Vinod Kumar is the managing director and chief executive officer of Tata Communications, which provides telecom infrastructure to services providers. NDTV Profit’s Vijay Ganeshan Iyer spoke to him about the company’s global and domestic operations, as well as its revenue models for the coming quarters.

How has the 10-year journey been?

It has been a PPP (public private partnership), the government still maintains 26%. It’s been a great partnership between the Tatas as the strategic partner and the government.
 

The government has been really supportive of the company at the board level and has given us the operational freedom to build a global business at this point.

How challenging has been for you leaving operations in Singapore and handling business and other global operations back in India?

I am based in Singapore but I am not there very much. If you have to look at the business (it is) very characteristic of a global MNC. We have India being the biggest home market. Its ‘the single biggest market, accounting for 25 per cent of our revenues, but 75 per cent of our revenue comes from around the world.
 

Our management team is highly decentralized and we have built an organization that doesn't have what we call a typical headquarters as such.

Since you mentioned more that 75 per cent revenue is generated from foreign markets, is the revenue plan going to change?

The game plan for us is very simple. In the telecom sector you (have) got to have a diversified portfolio that is geographically diverse to capture growth opportunities around the world but also to make yourself resilient to the economic ups and downs that all markets go through.

Second is from services standpoint in terms of heavy dependence on voice services to having a blend of voice and data services.
 

We have moved from traditional network services to management network services and gradually to IT  infrastructure services. We are also making selective investments in new technology waves that we are building to position ourselves for the future. Our plan is to maintain a portfolio of geographies and products and segments so that we can be quite resilient and continue to grow.

In the next three to five years, is a 50:50 ratio what you are aiming for?

I think our ratio will remain the same. It would roughly be 75-80 per cent in international and 20 per cent in India.

What is your strategy when it comes to BWA (broadband wireless access) because when it comes to the licenses being limited and there are also talks that you will try and acquire the licenses of the players who have got it. What will be your strategy?

Speaking from the Tata Communications perspective, we have been building for the last 10 years for this growth and consumer broadband that we are going to see - BWA, 3G, 4G - is going to unleash spectrum, increase speed of last-mile access. For that, we would need pipes which are robust, pipes which are diverse, pipes which are global and that is what we do.
 

We see the advent of 3G, BWA and subsequent technology on one hand, and on the other hand you have the access side and various kinds of smart devices. This combination positions us really well.

From a financial perspective, what are the three verticals you see driving growth in the coming years from the Indian market?

Our wholesale business or service provider business is very robust. Every single service provider in India is using our international connectivity or in some case using our domestic connectivity services. We expect that to continue to grow just because of the surge in the number of customers in the mobile broadband; in that, video will be a big aspect.

The second is Indian enterprises, we have only seen the tip of the iceberg as far as the network is concerned.
 

The third one that can't be ignored is MNC's coming to India and expanding their presence here. We are (a) small player but rapidly emerging player in global MNC space, or providing services to global MNC space. We are particularly attractive and people will need our services in Indian geography and that will be our third pillar of growth as far as India is concerned.

Telecom is a long term business with high initial investment. From an investment perspective how are you looking to strengthen your balance sheet? How soon can investors expect a clean baance sheet, since there is still debt and the company is showing losses. What are you projecting for the next three to four quarters, what do you want to say to investors when it comes to the balance sheet of Tata Communications?

About general financials, if you look at the last three-four quarters, the business models that we have created are beginning to pay dividends. The last 5-6 yearse, we had to invest heavily to transform the business model to make sure that we shift from voice to data, wholesale to enterprises, India to global. We now have a portfolio that we are confident of.

Each element of the portfolio has reached a certain critical mass that has proven itself and therefore now comes a time we will leverage the investments we have made over the last five years, in particular and 10 years if you want to take a broader horizon.
 

We have put ourselves on the map with a business model that works and now you will see steady improvement.

For the coming months the picture will be rosy?

Even in the last 3-4 quarters, we reported 16% growth and revenues we reported 50% growth. Our core business which does not include our investments in Neotel in South Africa turned PBT (profit before tax)-positive two quarters ago and we maintained that in Q3, we returned PAT (profit after tax) positive results quite some time. Neotel was a concern with investors. We showed that business has turned (the) corner and business has turned EBITDA (earnings before tax, depreciation and amortization) positive.
 

Net net, if you look at the business its not just the business model that has transformed, the finances are also moving in the right direction.

Is there a roadmap for reducing debt?

No roadmap as such. We look at in the context  of, we believe the consolidated business including Neotel will get to PBT-positive  in the next four to six quarters. We are more or less tracking towards it.

Is there any update on the rights issue?

It was only one of many issues we considered. It was not actively on the table right now. We will continually look for how we can bring equity into business so we can lighten the debt load, (that) ie something that will take its course. There is no plan.

Telecom has been the biggest growth story in India. How are you looking at the telecom sector given what has happened in the last six months. Is it time to relook the whole policy when it comes to the telecom sector?

(I am) Not an expert when it comes to all aspect of policy in terms of spectrum and so on. All I will say in telecom - you have to create a comparative playing field, also make sure that it’s a level playing field. As operators what we look for more than anything else is transparency… so you can have real competitions.

Whatever he domestic sector has witnessed in the last particular year, many once again feel that consolidation would stabilize it. Are you open to consolidation when the chance comes to you?

Today if we have to talk about consolidations and acuisitions in the Indian market, I will not look at from the perspective of gaining a customer base. We don't need that. However there could be smaller players, there could be other technology providers, cloud providers who complement what we do, who bring a world class technology that we can provide a bigger landscape for them to work within. That’s really the kind of company we will be looking at, more technology and capability acquisition rather than customer acquisition that we will be looking at.

There is one thing I need to ask before wrapping up. As you say primarily you would want to play the role of providing the infrastructure for new technology that gets rolled out from other operators. The one thing that everyone is keenly watching now is the 4G technology  that Reliance Industries (RIL) is talking about. How would you like to play a role in that, are you in  talks with Reliance for giving the required support since you have the infrastructure?

No specific talk as such and whether it is Reliance or anybody else as they deploy 4G or any other form of access technology at the end of the day in order to move the content globally they would have to work with providers like us, and Tata Communications being the largest provider of global bandwidth and one of the largest operators of internet backbone  around the world, we are well positioned to receive a portion of that.

My last question Vinod. The Tata group going through a transformation phase and you being the CEO of one of the group verticals, how is the mood like, how is it going to be?

The mood is buoyant, I would say that the transformation is being handled quite well. Mr Tata has done a very great job during his tenure of taking the business where it  is and I am sure he will do equally great job of transitioning to Mr. Mistry and he comes with a long runway ahead of him, and he will take his time and make the right moves without rushing into anything and will make sure that there is smoothness in the transition, just from an operating company's perspective, which is all I can speak about.