tulip telecom ltd Management discussions

Management Discussion Analysis

Industry Structure and Developments:

Enterprise Data Services forms the backbone of the Enterprise Telecom Market in India. The Enterprise Data Services Market further divided into :

• Connectivity (includes MPLS/VPN, Broadband, Metro Ethernet, DLC,IPLC,VSAT)

• Managed Services (includes Managed Security, Unified Communication & Collaboration and Data Centers)

• Network Integration

• Fixed Services (includes ISDN, DSL, Toll Free, VoIP etc)

• Others services (includes Hosted Contact Center, Audio Conferencing and Video Conferencing)

Enterprise Telecom Market

The Enterprise Telecom Market, at INR 61,994 Crores constituted 35% of the Indian Telecom Market. Managed Services, Network Integration and Data Services which form 46.7% and 10.6% respectively, will be the key growth engines for the Enterprise Telecom Market. Others comprise 24% of the Enterprise Telecom Market out of which fixed and mobile services each account for 12%. Hosted Contact Centers and Conferencing (audio and video) at INR 184 Crore accounts for less than 1% of the total Enterprise Telecom Market.

The Enterprise Telecom Market is expected to grow from INR 61,994 Crore to INR 1,16,400 Crore by FY 2016 at a CAGR of 13.2 %. Managed Services, Network Integration and Data Services will be the key growth engines for the Enterprise Telecom Market, expansion of Enterprises, increasing bandwidth and infrastructure requirements are resulting in rapid growth of the Managed Services and Network Integration market.

Key Drivers for Future Growth

The connectivity market is poised to approximately double in size from INR 6125 Crore to INR 12084 Crore at a CAGR of 12% between FY 2010 to FY 2016. The growth will be driven primarily by enterprise demand for MPLS, Internet and Ethernet services. MPLS and Ethernet markets are likely to grow at an average of 18% per year, Internet market is expected to grow at 10% and Ethernet is expected to grow at a rate of 9% approximately.

Sectors Driving Growth in EDC Market:

BFSI, Government, IT, Manufacturing and ITES will be the major contributors to the EDC Market. Together these five verticals would contribute to nearly 88% of the connectivity market demand. BFSI based market is expected to grow at a rate of approx 12%, Government based market is expected to grow at a approx rate of 15%, IT based market is expected to grow at a rate of apporx 8%, Manufacturing and ITES market is expected to grow at a rate of approx 15%. (according to Industry reports)

Business overview

With over two decades of practical experience in providing IT solutions, Tulip Telecom has emerged as Indias largest Enterprise Data Service provider with an aim to fully engage with its clients, by providing an extensive range of products and services through its meshed infrastructure of wireless and optic fibre. Complementing connectivity services are Network Integration, Managed Services and Data Centre segments which enables the Company to serve all the data demands of its customers thus becoming a One Stop Shop for its clients. This has not only facilitated the Company to generate multiple revenue streams, but has also enabled customer stickiness, accountability and control.

Business Overview & Performance

A) Data Connectivity Solutions

Tulip Telecom over a short span of time has created Indias largest last mile connectivity across India through its fibre and wireless network thus, providing high quality end-to-end data connectivity solutions for customers. The entire network of Tulip Telecom is connected over high speed fibre backbone and offers multiple access technology enabling faster and easier connectivity with minimum lead time.

Enterprise Data Connectivity - Fibre

Tulip Telecom, has created the largest last mile networks in India through a combination of owned and leased fibre optic. This has not only enabled the Company to increase its revenue stream, but also has lowered the cost per connect substantially

Additionally, Tulip Telecom also created network to network interconnections (NNI) with Global Telecom Operators to jointly provide IP VPN and Ethernet Services to Indian customers with a global footprint. This arrangement gives Tulip access to 100,000 kms of fibre networks spread across 190 countries.

Enterprise Data Connectivity - Wireless

Having built the largest last mile wireless network in the country spanning across 2,000 locations in India, Tulip Telecom enjoys unique distinction for itself in the wireless segment.

The client base now stands with over 2,200 customers which include more than 80% of the top 500 companies in India.

B) Managed Services

IT infrastructure has been growing at a rapid pace. However, the complexities related to networking and maintenance has outpaced this growth. This has resulted in a need to have a single owner for deploying and maintaining networking solutions. Tulips Managed Services model is designed to provide complete IT Infrastructure Management solutions to its customers, thus allowing them to focus on core compentencies. The need of the hour demands IT Infrastucture providers to be fast, innovative and efficient.

Tulip Telecom offers complete Managed Services solution to organizations. The Company has deep understanding of mission critical environments which can be leveraged for providing a differentiated suite of service offerings - which includes co-location, Data Centre Build, Facility Management Services and remote/onsite Infrastructure Management Services; powered with high degree of reliability, stability and scalability. Tulip Telecoms immaculate servicing ability is driven by best-in-class practices, state-of-the-art technology, skilled professionals and ability to deliver on-site/off-site solutions.

C) Data Centre:

Todays organizations are persistently looking for a robust and secure infrastructure that is scalable enough to meet their growing demands; with increasing criticality of IT services and decreasing IT budgets, Data Centre colocation, hosting and other services seem to be the solution for meeting the above challenges. According to a recent projection by Cyber Media India Ltd., the total Data Centre Market in India is expected to be worth $2.6 billion (INR 133 billion) of which 20 % or $600 million (INR 30 billion) is expected to come from the third party Data Center hosting thus creating a huge market space for Data Centre Services. In order to capture this growing demand Tulip built Asias largest and Worlds third largest Data Centre in Bengaluru.

Salient features of the Tulip Data City:

• Third Largest Data Centre in World with upto 9,00,000 Sq ft of total space

• Multy-tiered design conforming to Tier-3 and Tier-4 specifications as per TIA-942 standards

• Utility power from 66 KV substation Feeding 100 MVA power

• Carrier Neutral facility with multiple ISPs

• Contiguous Isolated Rack Space of 10,000 Sqft per Module

• 80,000 Sqft of Customer Office Space

• Industry Standard Building Automation System

The Data Centre Market in India

• The third party data centre market is currently dominated by large and established telecom players and pure play data centre services providers. Tulip Telecom has changed the pecking order of the data centre market by commissioning Asias largest and Worlds third largest data centre at Bengaluru in Feb12

• With an annual revenue potential of over INR 10 billion from this data centre, Tulip is set to emerge as the largest player in the space in India.

• With its size, economies of scale and NOC with a seating capacity of 1500, Tulip is set to emerge as Indias first to offer a data centre within a data centre facility, apart from co-location and hosting facilits. The data centre would also form the bedrock of the companys managed services offering

• IBM is Tulips design partner and Schnabel has been its consultancy partner to oversee its design, build and certification. Built to Tier IV and Tier III standards, the data centre has 99.995% uptime and has already tied up marquee clients as its anchor tenants