TELECOM INDUSTRY DEVELOPMENTS India Economic Outlook
India was one of the fastest-growing economies globally in FY24. The key growth drivers were Government spending on infrastructure & robust domestic demand for goods and services. Despite headwinds of persistent in_ation and high interest rates, Indias GDP growth rate for the financial year 2023-2024 is estimated to be ~7.6% vs 7.0% last year.
Looking ahead, the Indian economy is expected to grow ~7% in the financial year 2024-2025 driven by moderating in_ationary pressures, normal monsoon, and sustained momentum in manufacturing and service sectors.
INDIAN TELECOM INDUSTRY DEVELOPMENT Telecom Industry
Indias Atmanirbhar Bharat initiative aims to transform the nation into a global leader in telecom equipment development and manufacturing. The Department of Telecommunications ("DoT") is actively supporting this vision by:
Fostering a research and development (R&D) ecosystem: This includes encouraging research in areas like core transmission equipment, next generation 4G/5G infrastructure, and various types of user equipment (wireless, access, CPE, IoT devices, etc.).
Establishing 100 engineering institution labs dedicated to 5G application development: This initiative seeks to unlock the potential of 5G technology by fostering innovation and creating new business models and employment opportunities within the Indian telecommunications sector.
Growth Drivers for Telecom Industry
PLI Schemes under Atmanirbhar Bharat Abhiyan
The Department of Telecommunications has announced a Production Linked Incentive (PLI) Scheme with a substantial budget dedicated to boosting the manufacturing of telecom and networking products. Specifically, incentives have been set aside to strengthen the Design-Led Manufacturing Scheme within the existing PLI Scheme. This initiative aims to incentivize and expedite the production and advancement of telecom and networking products, fostering growth and innovation in the sector.
BharatNet Project
The BharatNet Project has achieved connectivity for 210,190 Gram Panchayats (GPs) and laid 678,148 Kms of _ber as of January 2024.
Digital India
The Government of Indias Digital India initiative serves as the cornerstone programme, envisioning the transformation of the country into a digitally empowered society and knowledge-based economy. Here is an overview of the status of various key initiatives under the Digital India programme nationwide:
BPO Scheme - The India BPO Promotion Scheme (IBPS) seeks to incentivise the establishment of 48,300 seats in respect of BPO/ITES operations across the country. It is distributed among each state in proportion to the states population with an outlay of 493 Crores. This would help in capacity building in smaller cities in terms of infra & workforce and would become the basis for the next wave of IT/ITES led growth. This scheme has the potential to create employment opportunities of around 1.5 lakh direct jobs considering three shift operations.
Common Services Centres (CSCs) - CSCs are offering government and business services in digital mode in rural areas through Village Level Entrepreneurs (VLEs). Over 400 digital services are being o_ered by these CSCs. So far, 5.70 Lakh CSCs are functional (including urban and rural areas) across the country, out of which, 4.48 Lakh CSCs are functional at Gram Panchayat level.
DigiLocker - Digital Locker provides an ecosystem with collection of repositories and gateways for issuers to upload the documents in the digital repositories. Digital Locker has more than 26.7 crore users and more than 673 crore documents are made available through DigiLocker from 1,703 issuer organisations.
United Mobile Application for New-age Governance (UMANG) - More than 1,984 e-Services across 207 Departments/Entities and over 6.35 Crore citizens registered on UMANG with transaction of 421.24 Crore already done.
MyGov - It is a citizen engagement platform that is developed to facilitate participatory governance. Presently, over 3 Crore+ users are registered with MyGov, participating in various activities hosted on MyGov platform.
MeriPehchaan - National Single Sign-on (NSSO) platform called MeriPehchaan was launched in July 2022 to facilitate/provide citizens ease of access to government portals. Total 7,960 services of various Ministries/States have been integrated with National Sample Survey Organisation (NSSO).
Open Government Data Platform - To facilitate data sharing and promote innovation over non-personal data, Open Government Data platform has been developed. More than 6.24 Lakh datasets across 13,092+ catalogues are published. The platform has facilitated 101.3 Lakh downloads.
Pradhan Mantri Gramin Digital Saksharta Abhiyaan (PMGDISHA) - This scheme for digital literacy in rural India has made significant progress in last year. Registered candidates grew from 6.63 Crore to 7.42 Crore, trained candidates increased from 5.69 Crore to 6.45 Crore and 4.83 Crore have been certi_ed.
Amid the rapid evolution of the digital landscape in India, organisations are swiftly adapting to the ongoing digital shift by reimagining their business models, strategies, and product offerings. To remain agile in this dynamic environment, organisations are continuously exploring and innovating new digital solutions. These solutions harness advanced technologies such as data analytics, cloud platforms, AI/ML, cybersecurity, and automation to drive digital transformation across various functions including marketing, sales, _nance, and beyond.
OVERALL MARKET VIEW
The enterprise telecom market in India is characterised by rapid digital transformation, continued evolution of use cases for 5G technology, heightened focus on security and compliance, increasing adoption of cloud and managed services, demand for united communication solutions, industry-specific requirements, and government-driven digital initiatives.
Large enterprises and SMEs both are driving digital transformation and leveraging telecom services to fuel their growth. Their specificneeds, preferences, and adoption patterns vary based on their size, resources, and strategic priorities.
FUTURE OUTLOOK
Businesses are expected to continue to invest in digital transformation to drive their business objectives of enhancing reach, streamlining operations, improving agility and security. Some key trends shaping the future of this dynamic landscape are:
SIP Trunking: Enterprises are increasingly gravitating towards IP-based SIP Trunking, drawn by its security features, adaptable scalability, and cost-effectiveness, positioning it as a superior alternative to traditional phone lines.
United Communications and Cloud Communications: Businesses are embracing integrated solutions that promise heightened business agility, seamless connectivity from anywhere, enhanced collaboration capabilities, and enriched customer interactions, all while streamlining operational expenses.
Enterprise Data Services: The market for enterprise data services is on a trajectory of steady expansion, propelled by the ascent of hybrid IT infrastructures and the widespread adoption of multi-cloud environments, underlining the evolving needs of modern enterprises.
SD-WAN: Businesses spanning various sectors are integrating SD-WAN solutions into their network architectures to streamline management complexities, realise operational e_ciencies, and curtail expenses, aligning with overarching WAN transformation agenda.
Internet Leased Line & Point-to-Point Connectivity: Robust demand from key sectors including IT, BFSI, Media, and Services is expected to fuel sustained expansion, underscoring the indispensable role of Internet Lease Line & Point to Point connectivity in facilitating critical business functions amidst a dynamic digital landscape.
Security services: Zero Trust architecture, endpoint security solutions are gaining prominence, particularly with the rise of remote work and BYOD policies triggering the need to safeguard devices and data against malware and ransomware. With the increasing migration of workloads to the cloud, there is a rising demand for cloud security services that offervisibility, control, and compliance across multi-cloud environments.
Advanced Business Communications and Marketing Solutions: The focus on omni-channel customer engagement, superior customer experiences and building customer loyalty will spur omni-channel platforms and solutions market.
KEY TELECOM REGULATORY DEVELOPMENTS/LITIGATIONS
The Standard Procedure for checking grey market operations has been amended to allow service provider to disconnect telecom resources given to a customer after giving 7 days of intimation to DoT.
NSDTS (National Security Directive on Telecommunication Sector) and MTCTE (Mandatory Testing and Certification of Testing Equipment) compliance have been mandated for Wi-Fi equipment either provided by service provider or purchased by customer from market.
DoT has issued a clari_cation on the definition of Gross Revenue and Adjusted Gross Revenue.
Restriction has been imposed on the Licensee from entering into any exclusive contract for establishing a public network or a Right of Way (RoW) with any public entity or any person.
With effect from October 1, 2023, DoT has made it mandatory for the Licensee to register all PoS (Point of Sale) before permitting them to enroll customers. All the existing PoS (PoS existing as on September 30, 2023) shall be registered by September 30, 2024.
Paper-based KYC process has been discontinued with effect from January 1, 2024.
Ministry of Law and Justice has issued a Gazette Notification on the Telecommunication Act 2023, after the same was passed by both houses of Parliament with the assent of the President of India. This Act has repealed three Acts, namely The Indian Telegraph Act, 1885; The Indian Wireless Telegraphy Act, 1933; and The Telegraph Wires (Unlawful Possession) Act, 1950. The Rules pertaining to this Act is yet to be notified by DoT.
Timelines for completion of digitisation of Paper CAFs has been extended till June 30, 2024.
TRAI issued "Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulation 2023" on September 13, 2023; and "Guidelines on implementation of Quality of Service (Code of Practice for Metering and Billing Regulation Accuracy) Regulations 2023" on September 19, 2023.
MAJOR LITIGATION Dual Technology
The Cellular Operators Association of India ("COAI") challenged the DoT Press Release dated October 19, 2007, allowing the existing licensees to use dual technology i.e., CDMA operators were permitted to acquire and use GSM spectrum for providing GSM services and vice-versa ("Dual Tech Policy") before TDSAT, which upheld the Dual Tech Policy by order dated March 31, 2009. TTML GSM admin spectrum in the 1,800 MHz band was allocated under this Dual Tech Policy in 2008 and it expired on September 29, 2017. COAI challenged the TDSAT order before the Supreme Court, praying that the Dual Tech Policy should be repealed, and the GSM start-up spectrum should be cancelled. The matter was last listed on April 18, 2023, but could not be taken up. The matter will be listed in due course. If the policy is held to be invalid, there could be some financial liability for the past period of about eight years during which this spectrum was held by the Company.
MERC Order on applicability of commercial tarific on Mobile Towers
By way of Multi Year Tari_ Order dated November 3, 2016, passed by the Maharashtra Electricity Regulatory Commission ("MERC"), the mobile towers were re-categorised and covered under the commercial tari_ as against the industrial tari_ applicable to the mobile towers under the previous tari_ orders. The said Tari_ Order dated November 3, 2016, was challenged by various telecom operators (including TTML) as well as IP1 companies before the Appellate Tribunal for Electricity ("APTEL"), Delhi by way of appeals under Section 111 of the Electricity Act and all appeals were clubbed and heard together.
APTEL vide its judgment dated February 12, 2020, allowed all the appeals thereby holding that the mobile towers shall be categorised under the industrial tari_ and not under commercial tari_. In other words, the said order of MERC is now reversed, and the industrial tari_ is restored for mobile towers. A Civil Appeal was _led in September 2020 by MSEDCL in the Supreme Court challenging the Order of APTEL dated February 12, 2020.
The Supreme Court in October 2020 ordered notice with an observation that the Telecom/Tower companies shall not recover any monies from MSEDCL which they have paid already under commercial tari_, at this stage and in the meanwhile, the industrial tari_ shall continue to apply to all the telecom towers until further orders. In a recent hearing on January 2, 2024, the Supreme Court passed directions to MSEDCL to raise invoices in terms of the APTEL judgment dated February 12, 2020, and continued the interim order, with regard to recovery, till the _nal outcome of the present proceedings.
The case is pending for _nal hearing in Supreme Court.
Note - In the meanwhile, TTML had moved its applications for ITES certifications and obtained the same for its important locations. By these certifications, TTML is entitled to draw power supplies under industrial tari_ in such locations.
Please refer to Notes to Accounts for the following litigations:
i. Mumbai Circle Term Penalty
ii. One Time Spectrum Charges
iii. Pune Municipal Corporation Property Tax bill for Al-Aqmar Onceiv. Adjusted Gross Revenue (AGR) De_nition
RISKS AND CONCERNS
This section discusses the various aspects of enterprise-wide risks management. It might be noted that the risk related information outlined here is not exhaustive and is for informational purpose only.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Enterprise Risk Management
Enterprise Risk Management ("ERM") is a comprehensive and structured approach to risk identification, risk assessment, risk response, and risk monitoring. The Company has formulated a well-defined and dynamic ERM framework, which gets reviewed and updated periodically. The framework is governed by a comprehensive risk management policy, which, amongst others, includes the risk management governance structure and the risk management process. Results of the risk management activities are periodically reviewed by the management and bi-annually presented to the Risk Management Committee of the Board. The risk management process enables proactive identification, recording, tracking of risks and monitoring of mitigation plans to respond to changes in business and regulatory environment. The ERM framework aims to realize the following benefits for the organization:
Enhance risk management
Improved decision-making
Enhanced risk awareness
Improve governance and accountability
Improved business continuity
Enhance credibility with key stakeholders such as investors, employees, government, regulators, society, etc.
Protect and enrich stakeholder value
The risk management process is embedded in the Companys work systems including the planning and review process, thereby reassuring all stakeholders, customers, investors, employees, and partners in respect of the Companys business sustainability.
Internal Audit
An Audit Committee of the Board of Directors has been constituted as per the provisions of Section 177 of the Companies Act, 2013 (the "Act").
The internal audit for various functions/aspects is conducted by the independent _rms. These audit firms carry out exhaustive audits. Internal audit reports are presented to the management. The Internal Auditors reports dealing with internal control systems are reviewed by the Audit Committee and appropriate actions are taken, wherever necessary.
Risk Environment
The Company is confronted with several risks, and maintaining an effective and flexible risk management process is essential for managing and mitigating their impact. Key risks facing the Company include:
1. Market and Competition Risks
Industry players accelerated their investment in products, network, and technology. Their focus was on use cases for 5G, united and cloud-based communications, cyber security solutions, network transformation, LEO satellites and AI technologies. The Company continued to strengthen its Smart Digital Solutions portfolio as highlighted below:
The Company enhanced its Smart_o Suite of Solutions with the addition of:
Smart_o WhatsApp for Business Suite which enhances omni-channel communication, thereby elevating customer engagement and customer experience.
Smart_o UCaaS Suite of Solutions which allows united communication experience for customer facing roles as well as enhances employee experience.
The Companys Infrastructure as a Service (IaaS) solution, in partnership with Microsoft allows enterprises to migrate their workloads to cloud enabling _exibility and agility. This year the Company launched Smart Cloud Managed Services which offers tailored support for cloud transformation. The Company is now a Microsoft Azure Solutions Partner for Infrastructure, Data & AI solutions.
The Company continues to expand its suite of Smart Workspace Solutions, in collaboration with Microsoft. The Company recently launched Microsoft Copilot for Microsoft 365, the AI assistant for work. This allows SMEs to leverage the power of AI for their repetitive tasks and frees up their time to focus on business expansion.
The Company partnered with Truecaller to offerTruecaller VerifiedBusiness Caller ID Solution. This comprehensive solution integrates Truecallers advanced caller identification features with business communication tools, enabling organisations to enhance customer engagement and operational efficiency.
The Company launched ILL Burstable Bandwidth Solution which allows adaptable connectivity for dynamic demands of businesses. This solution offers flexible bandwidth options, allowing businesses to scale their network capacity based on demand, ensuring optimal performance during peak periods.
The Company launched Data Loss Prevention Solution, to enable safeguarding of valuable information with proactive security measures. This comprehensive solution employs proactive security measures to mitigate the risks of data breaches, unauthorised access, and accidental leaks.
Recognising the need for streamlined communication, Smart Single Number Solution was launched. It lets the customer reach businesses across India on one single number, thus providing a comprehensive approach to connectivity challenges. The solution allows businesses to not only ensure efficient communication but also reduce operational complexities.
The Company will continue to strengthen its Smart Digital Solutions portfolio aligned to customer needs in the future as well.
2. Brand Risks
A brand is an important intangible asset that sets any organisation apart in a competitive market. The Company continues to make sustained efforts to drive brand preference through strategic marketing interventions including launch of new products that meet the changing business needs of the customers. During the year, the Company developed thematic campaigns aimed at boosting its brand awareness. Noteworthy campaigns include Azaadi Kuch Bada Karne Ki, unveiled during Independence Day, and Shuruvaat Kuch Bada Kar Dikhaane Ki, which brightened the Diwali festivities. Additionally, the Company established a brand property - IT Professionals Day, to celebrate of the pivotal role of IT professionals across various sectors. This initiative featured several engagement activities targeting customers, channel partners and Company employees.
In a move to bolster thought leadership, the Company introduced the Do Big Podcast, the first podcast channel of its kind in the category. Designed as a knowledge hub for SMEs eager to explore relevant digital technologies for their businesses, this podcast series features insightful discussions with the Companys Senior Leadership Team and external experts.
During the year, the Company enhanced its brand resonance through digital platforms and targeted marketing efforts. This approach underscores the Companys dedication to maintaining a dynamic and influential brand presence, aligning with the changing business landscape and customer expectations.
Outlook for future
The Company continues to invest in brand and marketing assets and have lined up brand interventions in the coming period which will help create positive word-of-mouth, strengthen brand recall, and brand equity.
3. Regulatory Risks
As is evident from the Major Litigation section here in above, the telecom industry continues to face a plethora of changes and ambiguities in the regulatory space. After the Supreme Court gave its judgement on the AGR definition, which was one of the major litigations in the industry, TTML _led an application in the Supreme Court seeking direction from the DoT to rectify mistakes in calculation and allow permissible deductions. TTML has opted for a 4-year moratorium and payment of AGR dues over a 6-year annual instalment, as offered by the DoT. The _rst instalment to be paid by March 31, 2026. TTML _led a Curative Petition with the Supreme Court on October 17, 2023. Through this Curative Petition, the Company has requested the Supreme Court to reconsider levy of interest, penalty, and interest on penalty on AGR dues and has also drawn its attention to the fact that mathematical/ calculational errors exist in the dues/amounts claimed by the DoT. The Company also obtained the approvals from the regulatory, licensing, and other statutory agencies for the demerger of the Consumer Mobile Business in FY20. DoT has issued on April 28, 2020, a show cause notice to the Company asking it to show cause why a penalty of 100 Crores would not be levied for transferring consumer mobile undertaking on July 1, 2019, without getting DoT final approval which was received on February 6, 2020. DoT _led an application in NCLT Delhi, praying for levy of penalty under Section 232(8) of Companies Act, 2013 against TTML. Honble NCLT vide its Order dated May 12, 2022, dismissed the petition of the DoT against TTML. The DoT has not _led an appeal against this order in NCLAT. Moreover, TTML has _led caveat in NCLAT. TTML approached TDSAT against the DoT show cause notice dated April 28, 2020, which directed TTML to _le a reply which TTML did on June 9, 2020. Now, DoT will take a decision on this, and TTML can approach TDSAT after the DoT decision. TTML continues to monitor the situation along with close engagement with the agencies involved and will take appropriate action based on any further communication from the authorities. The Company also continues to tackle the litigation issues (mostly legacy wireless issues) including - a) Telecom Policies and Licenses in areas of dual technology, b) Allocation of access and microwave spectrum, c) EMF radiation, d) Security guidelines, e) EKYC of the existing subscriber base, f ) Minimum rollout obligation, g) Decision to charge One-Time Spectrum Charges (OTSC) within the contracted quantum of spectrum, h) Penalties levied by TERM cell, among others, and these issues are now pending before various courts. There are significant financial penalties under challenge and those carry significant regulatory risks in case the court judgements are not favourable to the Company. The Company has a legal and statutory compliance programme in place to continuously scan and where possible, monitor, the regulatory environment, identify the changes applicable to the Companys operations and undertake measures to comply with the regulatory requirements. Further, the policy advocacy team continues to engage with external stakeholders, including regulatory bodies to ensure a harmonious relationship with various regulatory agencies.
4. Technological Risks a. Product Technology Risks Risk to Traditional Voice Services
In light of the transition to hybrid work models, there has been a notable surge in the adoption of IP based communication and collaboration solutions, signalling a foreseeable decline in traditional voice services. To address this evolving landscape, the Company is proactively diversifying its portfolio with an emphasis on expanding SIP Trunking, Cloud-based Communication, and United Communication (UC) solutions, thereby mitigating potential risks associated with the declining demand for traditional voice services.
Risk to Traditional Data Services
The competitive intensity among data service providers continues to drive the prices down. This could put pressure on the Companys margins. Additionally, improvement in quality of broadband connectivity across India poses a risk to revenue streams from services like Internet Leased Line and MPLS, particularly for micro and small businesses. To mitigate this, the Company continues to bolster its portfolio of value-added connectivity solutions tailored to the SME segment. b. Network Technology Risk
The Companys legacy hybrid network poses a risk. It is being progressively mitigated by transformed from a mobility to enterprise architecture through redesign, site optimisation, surrender of IRU routes, POI, and others since 2019. Replacement plan for the network equipment units that are End of Life and Support (EOL & EOS) is under way, as per business plan. Deployment of a network inventory monitoring and fault management tool is in progress.
This year we have seen launch of 5G by operators primarily focused on consumers. From an enterprise perspective, certain use cases like 5G FWA (Fixed Wireless Access), private networks being served through mm Wave spectrum, etc. might pose a risk to some parts of the existing revenues and future growth. The impact of 5G FWA as substitute is not well established and the few use cases seen globally are largely for broadband and for underserved areas. The Company has developed a mitigation plan to address these risks. The Company has an extensive optical _bre network across the country especially in the key metro cities. National, state and city authorities conduct infrastructure development such as bridges, _yovers, metro transportation networks, state & national highways, etc., which sometimes involves realignment and digging of roads. This activity carried out by civic and other authorities are a potential threat to our network which may result in disruption of services/ down-time to our customers. The Company carries out proactive monitoring, maintenance, and relocation of these underground assets to ensure optimal utilization of resources.
5. Cyber Security Risks
The risks and threats of cybersecurity have multiplied manifold in the prevailing environment, due to the change in working habits and the resultant impact on the network and security architecture. We have taken steps to strengthen end-user and mobile devices security, access to business-critical systems, and enhanced proactive monitoring. However, residual risks remain due to proliferation in the exploits ranging from the OS kernel/Motherboard cache to zero-day attacks on network devices and malware protection software.
Hence, a continuous e_ort to enhance the cybersecurity posture is being adopted. The Company has aligned its IT security operations to the Group level OTON framework and is actively evaluating and deploying additional security enhancements.
6. Financing Risks
The Company has been undertaking a series of cost optimisation initiatives and has built a robust system for planning and monitoring of cash flow. However, the Company continues to carry a substantial debt, which includes funds borrowed for AGR dues. Further, the Company is required to invest significantly in capital expenditure on network infrastructure to grow and sustain the enterprise business. This may impose additional strain on the existing financial position of the Company. Debt due for repayment during FY24 has been re_nanced. The Company engages with all lenders periodically and does not foresee any di_culty in re_nancing the future repayments. The Company has opted for the 4-year moratorium o_ered by the Government related to AGR payments and the total amount due including accumulated interest at the end of the moratorium will be payable in 6 annual instalments starting March 2026. However, the Company carries risk of losing its ability to re_nance the debt and raise additional debt. Further, due to the in_ation and tight liquidity in the market, the terms of raising fresh capital may not be in line with past terms and conditions and/or may be subject to such covenants which may be challenging for the Company to adhere to, thereby impacting the costs of not only incremental funds but also existing debt adversely.
7. HR Risks
The telecom sector is highly competitive, especially when it comes to attracting and retaining top talent with specialised skills. The ability to secure individuals with advanced expertise and strategic vision is crucial for driving innovation and growth in the sector.
Tata Teleservices has recognised this challenge and has been focusing on key hiring aspects such as competency-based hiring, cultural treatment, and streamlined onboarding processes to enhance productivity. The Company is committed to upskilling and reskilling through digital learning platforms, as well as a structured performance management and coaching process to identify high performers and potentials.
In addition, the Company continues to provide a safe, healthy, caring and productive work environment to enable people do their best at work, and stay happy and committed.
8. Natural Disasters and Pandemic Risks
Like any other corporate, TTML is always under the threat of various natural disasters like _oods, cyclones, and landslides.
In order to ensure continuity of operations and services to customers, TTML evaluates various such risks from people, process and technology perspectives and draws up mitigation plans. Weather data is regularly monitored to be prepared for natural calamities and work out business continuity plans. The Company closely monitors the pandemic situations and also continues to work on various opportunities of cost optimisation which will emerge on account of the pandemic.
OPPORTUNITIES AND THREATS Opportunities
The transition to hybrid work models has prompted companies to intensify their focus on digital transformation. This heightened interest is fueling the adoption of agile, cost-effective, and secure ICT solutions, with particular emphasis on United Communications as well as Cloud & SaaS offerings.
Public/hybrid cloud solutions are gaining momentum due to their simplicity and cost-efficiency, leading to a demand for robust internet access services and a re-evaluation of traditional enterprise network infrastructure. This shift presents opportunities for solutions like Internet Leased Line and SD-WAN.
With businesses expanding their digital presence and embracing remote work setups, security remains a top priority, driving an increase in the adoption of enterprise security solutions.
Furthermore, the pursuit of omni-channel customer engagement, elevated experiences, and brand loyalty is spurring demand for advanced business communication and marketing solutions such as cloud communications and omnichannel platforms like WhatsApp for Business.
While historically trailing large enterprises, the Indian SME sector is gradually embracing technology, supported by the growing reliability and affordability of cloud infrastructure, competitively priced internet access services, and accessible UC platforms and services.
Threats
Threat to traditional Enterprise Voice Services: In light of the transition to hybrid work models, there has been a notable surge in the adoption of IP based communication and collaboration solutions, signalling a foreseeable decline in traditional voice services. To address this evolving landscape, the Company is proactively diversifying its portfolio with an emphasis on expanding SIP Trunking, Cloud-based Communication, and United Communication (UC) solutions, thereby mitigating potential risks associated with the declining demand for traditional voice services.
Threat to Enterprise Data Services Potential Impact of 5G
5G deployment primarily targets consumers. From an enterprise perspective use cases like 5G Fixed Wireless Access (FWA) and private networks might pose a potential risk to some parts of existing and future revenue streams for enterprise data services. The impact of 5G FWA as a substitute is not well established and the few use cases seen globally are largely for broadband and for underserved areas. Overall, the Company estimates that the risk of 5G on enterprise data services over the next 3-5 year horizon remains low as:
Fiber offers superior performance and reliability at a lower cost.
Most global deployments of 5G FWA have been for selective use cases where _ber deployment is challenging.
Margin Risk
Declining data service prices due to increased competition could pose a risk to the Companys margins.
Aggressive pricing and bundled offers from new entrants in the SME segment could further impact margins and increase customer churn.
Improvement in broadband quality in India might pose a risk to revenue from Internet Leased Line and MPLS services for micro and small businesses.
The Company is addressing these challenges by:
Diversifying its product portfolio to include value-added connectivity offerings. This includes products like Smart Internet Lease Line, ILL Burstable Bandwidth, SDWAN and SmartOnce? Broadband.
The Company continues to proactively explore new products and technology options to mitigate threats and capitalise on emerging opportunities.
HUMAN RESOURCES
The Company had 385 employees on its rolls as on March 31, 2024. Please refer to "HR Initiatives" under Directors Report.
QUALITY AND PROCESSES
Like other companies in the Tata Group, the Company follows the Tata Business Excellence Model (TBEM) as its quality and process improvement framework. TBEM is a process maturity model that is adapted from the globally acclaimed Malcolm Baldrige Performance Excellence Framework of the National Institute of Standards and Technology, US Department of Commerce. In our journey to strengthen our commitment to quality, we have renewed our ISO 9001:2015 Quality Management System certi_cation.
To improve quality of service and customer experience, various improvement projects have been undertaken across the organisation in the areas of customer life cycle management, product, service design & delivery, network augmentation, risk management, quality control, etc.
The Company will continue to invest and accelerate its journey of business and process excellence.
KEY FINANCIAL INFORMATION & OPERATIONAL PERFORMANCE Revenue from Operations
Revenue from Operations for the year ended March 31, 2024, increased to 1,192 Crores as against 1,106 Crores in the previous year.
Other Income
Other income during the year stood at 18 Crores (previous year
20 Crores) which included other operating income to the tune of
9 Crores (previous year 12 Crores).
Operating Expenses
Operating expenses for the year were recorded at 664 Crores as against 614 Crores in the previous year. The major components of the total operating expenses are as follows:
Net Loss
The Companys loss before exceptional items was 1,228 Crores as compared to last year level of 1,139 Crores. There are no exceptional items in the current year as compared to
5 Crores in last year and the Company reported a net loss of
1,228 Crores during the year, as compared to last year level of
1,145 Crores.
Balance Sheet
The Shareholders Funds was 19,253 Crores (Negative) as on March 31, 2024, against 19,055 Crores (Negative) as on March 31, 2023.
Total borrowing for the Company (including long term borrowing, short term borrowing, current maturities of long-term borrowing, debt components of ICDs and deferred spectrum liability including interest) was 18,014 Crores (excluding liability component of RPS) as compared to 18,043 Crores in the previous year.
The Net Block (including tangible as well as intangible assets) as on March 31, 2024 decreased to 662 Crores as compared to 676 Crores in the previous year. The Company has Capital Work in Progress of 59 Crores and Right of use Assets of 126 Crores.
Earnings Before Interest, Tax, Depreciation and Amortization ("EBITDA")
The focus during the last few years for the Company has been on optimizing its operations and increasing the asset utilizations. The Companys EBITDA margins maintained at 45% in current year, similar to previous year.
Significant Changes in Key Financial Ratios
The key financial ratios are as under:
Particulars | 2023-24 | 2022-23 |
Operating Profit Margin (%) | 32% | 31% |
Net Profit Margin (%)1 | (103%) | (103%) |
Return on Net Worth (%)2 | NA | NA |
Debt Service Coverage Ratio (DSCR)3 |
0.08 | 0.06 |
Interest Service Coverage Ratio (ISCR)3 |
0.80 | 0.85 |
Debt Equity Ratio | (1.04) | (1.04) |
Current Ratio | 0.54 | 0.64 |
Operating Profit Margin: Earning from Operation divided by Revenue from Operations (Earning from operations = EBITDA net of Dep and Other Income)
Net Profit Margin: PAT divided by Revenue from operations
. Debt Service Coverage Ratio: EBITDA divided by total debt and interest payable in a year (debt includes principal repayment of long-term borrowings repayable within 12 months, interest on term loans, interest on deferred payment liability and license fees and interest on inter-corporate deposits).
Interest Service Coverage Ratio: EBITDA divided by Interest expense (interest expense includes interest on term loans, interest on deferred payment liability and license fees and interest on inter-corporate deposits).
Debt Equity Ratio: Total Debts divided by Total Equity. (Total debt includes current borrowings and non-current borrowings)
Current Ratio: Current Assets divided by current liabilities (Current Liabilities excluding short-term borrowings).
Note:
1
Provision for LF/SUC 249 Crores made during FY24.2
Due to negative net worth, this ratio is not computed.3
Interest expenses exclude notional interest and other _nance charges.COMPANY OUTLOOK
The Company is projected to witness growth in the years to come driven by:
1. Strong portfolio of Smart Digital Solutions
2. Robust channel partner ecosystem
3. Expanding network presence
4. Strong brand
5. Best-in-class and differentiated customer experience.
However, with the rapidly evolving technology landscape, heightened competition, and evolving macroeconomic outlook, the Company will need to continue to invest across products, people, and infrastructure to sustain growth momentum and ensure market relevance. Its essential to note that the expectations and risks outlined in this report represent managements perspectives and may not necessarily materialise.
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IIFL Securities Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.