and thePlanning Commission expect the Indian economy to grow at 8.5% in 2010-11 and 9% in2011-12. Due to the fundamental strengths and strong advances in private consumption andinvestment in the next two years, India’s economic growth is projected at 10% in2011-12. High growth trajectory will accelerate growth and expansion momentum acrosssectors; which in turn leads to demand across the Enterprise Data market.

2. Corporate expansion

Data connection forms the core of growing demand for increasing efficiencies forcorporate business, organisations expanding geographically, Government-based largee-governance sectors and industries seeking to reach the untapped potential of the largerural market.

3. Rural market

It is estimated that nearly two-thirds of India’s billion plus consumers live inrural locations, making it a market of significance for consumer and retail brands.Banking and educational sectors are continuously look at tapping the rural market.

Further, the Government, through a wide range of e-Governance initiatives, Mission ModeProjects, NREGA, etc., requires networking and Internet access even in remote locations,for which it has launched 26 Mission Mode Projects and 8 support components that areestimated to cost over Rs 23,000 crores over the next 5 years. The entire effort involves500 implementation agencies, 2 lakh sites and an estimated 70,000 man-years of effort.

However, connecting people living in the rural environment is a major challenge as itrequires development of new communication infrastructure. Further, the rural environmentposes numerous economic and operational difficulties such as rough terrain, limited powersupply and dearth of skilled labour. To capitalize on the potential, customers seek smartcommunications solution designed for the rigours of rural environments.

OPPORTUNITY POTENTIAL

According to Frost & Sullivan, the Indian Enterprise Data Services market isestimated to be around Rs 8,378 crore in 2009-10. The Enterprise Data Services Market isprojected to be at Rs 9,317 Crore in 2010-11. Revenue in the enterprise data market inIndia grew at an estimated 28% CAGR over 2007-09 and the growth is expected to staybuoyant at 20-25% CAGR over the next few years, led by increasing connectivityrequirements for enterprises. It is estimated to reach Rs. 16,779 crore by 2014 with aCAGR of 22.6%. It is expected that MPLS/VPN and IPLC will continue to show high growthrates, while ATM/Frame relay will slowly phase out.

BUSINESS OVERVIEW

Tulip Telecom is one of India’s leading Enterprise Data Service providers, focusedon providing connectivity to organisations across diverse industries, SMEs and governmentverticals.

Tulip Telecom’s business is designed to meet all telecom requirements of customerswith respect to data connectivity. The company offers data connectivity services (IPLC,DLC, MPLS VPN and Internet), which is complemented by its managed services like datacenters, security and management, and total IT outsourcing.

Company is aiming to maximise revenue from Enterprise data services (includingconnectivity) going forward.

The company’s Enterprise Data segment is complemented by the Network Integrationand Managed Services divisions, which help the company to become a ‘one stop hub forall IT needs’, thus enabling complete client accountability and control whilecreating multiple revenue streams.

"The Company’s Enterprise Data segment is complemented by the NetworkIntegration and Managed Services divisions, which help the Company to become a ‘onestop hub for all Telecom needs’"

Tulip Telecom is India’s only premier technology partner providing dataconnectivity solutions, data centers, access networks, Internet, managed services andnetwork integration services for large business rollouts.

1. DATA CONNECTIVITY SOLUTIONS

1.1 MPLS/VPN connectivity

Tulip Telecom’s IP/MPLS VPN network is a carrier grade infrastructure, built withstate-of-the-art networking equipment. The company enjoys the unique distinction of beingthe only network in the country offering MPLS VPN services across over 1700 locations. Thecompany is fully equipped to provide new-age infrastructure to facilitate technologiesthat significantly increased productivity, enable faster decision and reduce costs forcorporate businesses. Tulip Telecom is geared to provide bandwidth on demand, videoconferencing, VoIP and a host of other value-added services that play a critical role inenterprise communication across industries.

The entire network of Tulip Telecom is connected over high-speed fibre backbone andoffers multiple access technology options, including wireless to the last mile. Thisunique approach enables faster and easier connections with minimum lead time, overcomingsignificantly the hurdles faced by traditional copper-based last mile connectivityprovided by incumbent service providers.

A majority of the inter-city fibre bandwidth is leased. Tulip uses a mix of owned andleased fibre for intra-city connectivity. Tulip largely uses wireless as the last mileaccess with increasing focus on fibre-based last mile for connects with higher bandwidthrequirements.

Tulip Telecom’s WAN Management portfolio includes remote management for allcustomer devices, links and processes on the network. The company is also equipped toprovide an extended NOC for enterprise customers or create a dedicated helpdesk for usercomplaints.

1.2 Corporate Internet Access

Tulip Telecom is a Class ‘A’ Internet Service Provider and specializes inproviding high bandwidth connectivity to corporate customers. Tulip offers 1:1 Internetaccess on wireless as well as on fibre optic last mile in large cities and offers multiplebandwidth options to provide tailor-made solutions to its customers.

The company has a vast fibre network in major cities to provide last mile fibreconnectivity. Through the use of dedicated fibre connectivity, Tulip Telecom is geared tooffer customers in key business districts very high bandwidth.

All the remote aggregation points are connected to the core network over redundantpaths, allowing connectivity to be maintained at 99.5% plus levels.

Key features

• 1:1 Symmetric Bandwidth

• Last mile on fibre with scalability to Gbps levels

• Last mile on wireless, across 1700 cities in India

• Redundancy in cable systems. (Atlantic & Pacific routes)

• Uptimes in excess of 99.5%

• Best in class quality parameters

1.3 Global MPLS, IPLC, Ethernet

With the international connectivity services offered by Tulip Telecom through GlobalMPLS, IPLC and Ethernet Leased Lines, the company has extended connectivity solutions tomost international locations, including U.S., Middle East and the Asia Pacific.

The company offers connectivity to customers’ global offices, along with theadvantage of complete back-up in the domestic markets, better governance with regard toredundancy, global reach and market ready roll-outs. Tulip Telecom, through strongerpartnerships for holistic connectivity, is equipped to offer carrier agnostic solutionsfor better business agility.

Tulip Telecom’s international connectivity solutions offer various benefits:

• Global reach

• Carrier agnostic

• High network availability

• 24*7*365 global NOC support

• Industry leading SLAs

• Ease of deployment

• High scalability

• Security

• Single point of contact

• World-class service deliver

• End-to-end network management

Global MPLS

Tulip Telecom delivers a secure, high performance Global VPN network to address thefast growing demand for MPLS VPN connectivity across the globe. Equipped with the latestnetworks and technology, Tulip Global MPLS VPN solutions allow customers to share missioncritical data, voice and video across a secure, scalable platform with high levels ofsecurity. The company’s Global MPLS VPN solutions have a rich set of features thatinclude multiple classes of service, scalable bandwidth, network topology options and theright choice of interfaces. Global MPLS VPN is ideally suited for growing organisationsseeking a flexible, cost-effective solution that lends scale as business grows.

Utilizing an end-to-end, Layer 3 infrastructure with advanced MPLS features, TulipGlobal MPLS VPN solutions provide secure network connectivity, without the need forprivate infrastructure.

International Private Leased Circuit (IPLC)

Tulip Telecom’s IPLC offers cost-effective and reliable connectivity to meet thebusiness needs for transmitting data, video, voice or multimedia applications offeringglobal network reach, operational support and the expertise to deliver the rightsolutions. Tulip Telecom provides end-to-end International circuit connection right fromthe customer sites, taking care of all matters of provisioning, liaison, service ordering,fault monitoring, support, and billing.

Tulip IPLC solution offers a reliable, secure solution with high level of redundancy ondifferent cable systems. Tulip delivers protection in order to ensure continuity ofcustomers’ IPLC in the event of cable cut on the primary route. Tulip Telecomprovides the necessary reliability and diversity by allowing data on a transparent autoswitch-over mode to a different path if a link or device fails. The company’s diversecable networks enable path diversity for customers.

Ethernet Private Line

Tulip International Ethernet Private Line service extends the benefits of Ethernettechnology to a WAN solution which is more cost-effective and eliminates the need forseparate inflexible networks. It enables the creation of a single next generationmulti-service WAN that can transport Voice, Video and Data traffic in a reliable,convenient and an economical manner.

The company offers access to 206,356 kms of global connectivity through partnershipswith significant TransAtlantic and Trans-Pacific data transfer capacity and SDH &SONET to support IP, Gigabit Ethernet. Tulip Telecom offers significant diversity to andwithin India, and is not dependent on only one operator. The company has access toIndia’s largest MPLS network, as well as the largest fibre backhaul infrastructure.

1.4 Rural connectivity

With nearly two decades of experience in provisioning and managing large networks forcustomers across the industry verticals, Tulip Telecom has the expertise to analyse thecustomer’s IT infrastructure and help in defining the detailed architecture based onthe chosen strategy and business direction in the rural area. Further, Tulip Telecomprovides connectivity using multiple wireless technologies for access in the rural areas.

Unlike other solutions that deliver limited bandwidth and are designed primarily forvoice, Tulip Telecom’s solutions are IP-based, using wireless technology, and deliverhigh quality of voice, data and video. With the largest wireless roll-out infrastructureand the combination of the highest levels of networking skills, Tulip Telecom has emergedas the most trusted partner for rural and beyond-the-metro connectivity.

2.0 NETWORK INTEGRATION

Network integration is legacy business for Tulip Telecom.

The company has been a leading provider of integrated network solutions for the design,upgrade and expansion of business networks. Tulip infrastructure solutions consolidate andoptimise IT resources and improve clients’ business productivity by providing highavailability and high performance.

Tulip has strategic partnerships with most leading OEMs and offers various networkintegration services, including network design and consultancy, implementation andend-to-end management. Tulip provides high-end solutions from leading OEMs.

Tulip Telecom is specialised in various technology solutions, including:

• Advanced IP routing and switching

• Network Management

• Voice over IP

• Video conferencing

• Tele presence

• LAN and WAN connectivity (network cabling, wireless connectivity)

• Application installation and support

State Wide Area Networks (SWANs): The company has the financial and operationalwherewithal to provide the infrastructure for large State Wide Area Network projects andshares the invaluable experience of successfully executing infrastructure projects of theWest Bengal SWAN, MP SWAN, Haryana SWAN and Assam SWAN.

The company is equipped to design, deploy, operate, manage and maintain the entirenetwork, connecting all State Headquarters, District Headquarters, Block/TehsilHeadquarters and also all respective horizontal offices. Tulip Telecom can further extendthe network to every Panchayat, Citizen Service Center or kiosk that may be set up acrossthe State. This connectivity is provided through Tulip’s state of the art MPLS VPNnetwork, which is the largest such network in India.

The company’s market share in this business is now limited as it has beenselectively picking orders due to low margins.

3.0 MANAGED SERVICES

In IT-enabled business environment, stable and high performance communication systemsare of immense value. Every business organisation needs an IT infrastructure that canextend globally to all prospective customers, employees, suppliers and partners. And theinfrastructure is expected to offer fast, innovative and efficient business processes.

These demands are further aggravated by the spiralling complexity of informationnetworks and the high cost of hiring and retaining specialised personnel and complex ITinfrastructure. As a result of this aggravation, organisations find themselves graduallylosing control of the direction and effectiveness of its infrastructures. Feworganisations have the internal resources to ensure stable operation of such large andpowerful IT-integrated network infrastructure. This situation has led to tremendousopportunity for management services.

"The company has been a leading provider of integrated network solutions for thedesign, upgrade and expansion of business networks"

Tulip Telecom’s Managed Services model is designed to provide complete ITInfrastructure Management solution to its customers, helping them in their IT processesand enabling them to keep their business focus on core operations.

Tulip Telecom’s IT infrastructure services include the monitoring and managementof all desktops, network, messaging, servers, database and applications. With the rightcombination skills, technological prowess, the ability to customise services to customerrequirements and the flexibility to implement and manage key infrastructure as part of theongoing operations, Tulip Telecom offers a complete managed services solution toorganisations.

Tulip IT facility management services

The company’s IT Facility Management Services work round the clock to facilitatethe smooth and efficient running of the customers’ IT infrastructure as per theagreed terms and conditions. The company’s flawless servicing ability is powered bybest-in-class practices, state-of-the-art technology, skilled professionals, ability todeliver on-site customised solutions for facility and infrastructure need of thecustomers.

Tulip Telecom’s Managed Services cover the entire array of IT infrastructureservices, which include:

• Network Management

• Server Management

• Database Management

• Managed Messaging Services

3.1 Data Center Co-location and Hosting

Tulip Telecom also caters to server hosting, security, network device hosting, back-upand storage requirements of the customers; powered by ISO 27001 and ISO 20000:1 certifiedtier III+ Data centers in New Delhi, Mumbai, Navi Mumbai and Bengaluru. To ensure completestability to the company’s operations, the Data centers are located at either selfowned or long-leased buildings with potential capacity of 100,000 sq feet. Tulip Telecomenjoys the unique edge of being the only provider to have termination from all telcos.

Tulip Telecom has a deep understanding of mission critical environments which can beleveraged for providing a differentiated suite of service offerings, including co-locationand data centre build solution, powered with high degree of reliability, stability andscalability.

The company has access to fibre from all telcos (service providers) to ensurefail-proof connectivity. The facilities and processes are SP agnostic. Tulip Telecomalready has a ready to use Next Generation Networking (key architectural evolutions intelecommunication core and access networks that maybe deployed in future) head. Thecompany services premium customers like AT&T, Orange, amongst several others.

3.2 Total IT outsourcing

With nearly two decades of practical experience in providing IT solutions, TulipTelecom is a well established and trusted advisor to different organisations to optimisetheir IT infrastructure. Tulip Telecom provides consultation in IP, LAN/ WAN, Dataconnectivity, VoIP, Video conferencing, VPN, co-location and managed services.

BUSINESS PERFORMANCE

The Enterprise Data Connectivity segment, with its immense potential, is the key focusarea of the company. With the growth in the Indian economy, the demand for dataconnectivity is expected to increase at a rapid pace. The fast growth trajectory of theIndian economy and industries, growth in small and medium enterprises, along with thelarge-scale government projects and initiatives in the rural sectors, has generated a hugemarket potential for enterprise connectivity. Further, as bandwidth prices continue todecline, many more corporate and large organisations are expected to increase theirbandwidth requirement while connecting their counterparts spread across tier 2 & tier3 towns.

Tulip Telecom provides intra-city data connectivity specifically to corporate clientsthrough the company’s own wireless and fibre network. During the year, the companystrengthened its network infrastructure to meet the most demanding scenario to ensureuptimes in the range of 99.9%.

Further, with its unparalleled reach across cities in India, Tulip Telecom is fullyequipped to extend its service offerings in Enterprise Data Services across variouscustomers spanning diverse sectors. To improve data connectivity and increase reach in themetros and the large cities, the company has rolled out large fibre-based Metro Ethernetnetwork.

The Enterprise Data segment is complemented by the Network Integration and ManagedServices divisions, which helps the company to become a ‘one-stop hub for all ITneeds’, thus enabling complete client accountability and control while creatingmultiple revenue streams.

With the ability to offer one-stop solution in data connectivity, Tulip Telecom hascarved out a distinct niche for itself in Enterprise Data Services business and enjoys asignificant market share of 11.34%.

This strong foothold in the Indian Enterprise Data segment has been achieved by thecompany by fully engaging with its customers and providing them an extensive range ofproducts and services catering to their entire data requirement through its meshed networkinfrastructure from wireless and optic fibre. The exceptional meshed networkinfrastructure through wireless and optic fibre has been engineered to deliver maximumuptime to the customers with adequate back-up of alternate routes to take care of any linkfailure.

Share in MPLS/IP VPN segment

MPLS/IP VPN currently dominates the growth in the Enterprise Data Service marketbecause of establishing redundancy in the network, providing end-to-end security, higheruptimes and offering highly flexible & scalable network solution, thereby allowing itto deliver more bandwidth at the same price as other connectivity solutions. The companycontinues to maintain leadership position in the MPLS/IP VPN business segment.

Tulip Telecom’s MPSL/IP VPN revenue breaks into wireless and fiber.

Enterprise Data Services (Fiber)

The business extension into fibre has enabled Tulip to now address a large share of theEnterprise Data Service market. Tulip Telecom’s addressable Enterprise Data Servicesmarket before the fibre roll-out was limited to wireless last mile and accounts for barely17% (approximately Rs 1300 crore) of the total market opportunities of over Rs 7000 crore.However, with the fibre roll-out, the addressable share has now vaulted to a significant93% (approximately over Rs 7000 crore).

Also, this rollout will significantly increase the bandwidth requirement it willsubstantially lower cost per connect for Tulip Telecom which is expected to increaseearnings from this business going forward.

During the year, the company expanded its reach to 46 cities, where a meshed andredundant infrastructure has been created to enable higher uptimes. Tulip Telecom’sstrategy to roll out fibre based on real customer demand has enabled relatively limitedcapex with higher payback. The company has invested in large fibre network in terms oflast mile connectivity. This includes own deployment, leased as well as swapped fibre frommultiple operators.

Further, the company has presence in 250 cities with at least one connect. The companyplans to augment its presence in these cities by covering the key commercial areas ofthese 250 cities as the company believes that 90% of the high bandwidth customers in thesecities is located primarily in CBDs.

This would be achieved by creating a comprehensive ring network over the next 2 years,based on the company’s strategy where capex trails real demand. Tulip Telecom is alsolooking to free its wireless spectrum in certain areas, where the demand is high, byproviding connectivity on fibre.

Additionally, Tulip Telecom plans to extend its offering in the ILD (International LongDistance) segment by setting up 6 POPs, one each at East & West coast of USA, London,Singapore and two in India which will act as landing stations.

The company witnessed significant traction from this line of business, which currentlycontributes 20% to total revenues. Tulip Telecom added several new clients as well ashaving an extensive engagement with the existing wireless customers. The customer base ason March 31, 2010 stood at 600. The Company aims to achieve a 70% contribution from thisline of business in the next two years.

Enterprise Data Segment (Wireless)

The company has carved a niche for itself in this segment and has been able toconsolidate its leadership position in the MPLS/ IP VPN segment .Expansion of the meshedinfrastructure, higher uptimes as a result of high levels of redundancy on all routes hasenabled the company to acquire clients from almost every industry vertical like banking,insurance, services, logistic, telecom, etc. The company has also successfully positioneditself in various new verticals including IT, ITeS, financial inclusion, Government andeducation.

The client base now stands at over 1,600 customers which include more than 90% of thetop 500 companies in India.

Managed Services

The company has the expertise and experience to manage infrastructure and runoutsourced operations for customers smoothly. Also, Tulip Telecom’s comprehensive setof managed services can effectively manage IT investments, improve operations performanceand availability. With these services to offer, the company can provide mission criticalsupport with the highest level of expert consultation throughout the entire lifecycle ofthe hosted application.

Tulip Telecom has created state-of-the-art data centers at 4 locations in India, whichare ISO 27001 certificated, in addition to network operational centers, demonstrating thecompany’s commitment to provide secure and reliable service to its clients.

Tulip Telecom has recently won an order worth USD 20 million from a partner in SaudiArabia. Also, the company has been in talks with the Gujarat government for providingmanaged services to their State Area Wide Network. The order size for this project isestimated to be approx Rs 250 million.

Network Integration

Growth in the service and manufacturing sector has resulted in many companies expandingtheir services to new geographies. This requires multi-location connectivity to thrive incompetitive markets. The services comprise designing and developing networks for clients,apart from providing supplementary services, such as identifying and providing equipmentfor their network and integrating & implementing. Services such as facilitymanagement, network management and security services are also provided. Services such asremote management through network operation centers are also delivered to create a singlewindow for countrywide support. These facilities benefit the clients in terms ofsignificant cost and space savings. The company offers a wide range of wirelessapplications such as point-to-point or point-to-multipoint.

Network Integration - SWAN

Tulip Telecom undertook four SWAN projects of which the SWAN project in Haryana hasbeen handed over to the state government and has started recognizing revenues.

Tulip Telecom successfully completed a part of the West Bengal Swan project, which isundergoing acceptance test. The company expects to recognize revenues by H2 FY2011. SWANin Assam has been completed while SWAN in Madhya Pradesh is currently being implemented.Tulip’s focus on SWAN is limited in terms of growing the Network Integrationbusiness. The company believes there is immense potential from this business by providingbandwidth to these projects, which is expected to add to the performance going forward.

The company limits its focus in this segment to projects that are coupled with dataconnectivity.

The company aims to garner a share of the network integration/ data connectivity ofsome of the very large scale Accelerated Power Development and Reform Programme (APDRP)projects aimed at curbing power losses through network integration companies who winsignificant value of the projects.

Under 11th Plan, APDRP involves collection of baseline data without human interventionand creation of GIS based indexing of assets and the customer is proposed to be mandatoryfor utility, which will enable energy audit and accounting and setting up of single windowcustomer care center. The programme is estimated at over Rs 50,000 crore with additionalbudget outlays. The scheme proposes to create centralised data centers, where database andapplication server will reside and necessary IT infrastructure will be established in theareas covered under the APDRP scheme for collecting base line data, and also creates ITbackbone in the area of distribution business process to capture the benefits of theinvestments on sustainable basis. All of this will unleash huge demand for the businesssegments offered by the company.

Way forward

The elieves that there are ample opportunities which will provide impetus to thewireless data connectivity business going forward. With the roll-out of the fibre, thecompany can offer even wider business opportunities estimated at over Rs 7000 crore.

The company, with its widespread reach and network base, is confident of its ability toservice the various initiatives undertaken by the state and central governments to extendconnectivity to rural India for financial inclusion and National e-Governance Programmes,apart from the Accelerated Power Development and Reforms Programme (APDRP) and bandwidthprovisioning to SWAN projects. Though Tulip Telecom’s focus in the APDRP is limitedto network integration and data connectivity, the quantum of the APDRP roll-out provides ahuge potential of the business.

Overall, Tulip believes that it is ideally positioned to cater to the requirements ofFinancial Inclusion, large Government programmes similar to APDRP, National RuralEmployment Guarantee Act (NREGA), National Identity Card, etc with its expertise inproviding data connectivity over a wireless network combined with an existing largewireless infrastructure located in over 1,700 cities.

"Tulip Telecom has won the prestigious R-APDRP project worth Rs. 158.2 Crore forUttar Pradesh and Gujarat"

Financial Inclusion

The Central Government is emphasising on financial inclusion with strong focus onincreasing the financial outreach to the underprivileged located in rural India. Ruralareas provide a geographically sparse customer base and therefore, it is not commerciallyviable for finance companies to open branches in these locations. An IT solution that isbased on a movable framework, while providing banking applications, is ideally suited forthis problem. This can be provided over a wireless connectivity network. An area thecompany is geared to provide solutions.

Outlook

The company’s large portfolio of product and service offerings, widespread reach,extremely high levels of customer satisfaction and state-of-the-art meshed infrastructureensure that Tulip Telecom is well poised to take advantage of the opportunities in theEnterprise Data Service market, which concurrently would translate into a strong earningsperformance going forward.

Tulip Telecom believes that there are numerous opportunities arising in the wirelesssegment from the Government initiatives, along with the Alliances and Partnership modelthat are expected to provide considerable thrust to the data connectivity business.

The company also sees huge potential in the fibre roll-out business as it allowsadditional Data service offerings, including IPLC, DLC, Corporate Internet, as well as VPN– fibre. With roll-out complete in 46 cities in India and presence in 250 cities,Tulip Telecom is eyeing opportunities to extend its fibre optic network on an ongoingbasis.

The vision of the company is to garner a 20% market share within the next two years.This belief is on the back of all the initiatives undertaken in the last one year to reapbenefits by 2012. Going forward, with multiple business opportunities in the EnterpriseData Service market, the company is well poised to become a leading player in thissegment.

• License conditions and regulatory risks

The company’s business is highly regulated and subject to conditions, restrictionsand obligations under the Internet Service Provider License Agreement executed with theDepartment of Telecommunications under the Ministry of Communications and InformationTechnology, GOI. The legal and regulatory framework under which the company operates isstill evolving.

• Competition from existing private operators and potential new entrants,including Government controlled enterprises

No significant entry barriers are present in the area that the company operates in dueto easing of telecom policies over the years. New entrants may enter the IP/VPN sector,which would increase competition. The telecom policy now offers a level playing field forall operators and no operator has any significant advantage vis--vis the company inIP/VPN connectivity.

However, there is no assurance that in future the Government policy will not favourGovernment-controlled enterprises, which can adversely impact private players.

• External risks such from fire, riots, vandalism, terrorism and other lawand order problems may impact our business.

RISKS & CONCERNS

The company leases the inter-city networks from other service providers and the qualityand availability may not be uniform. The company provides inter-city connectivity for itswireless-based IP/VPN business through lease arrangements rather than through capitalinvestment in connectivity assets. The company’s ability to offer high qualitytelecommunications service depends, to a large extent, on the quality of the networksmaintained by other operators, and their continued availability, neither of which is underits control. In the event of any adverse movement of lease rentals, the company may haveto incur additional expenditure to maintain its network.

However given the abundant availability of inter-city network spread across ninecompanies, the company does not foresee any supply or quality issues.

Limited availability of frequency spectrum

Network capacity plays an important role in the growth and development of thecompany’s wireless based IP/VPN business. A wireless network’s capacity islimited by the amount of frequency spectrum available for this use. At present, thecompany has sufficient frequency spectrum to support its services.

INTERNAL CONTROL SYSTEMS

The company has in place an adequate accounting and administrative internal controlsystem in order to ensure that all transactions are authorised, recorded and reportedcorrectly, and that all assets are protected against perils of unauthorised use ordisposition.

The company has a well-defined organisation structure with clear functional authoritylimits for approval of all transactions. The company has a strong reporting system, whichevaluates and forewarns the management on issues related to compliance. The performance ofthe company is regularly reviewed by the Audit Committee as well as the Board of Directorsto ensure that it is in keeping with the overall corporate policy and in line with pre-setobjectives.

The company updates its internal control systems from time to time, enabling it tomonitor employee adherence to internal procedures and external regulatory guidelines.

FINANCIAL REVIEW

a) Income from Operations

The company registered total revenue of Rs 2, 01,193.40 lacs during the financial year2009-10, a 22.5% growth over the previous year.

Other Income in the financial year 2009-10 increased to Rs 4,681.98 Lacs as compared toRs 3,444.92 lacs in the year 2008-09, an increase of 36%. Other Income includes saving ofRs 2182 Lacs on account of buy back of FCCB of face value USD 19.6 Million. It alsoincludes gain on account of foreign currency fluctuation amounting to Rs 4420 lacs andloss on account of derivative settlement amounting to Rs 2221 Lacs.

b) Cost of Goods Sold

During the financial year 2009-10 the cost of goods sold increased from Rs. 1,15,105lacs in FY 09 to Rs. 1,29,528 Lacs in FY 10

COGS as a percentage to revenue has fallen from 70.1% to 64.4% on account of increasingfocus on providing wireless and optical fibre based solutions having higher margins ascompared to traditional low margin wired business.

c) Administrative and Other Expenses

Administrative and Other Expenses increased by 25% in line with the increase inrevenue. The percentage share to revenue has gone slightly up from 2.82% to 2.87%

d) Staff Cost

Staff cost increased by 15% from Rs 7118 lacs to Rs 8167 lacs. This is due to ongoingexpansion activities, including opening of new branches and recruitment of new staff. Thenumber of employees has increased to 2571 from 2403. However as a percentage to totalturnover, it has decreased to 4.06% from 4.33%.

Selling and Distribution expenses increased by 12.5% in the fiscal year 2009-10.However as a percentage to total revenue, it has come down from 0.26% to 0.23%.

f) Earnings Before Interest, Depreciation & Write Offs Taxes (EBIDTA)

The operating profit (EBIDTA) has increased by 54.7%. The margins have improved to28.4% from 22.5% in the last year .

The company’s operating profits have improved due to:

• Increased focus on high margin business like wireless and optic fibre solutionin comparison to traditional low margin wired solutions.

• Increased utilisation of same resources resulting in higher efficiency ascompared to earlier years.

g) Finance Expenses

Financial charges increased significantly by 55% during the year 2009-10.However, the increase is still lower than 78.89% increase in the year 2008-09.The rise infinancial charges was on account of higher working capital loans and the term loan raisedby the company to part finance capital cost on network. As a percentage to total revenue,it has gone up from 2.81% to 3.55%. As the company focuses on maximisation of revenue fromexisting capital employed, the financial charges as a percentage to total revenue shouldremain under control.

h) Depreciation and Other Write-Offs

The depreciation for the financial year 2009-10 stood at Rs. 13,529.64 as against Rs4,144 Lacs

As a percentage to total revenue, depreciation has increased to 6.72% from 2.52%. Theconsiderable rise in depreciation in the current year is on account of increased capitalexpenditure, putting CWIP into commercial use and bringing rates in line with the industryaverage.

i) Income Tax

The company is availing tax benefit under section 80 IA and 80 IB of the Income tax act1961. Since company has entered into the second phase of the tax benefit under section 80IA of Income tax act 1961 this year wherein only 30% of the profit(emanating from"Telecom" related activities) is exempt from Income tax (As against 100% ofprofit being exempted from Income tax) and henceforth the provision for Income tax is madefor Rs 8994 lacs in FY 2010 as against Rs 3273 lacs in FY 09. Overall cost of Income taxto revenue has increased to 4.47% from 1.99%. The effective tax rate has also increasedfrom 11.59% to 24.61%.

Under section 80 IB of the act, having an undertaking in the notified area of Jammu andKashmir for manufacturing the product within a specified period enables the undertaking toclaim income tax benefit under the said section. In addition to this, profits from thecorporate network and Data services are also exempt under Income tax act 80 IA.

j) Profit After Tax (PAT)

PAT for the financial year 2009-10 has increased by 10.39% to Rs 27,434 lacs from Rs24,882 lacs in 2008-09. In percentage to total revenue it has marginally decreased to13.69% in comparison to the last year’s 15.19%. The same is primarily on account ofhigher incidence of income tax. The PBT (Profit before tax) as a percentage to totalrevenue has gone upto 18.2% as compared to 17.2% in 2008-09.

MATERIAL DEVELOPMENTS ON HR FRONT

Human Resource Department of an organization aims at maximizing the return ofinvestment in the organizational human capital. HR seeks to achieve this by aligning theright mix of talent and capabilities of the current workforce with the organization’sbusiness objectives and strategic planning. Keeping this in view HR department at Tuliphas taken various initiatives towards increasing the talent pool of the organization andat the same time motivating and developing competencies and capabilities of currentworkforce. Some of the important initiatives undertaken by the company include Let’sTalk ‘Employee of the month Award’, ‘Tulip Telecom Innovation Award’,‘Mindshare’ etc. These are aimed to develop the competencies of theemployees and alligned with overall management objectives and goals.

As at 31st March 2010, the company’s total employees were 2,571 against 2,403 asat 31st March 2009.